Japanese Industry Hit Hard By Wake Of March Earthquake and Tsunami, But There May Be A Silver Lining For Investors
While industrial giants including the Japanese automakers and digital technology companies have taken significant hits, the renewable energy sector is thriving. Provideo Financial analysts believe that now is a good time to invest across the board.
- (1888PressRelease) April 30, 2011 - Domestic production at Toyota, the world's largest automaker, plummeted 63 percent in March, while Japan's No. 2 Nissan Motor Co said its corresponding figure fell 52 percent. Honda Motor Co, Japan's No. 3 automaker and fourth-biggest in the U.S. market, said on Monday it would take until the end of the year before production returned to normal. Canon, the world's largest maker of digital cameras has reported a 5 percent fall in quarterly operating profit while it struggles with a quake-hit supply chain which is months away from being fixed.
While finance and manufacturing in Japan continue to suffer, the nuclear disaster following the earthquake and tsunami on March 11 is proving to be a windfall to the renewable energy sector. China has announced it would suspend approval for new nuclear power projects. Germany, too, has suspended its nuclear program and ordered seven older plants closed during the moratorium. Consequently, the share prices of renewable energy companies soared as much as 10% last week.
Oil prices, which directly influence interest in renewable energy, have been rising - especially since the loss of Libyan oil. Fukushima has jolted the world into increased wariness towards nuclear energy, and oil is not a good back-up plan. Germany has boosted the size of the government's renewable energy fund from €300 million to €1 billion. In Japan, where nuclear energy provides 24% of power and oil 13%, the government is now reviewing long-stalled wind power feed-in tariffs (a form of government subsidy) under which alternative power producers, including solar power generating households, are paid a premium for feeding power into the grid (renewable energy currently supplies 2%). There are also ambitious plans for solar power, but even the most optimistic projections only put it at 10% of power by 2050. A Goldman Sachs report estimates that Japan will need at least $150 million in solar panels to meet planned power generation levels over the next decade. Other alternatives are being looked into: Japan and China are predicted to invest heavily in natural gas plants, and biomass fuels are being seen with renewed interest.
In June 2010, Japan was planning on building nine more reactors in the next ten years to obtain 50% power generation. As Chernobyl observes 25 years since its own nuclear disaster, countries are grasping at straws for green energy sources. The Fukushima nuclear plant will not be used again and there are already calls for a total ban on the use of nuclear energy in the country.
Provideo Financial analysts see this as a great investment opportunity. Rising demand for green energy solutions mean great opportunities for growth in the coming years, and a wave of international legislature mandating renewable energy is sure to have a positive effect on green stocks. According to Provideo Financial analyst Lee Jacobs, "renewable power generation is a movement that is only gaining momentum. We are looking very closely at renewable energy and picking sectors and companies that we think are crucial to successful implementation of technology." Jacobs mentioned battery technologies and grid stabilization as one sector that he thinks will grow significantly. Off the topic of renewable energy, Jacobs also noted that Toyota (NYSE:TM) is a great buy under $80.
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