Tilting at Turbines

2015.1.8.Windmills.mainA row of 20 windmills in the waters just outside Copenhagen, Denmark. (Photo: Peter Kirkeskov Rasmussen / Flickr)

United Nations Secretary-General Ban Ki-moon, Archbishop Desmond Tutu, and several of John D. Rockefeller’s heirs have some investment advice for you.

They want you, your college or alma mater, your local firefighters’ pension fund, and all other investors — big and small — to adopt a new financial strategy.

They’re calling for everyone to shed their oil, gas, and coal assets while actively investing in solar and wind power, along with other climate-friendly industries.

Are they tilting at windmills?

Sagging oil prices have been dragging down shares in solar and wind power companies since the middle of 2014. After rising early in the year, most renewable energy stocks fell by December 31. They underperformed the Dow Jones Industrial average, which climbed 7.5 percent.

But dirty-energy industries fared worse. Coal and fracking stocks plunged more than 20 percent.

Renewable-energy stocks slumped because many investors wrongly assume that cheap oil will sap demand for solar panels and wind turbines.

For one thing, solar power is on fire. New installations go online every three minutes, and the sun’s rays are fueling more than a third of the electric power installed last year across the country.

Wind energy is also flourishing after growing 26.2 percent a year for nearly two decades worldwide. Those modernistic turbines now boost grids in many of the most conservative and oil-rich corners of the United States, including Texas, North Dakota, and Oklahoma.

While climate concerns do help, market forces are driving this surge.

Generating a kilowatt of solar energy today costs less than 1 percent of what it cost in 1977. Both wind and solar are becoming increasingly competitive against dirtier energy options. And on average, US homeowners can bank on saving $20,000 or more within two decades of sticking solar panels on their roofs.

“It isn’t often we have an opportunity to both do well and do good,” Wallace Global Fund executive director Ellen Dorsey wrote in a Wall Street Journal op-ed.

Yet that’s the case today for people and institutions which, like Wallace, divested from oil, coal, and gas over the past two years — and then channeled money into wind, solar, energy efficiency, and other climate solutions.

The Guggenheim Solar exchange-traded fund (ETF) zoomed up 128 percent in 2013, while the First Trust ISE Global Wind Energy ETF jumped 65 percent. These renewable-energy benchmarks blew past the Dow’s 26.5 percent gain that bull-market year.

Even with last year’s decline, solar shares increased 118 percent and wind stocks gained 46.5 percent over the course of 2013 and 2014, outshining the Dow’s cumulative 36 percent rise. In contrast, standard oil and gas stocks inched up 11 percent, fracking shares sank 3 percent, and coal shares plummeted 42 percent during that period.

Of course, the market has foolishly snubbed the immense promise of wind and solar power before. Many individual stocks in these industries fizzled between 2010 and 2012, and they remain far below levels seen prior to the 2008 crash.

But I think the past two years say more than the previous five about how the stock market will treat these industries from now on.

While renewable energy remains vulnerable to volatility as governments phase subsidies in and out, it’s poised for massive growth.

Consider this: Thanks partly to China’s efforts to stamp out smog by closing coal-fired power plants, solar power alone may fuel half the global grid by 2050, according to the International Energy Agency. That would mark a major transformation from its global market share today of under 1 percent worldwide and less than 2 percent in the United States.

What about wind? It generates about 5.5 percent of America’s electricity and has plenty of room to grow.

Wall Street will eventually accept renewable power’s full potential. In the meantime, you can do well by doing good by heeding that call from Ban, Tutu, and the Rockefellers.