Nuclear’s downfall props up renewables

flovestock

TIM KILADZE
Globe and Mail Update
Posted on Tuesday, May 31, 2011 1:31PM EDT

Germany shocked the world with its announcement on Monday that it would close all of its nuclear power facilities by 2022. Shortly after the shock and awe wore off, most people considered what it would mean for nuclear stocks. (They fell, as expected.)

An equally important question is what this means for renewable energy names. Solar energy companies in particular are under the spotlight because Germany dominates the solar panel installation market. About 7.5 gigawatts of the 18 gigawatts installed globally in 2010 came from Germany, notes National Bank Financial analyst Rupert Merer. In turn, solar stocks are up between 3 and 10 per cent following the announcement.

It’s also a relevant question in Ontario, which isn’t nearly as important to the solar market as Germany, but has a big impact in Canada. Ontario is holding a provincial election this fall and opposition leader Tim Hudak is already attacking Premier Dalton McGuinty’s renewable-energy plan that is pushing home energy costs much higher.

But now Mr. Hudak is in a corner. If he cuts back on renewables funding, it’s pretty hard to argue for nuclear at a time when Germany is ending its production. The Ontario Liberals have already seized on this and painted the picture of what a return to coal-fired power plants would look like.

In the big picture, it’s promising for renewable sources like solar and wind.

Still, Mr. Merer is wary of putting too much hope into renewables right now, especially solar. German subsidies have been declining and investors have been expecting a glut of solar module output this year and beyond, he notes. Plus, renewable sources have much more intermittent power, so thermal sources like coal and gas will probably fill the hole in Germany's power production.

Moreover, natural gas has been getting a lot of attention of late. Although huge new discoveries sent prices plummeting over the past few years, there is now the potential of exporting liquified natural gas to other nations where prices are higher. And long-term, if oil prices skyrocket, natural gas could become the more convenient energy source.