Despite the economic slowdown, global clean energy stocks shot up almost 40 percent last year—mainly because of the "spectacular out-performance" by firms involved in energy efficiency and electric cars and batteries, research firm Bloomberg New Energy Finance reported this week.
But the strong results mask dramatic variations within the index and a weakness in the solar space.
The 86 clean energy companies in the firm's Wilderhill New Energy Global Innovation Index (NEX) gained substantial ground on average after a 60 percent plummet in 2008.
But "there were huge differences in the performance of different subsectors," said New Energy Finance.
The 25 solar stocks in the NEX, for example, were up 30 percent overall but accounted for five of the index's worst performers.
The group of underperformers included the struggling Q-Cells of Germany, which laid off almost 20 percent of its work force and suffered a 54.3 percent drop in shares, and Michigan-based thin-film maker Energy Conversion Divisions, which fell 58.1 percent.
The Warren Buffet-backed Chinese electric car and battery maker BYD, meanwhile, surged 439 percent last year, helping to carry the entire index.
In total, the nine power storage firms related to electric cars wrapped up 2009 with a 120 percent spurt. Similarly, in the fourth quarter alone, three energy efficiency stocks rose between 200 and 300 percent.
But commercializing solar technology carries a heftier price tag, making its path out of the recession a bumpy one.
The solar sector suffered "because nervous investors shied away from young, high-growth stocks in capital-hungry sectors," said Michael Liebreich, chairman and CEO of New Energy Finance and a partner behind the NEX.
The point has been echoed from other players in the cleantech arena.
Dallas Kachan, managing partner of the market research firm Cleantech Group, said that in terms of venture capital investing, solar was down over 60 percent in 2009 compared to 2008, because of "its capital intensity."
This week, the group released its preliminary 2009 results for clean technology venture investments. Solar snatched up the most VC dollars, the study found, with 21 percent. But energy efficiency and transportation, with record years, were remarkably close behind for the first time.
Investors realized "there may be other places to be putting their money to work in the short term," said Kachan.
New Energy Finance said gains of transportation shares were a result of "excitement over electric vehicles." Kachan said that more companies than ever before are finally "betting that the future of transportation will be all electric," rather than hydrogen powered.
Energy efficiency shot up in 2009 for four reasons, said Kachan. The technologies are much faster to bring to market compared with other sources; they're also cheaper, net negative in terms of carbon emissions and have no land or water impacts.
The group predicts that in 2010, private investment in efficiency will eclipse solar, spurred along by smart-grid technology and other "smart systems" that will drive more efficient uses of power.
There is even a potential for investment to "reach frenzied levels," the group said. That's only if the U.S. can fix basic market failures that encourage wasteful energy use, such as encouraging the decoupling of utility revenue so that power companies get paid more money when they sell less electricity.
Even without such policy support, efficiency companies will have something unique—a product that pays back. That takes on added significance in a recovering economy facing global carbon regulation.
According to a report by consulting firm McKinsey, the world would make $1.2 trillion on an efficiency investment of $520 billion over 10 years, a savings of $700 billion.
Most analysts agree that for the planet to have a reasonable chance of avoiding dangerous climate change, energy efficiency must be a big part of the solution. Last month, the executive director of the International Energy Agency (IEA), Nobua Tanaka, said that by 2030, efficiency could save 7.1 gigatons of carbon emissions (one gigaton is equal to 1 billion tons), compared with 6.6 gigatons for all clean energy sources combined.
He added that "current levels of implementation [of efficiency] are insufficient."
Cleantech observers seem to agree that if efficiency—or any clean energy category—is really to shine in 2010, then governments will be the catalyst.
Major economies have pledged $177 billion in green stimulus, according to New Energy Finance. "Much of that cash" will be unleashed in 2010 and 2011, it said.
"Who gains the most from that will be a key driver of share performance in the months ahead," said Liebreich.
Kachan said that U.S. investors are definitely doing some "fed watching" — by the looks of the fourth-quarter slowdown in cleantech investing.
"Investors could be keeping their powder dry," he said, waiting "to back the big recipients of the stimulus funding that is still to be allocated."