Buffett has invested heavily in new energy.
The every move of “stock god” Buffett has attracted much market attention. According to the latest report, Buffett’s Berkshire Hathaway plans to spend $3.9 billion (about 24.7 billion yuan) to build wind power and Cecep Solar Energy Co.Ltd(000591) power generation projects, or will become the largest single wind power project in the United States.
While Buffett paid a lot of money, the wind and photovoltaic tracks in the A-share market were sold off. Since 2022, the total market value of all listed companies in the photovoltaic and wind power sectors of A-Shares has evaporated nearly 500 billion yuan.
In fact, on the news side of the resumption of trading since 2022, the wind power and photovoltaic sectors of A-Shares have not suffered obvious bad news. Some industry analysts said that the stock price correction since the new year is more a valuation repair for the excessive rise of stock prices in the early stage, and some institutions have carried out position adjustment and stock exchange after the beginning of the year.
Does Buffett’s investment in wind power and photovoltaic indicate that the clean energy represented by wind power and photovoltaic is still the general trend in the future? Can it bring some positive signals to the continuously adjusted A-share wind power and photovoltaic track?
Buffett’s big move
On January 20 local time, Bloomberg reported that Warren Buffett’s Berkshire Hathaway plans to spend $3.9 billion (about 24.7 billion yuan) to build wind energy and Cecep Solar Energy Co.Ltd(000591) power generation projects, which will increase the proportion of clean electricity in Iowa.
Wall Street analysts pointed out that such a huge amount of investment may become the largest single wind power project in the history of the United States.
Berkshire Hathaway’s MidAmerican Energy said in a statement that the renewable energy project, named “wind prime”, will bring 2042 megawatts of wind power and 50 megawatts of Cecep Solar Energy Co.Ltd(000591) power generation, enough to support the daily power demand of about 600000 families.
According to Iowa governor Kim Reynolds, the wind prime project is a new agreement and investment that will further improve the local power structure.
In fact, Iowa has always been one of the most important wind power producing areas in the United States. It is rich in renewable energy and has the highest utilization rate of wind power in the United States. Moreover, it has a complete set of wind power industry chains such as wind turbines, blades and towers.
According to the Iowa Utilities Commission, 41% of the state’s energy demand came from wind energy in 2019, compared with 5.1% in 2006.
Perhaps it is this resource endowment that attracts Buffett to invest heavily in local wind energy projects. Buffett expressed the hope that Sino US energy companies can achieve “wind energy self-sufficiency” in Iowa.
In fact, in recent years, Berkshire hasa has been investing in renewable energy projects through China US energy company. Sino American energy estimates that in 2021, the company will provide 88% of renewable energy to Iowa customers every year.
Such a huge investment is also a big order from the Iowa government. According to the data, the wind prime project will create 1100 jobs during the construction period and another 125 jobs during the continuous construction period. At the same time, the project can bring about US $24 million in property tax for local turbines and Cecep Solar Energy Co.Ltd(000591) equipment every year, plus more than US $21 million in land easement fees every year.
Berkshire expects that if the project is approved, the construction will be completed by the end of 2024. At the same time, the company also plans to fund research on technologies that contribute to carbon capture, energy storage and small nuclear reactors.
Prior to this, Buffett continued to invest in renewable energy through Berkshire Hathaway energy (bhe), the holding company. At present, bhe has become one of the largest owners of renewable energy assets in the United States, with an investment of US $34 billion by the end of 2020, most of which are wind power assets.
According to the 10-K document disclosed by bhe, the power generation capacity under operation and construction includes 38% wind energy and Cecep Solar Energy Co.Ltd(000591) , 32% natural gas, 24% coal, 5% hydropower and geothermal, and 1% nuclear energy and other power generation capacity.
Another reason for Buffett’s continued layout of renewable energy may be the U.S. government’s stimulus policy on clean energy. In November 2021, US President Biden signed a US $1 trillion infrastructure bill, of which US $73 billion will be funded for the deployment of renewable energy.
According to the report of 2030 U.S. power market outlook, updated in 2021 – market trends, regulations and competition pattern, renewable energy power generation in the United States will account for 19% of the total power generation in 2020, which is expected to increase significantly to 48.4% by 2030. The report points out that the preferential policies launched by the U.S. government will continue to promote the development of renewable energy industry, especially photovoltaic and wind power industry.
Some investors commented that Buffett’s investment in wind power and photovoltaic indicates that the clean energy represented by wind power and photovoltaic is still the general trend in the future, which may bring some positive signals to the continuously adjusted A-share wind power and photovoltaic track.
A-share trillion track suddenly stalled
In 2021, wind power and photovoltaic tracks are very popular in a shares, and a large number of bull shares were born. However, since 2022, wind power and photovoltaic tracks have suddenly “lost their flavor” and have been continuously sold off by funds.
On January 20, the photovoltaic and wind power sectors suffered another sharp drop, with the photovoltaic index falling by 2.48% and the wind power index falling by 0.62%. Since December last year, the photovoltaic index and wind power index of A-Shares have begun to weaken, with a cumulative decline of 19.8% and 20% respectively.
Specifically, for individual stocks, the latest closing price of Longi Green Energy Technology Co.Ltd(601012) was 78.2 yuan, a cumulative decrease of more than 24% compared with the high point in November last year, Sungrow Power Supply Co.Ltd(300274) a cumulative decrease of 31.7%, and the closing price of Xinjiang Goldwind Science And Technology Co.Ltd(002202) a decline of more than 28.6% compared with the high point. According to the statistics of Chinese journalists of securities companies, since 2022, the total market value of all listed companies in the photovoltaic and wind power sectors of A-Shares has evaporated nearly 500 billion yuan.
In fact, on the news side of the resumption of trading since 2022, the wind power and photovoltaic sectors of A-Shares have not suffered obvious bad news. Some industry analysts said that the stock price correction since the new year is more a valuation repair for the excessive rise of stock prices in the early stage, and some institutions have carried out position adjustment and stock exchange after the beginning of the year.
On January 20, the Chinese reporter of the securities firm learned that an asset manager of the insurance industry disclosed that he saw a large-scale position adjustment of an institution for the first time on the same day, and the direction of position adjustment was big blue chip. As of the closing of the same morning, Shanghai Stock Exchange 50ETF rose by 1.7%, but the overall decline of A-Shares was more or less.
Research institutions believe that new energy is still a high-quality track, but with the overall valuation of the sector being pushed up, the track is gradually differentiated, and it is necessary to identify high-quality enterprises. Some segments are still expected to continue to enjoy dividends, while others face difficulties in keeping up with profit growth. At the beginning of the new year, the market is bound to re-examine the overall new energy sector and select the best from the best.
are there opportunities in the future?
Globally, China’s wind power installed capacity is the largest in the world. According to the data of the national energy administration, as of November 2021, China’s wind power grid connected installed capacity has exceeded the 300 million KW mark, double that at the end of 2016, 1.4 times that of the EU at the end of 2020 and 2.6 times that of the United States, ranking first in the world for 12 consecutive years.
Looking forward to the future of wind power and photovoltaic track, it is naturally inseparable from the era background of “carbon neutralization”.
Under the planning goal of carbon neutrality, in order to meet the new power demand in the future, Irena estimates that about 86% of the global power consumption in 2050 will come from non fossil energy, which means that the average annual new installed capacity of global renewable energy in the next 30 years needs to reach 700gw, four times that of 2019.
Among them, Cecep Solar Energy Co.Ltd(000591) photovoltaic and wind power generation are highly expected. Compared with wind power generation, photovoltaic technology has faster iteration and stronger cost reduction ability. According to Irena’s calculation, the global photovoltaic power generation cost has decreased by 82% in the past ten years, and with the improvement of silicon chip, battery chip and other technologies, the power generation cost of Cecep Solar Energy Co.Ltd(000591) photovoltaic is expected to continue to decrease significantly in the future.
At present, China’s photovoltaic power generation is entering the power generation cost area of fossil energy, which means that photovoltaic power generation is moving from subsidized blood transfusion to self hematopoiesis. Since 2020, China’s policy subsidies for photovoltaic have gradually withdrawn, and the cost reduction brought by the progress of photovoltaic technology has truly realized parity, leading to the stage of large-scale photovoltaic power generation.
in the future, under the background of “carbon neutralization”, the space of photovoltaic track is still very considerable. During the “14th five year plan”, the development of Shanxi Guoxin Energy Corporation Limited(600617) may usher in an outbreak period. The International Energy Agency predicts that by 2025, China will account for 40% of the growth of all renewable energy capacity, of which photovoltaic capacity will account for 80%. By 2025, China’s annual installed capacity of photovoltaic will increase or reach 100gw.
According to the current plan, the proportion of wind power and photovoltaic in China’s power structure will rise steadily. Ping An Securities estimates that according to the calculation that wind power will meet 15% of the power demand in coastal provinces by 2030, the installed capacity of China’s offshore wind power will exceed 200GW in 2030, while the cumulative installed capacity of China’s offshore wind power will be about 11gw by the end of 2020. Offshore wind power is expected to usher in a golden age of rapid development.
Citic Securities Company Limited(600030) pointed out that in 2022, the national energy administration will accelerate the implementation of renewable energy substitution action, focus on the development of photovoltaic and wind power, actively promote the cluster development of offshore wind power and the development of photovoltaic bases in the “Three North” areas, as well as the construction of wind power photovoltaic bases in deserts, Gobi and deserts, and start the implementation of wind power photovoltaic development in the countryside, This means that the wind power photovoltaic sector will still maintain rapid development in 2022, bringing a lot of investment opportunities to relevant fields.
However, it should be pointed out that from the perspective of industry prosperity alone, there may still be good investment opportunities for wind power and photovoltaic tracks in the future, but most stocks have increased too much in 2021, which has overdrawn the future growth space to a certain extent, so we still need to be vigilant against high valuation risks.
Dialogue choice “best analyst” | Tan Qian of Huaxin Securities: the most promising photovoltaic sector in the field of new energy in 2022
