Green Energy and Economic Bubble

1© FH AACHEN | M.SC Energy Systems | Joko P.M. Putra 11.05.2017

Habib Fernandez

3088080

Table of Contents

• What is Economic Bubble

• Economic Bubble Examples

• Is Green Economy an economic bubble?

• Predicted Economic Bubble

• Conclusion

• References

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What is Economic Bubble

“A market phenomenon characterized by surges

in asset prices to levels significantly above the

fundamental value of that asset.”

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Example 1: “Tulip Bubble” (Classic Economic Bubble)

• Netherlands (year 1636 – 1637)• Dutch Golden era VOC-Vereenigde Oost-Indische Compagnie Rich Citizen/Merchants

• Tulips Mania Origin from Turkey Wealth Symbol

• Price High Demand Rising Crash

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Video – Tulip Bubble

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Internet Dotcom Bubble

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• High PER (200x)

• More than 50% of IT

based company could

not survive

Subprime Mortgage

• USA in the year 2000’s• Subprime Customer• Greedy Investment Banks

They Knew at first place, subprime costumer couldn’t pay the loan

• People bought expensive houses using loan with low interest rates

• Suddenly the rates would increase Borrowers could not afford

• Foreclosure and other factors caused the market to decline

• When borrowers could not pay back Bank lost money

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Effect of Subprime Mortgage

• Americans lost more than 25% of their net worth• At the end of 2008, Stock Market (S&P) down 45% from

highest in 2007• Housing Prices dropped to 35% at 2010 compared to 2006• Retirement Assets dropped to 22%• Systemic Effect (Construction sectors and investors lost

confidence in the economy)• Domino’s Effect to the rest of the world

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Potential Commodity Bubble - Green Energy

Is Green Energy (Renewable Energy) bubble happening??

Wall Street: “the world is facing an over-investment in renewable energy and that the current levels of debts in many clean tech companies are unsustainable.”

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SunEdison Case – The Death of Solar Star

SunEdison:• Peak Assets Value 32.13

Bio USD• Big Leverage (not by

organic Growth) 21 Bio USD total leverage

• Fairy Tale of Media Darling• Over Expansion

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Abengoa – The collapse of Spanish Giant

Abengoa:• Peak Assets Value 25.3 Bio USD• Big Leverage (not by organic Growth) 16.5 Bio

USD total leverage• Fairy Tale of Media Darling• Over Expansion

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How to Predict a Bubble

Irving Fisher:

• Assets price is rocketing• Everyone talks about investment even in family

dinner time• At the beginning, every investors act like the

winner• “This Time must be different” syndrome

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Cycle of Bubble

Source: Raymond James Investment Co

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Key Question about Green Energy Bubble

• Is Renewable Energy (RE) producers commercial?• Should you fund from tax payer allocated to for RE?• Why Development is very progressive?• Same Pattern with Internet dotcom Bubble (end of 1990’s)?

• Green Energy is a Revolution• If Environmental Cost taken into account, RE Sector will be

competitive

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Thank You

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