There was a time when renewable energy was buzzword. The crisis took the wind out the renewable assets as the prices fell. Markets tried explaining the causes. But many conventional reasons failed to explain what’s happening in the renewable complex today.

The following are some positive conventional reasons backing up solar. First, they said it was easier to get solar firms in place than wind, because wind mills destroy the scenic beauty of landscape. The sun was more abundant than wind. Second, Alternative energy becomes valuable only when Oil stayed above 100.

The following are the negative conventional reasons challenging solar. Owing to its small scale generation, solar may not be able to play a large role. Climate changes leads to volatility in suntime creating further inconsistencies. Solar subsidies threaten investment in other renewables. Solar is still for the rich and hence solar subsidies passed on to energy bills invariably hurt the poor creating a risk of social unrest. This is something similar to what was written and believed about biofuel, which was blamed for more carbon emissions owing to forest covers converted to corn farms.

Latest solar technology has introduced solar cells that can convert sunlight into electricity with an efficiency of more than 40%. In the 1980s, 20% was thought good. Scientists are working on harvesting solar power in space. There are also technologies which combine solar and water technologies to generate electricity.

At a degree markets are trying to explain the performance of the solar sector. From a performance numeric ranking perspective, Solar Index is the worst quarterly performer below the ISE Global wind Index. Despite the fall of Oil last few weeks, Oil Index is much higher in rankings compared to clear energy. Even the facts that Electricity benchmarks are higher in rankings suggest that solar is lagging behind in terms of solutions for the power sector, at least in the short term and in terms of market expectations.

Another thing that can be observed from the respective rankings is that commodities are on the higher rankings while electricity utilities and renewables are on the lower ranking side. Intermarket talks about the inverse relationship of commodities with utilities. When commodities rise utilities underperform. And the fact that the short DDP (Commodity Index) is the worst performer reinforces the fact that the way ahead is for the rankings to inverse that is commodities underperforming (Short DDP Commodity Index outperforming) and renewables getting a boost. Performance and underperformance is happening at all degrees of time depending on the time horizon we are looking at. Relative rankings are another way to see how intermarket relationships are working or failing.

The Solar Index Jiseki cycles just like wind we carried prior is suggesting an intermediate uptrend. On the large primary yearly cycle Solar is not out of the woods yet and it may take more than few years before the sun shines back on the solar sector way in a secular way, but that’s another performance cycle.

Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research