First Shock: When Green Turns Red
Imagine a world where every country races to invest in solar, wind, and batteries—like there is no tomorrow. However, behind the glow of these green projects lies a secret rarely mentioned: the green bubble. Yes, you read that right. This term, which may make you pause, is not a joke but an economic theory claiming that investments in renewable energy have gone beyond sustainable limits. According to Wikipedia, the term gained prominence in the late 2000s and 2010s, popularized by authors like Per Wimmer in his book
The Green Bubble, as well as articles in Wired and The New Republic. The idea is that when interest rates rise, heavily indebted clean energy companies will fall like dominoes. Irony is that while the world shouts 'green is the future,' this theory warns that the future might be burning investors' money.
From Solyndra to Crazy Debts: Stories of Failure
The most classic example to understand the green bubble is the story of Solyndra, an American solar panel company that received a $535 million government loan in 2009. In 2011, Solyndra went bankrupt. Why? Because their cylinder panel technology could not compete with cheaper flat Chinese panels—and more importantly, demand was not as high as expected. This is not the only case. Look at companies like SunEdison, once a solar giant, which went bankrupt in 2016 with $11.7 billion in debt. Or Tesla, which, although not bankrupt, often operates with negative cash flow and large corporate debt. Data from Bloomberg New Energy Finance shows that in 2022, global clean energy companies accumulated $1.3 trillion in debt—an increase of 25% from the previous year. When interest rates rise, the cost of this debt becomes an unmanageable burden. This is not a prediction, but a reality already starting to show.
Bubble Mechanism: Why Interest Rates Are the Destroyer
The green bubble theory is based on simple logic: renewable energy projects require large initial capital (to build wind farms, solar panels, or batteries) and returns come slowly over time. When interest rates are low, cheap loans cause investments to surge. However, when central banks like the Federal Reserve or Bank Negara Malaysia raise interest rates to control inflation, loan costs spike suddenly. Projects that looked profitable on paper (with low discount rates) suddenly become unprofitable. Added to this is the inflation of material costs such as silicon, lithium, and steel, further shrinking profit margins. According to a McKinsey report, large-scale solar projects in Southeast Asia require an internal rate of return (IRR) of at least 8-10% to attract investors, but with loan costs of 6-7%, achieving this IRR is difficult. The result: stalled projects, falling stock prices, and investors fleeing.
Counterargument: Will Technology Save Us?
But don't jump to conclusions. Those who oppose the green bubble theory argue that this industry is different from the dot-com or housing bubbles. They claim that technological advancements and economies of scale will continue to reduce costs. Just look: solar panel costs have dropped 90% since 2010, and lithium-ion battery prices have fallen 85% over the same decade. Large companies like NextEra Energy or Ørsted continue to acquire weaker small competitors, creating stronger entities. Moreover, government policies such as subsidies, carbon credits, and renewable energy mandates (for example, Malaysia's target of 40% renewable energy capacity by 2035) provide support not seen in other bubbles. However, data shows that this price drop is also caused by excessive production capacity—a classic sign of a bubble. When the market is saturated, only companies with strong cash reserves can survive. Others will go bankrupt, leaving behind debt and half-finished projects.
Implications for Malaysia and Southeast Asia
What does this mean for us in Malaysia? Our country is actively investing in solar and hydro power, with plans to reduce carbon emissions by 45% by 2030. However, if the green bubble actually bursts, these projects may be affected. Take for example the wind farms in Kedah or the massive solar projects in Sabah—these all depend on bank loans with rising interest rates. Bank Negara Malaysia has raised its overnight policy rate (OPR) by 125 basis points since 2022, and this is already being felt by local clean energy companies. Furthermore, the depreciation of the ringgit increases the cost of importing solar panels and other components. If this trend continues, we may see clean energy projects in our country either delayed or canceled, leaving behind unrecouped debt.
Conclusion: Between Hope and Reality
The green bubble is not a theory to be outright rejected, nor is it an absolute disaster forecast. What is certain is that the renewable energy industry is going through an unstable growth phase—where too much money is chasing too few truly viable projects. Investors need to be more selective, governments must plan subsidies wisely, and consumers must realize that today's low green prices may be paid for with tomorrow's debt crisis. If not, we may witness that the green mark is actually a warning signal. As Per Wimmer said, "Not everything that glitters is gold, and not everything that is green is sustainable."
Rujukan: Green bubble — Wikipedia
Green Bubble: A Renewable Energy Crash or a Market Correction?. The 'green bubble' theory claims that excessive investment in renewable energy will collapse as interest rates rise. This article explores the reality behind this phenomenon, from the Solyndra failure to the soaring debts of clean energy companies. Is the industry heading toward destruction or just a market correction phase?. First Shock: When Green Turns Red
Imagine a world where every country races to invest in solar, wind, and batteries—like there is no tomorrow. However, behind the glow of these green projects lies a secret rarely mentioned: the green bubble. Yes, you read that right. This term, which may make you pause, is not a joke but an economic theory claiming that investments in renewable energy have gone beyond sustainable limits. According to Wikipedia, the term gained prominence in the late 2000s and 2010s, popularized by authors like Per Wimmer in his book The Green Bubble , as well as articles in Wired and The New Republic. The idea is that when interest rates rise, heavily indebted clean energy companies will fall like dominoes. Irony is that while the world shouts 'green is the future,' this theory warns that the future might be burning investors' money.
From Solyndra to Crazy Debts: Stories of Failure
The most classic example to understand the green bubble is the story of Solyndra, an American solar panel company that received a $535 million government loan in 2009. In 2011, Solyndra went bankrupt. Why? Because their cylinder panel technology could not compete with cheaper flat Chinese panels—and more importantly, demand was not as high as expected. This is not the only case. Look at companies like SunEdison, once a solar giant, which went bankrupt in 2016 with $11.7 billion in debt. Or Tesla, which, although not bankrupt, often operates with negative cash flow and large corporate debt. Data from Bloomberg New Energy Finance shows that in 2022, global clean energy companies accumulated $1.3 trillion in debt—an increase of 25% from the previous year. When interest rates rise, the cost of this debt becomes an unmanageable burden. This is not a prediction, but a reality already starting to show.
Bubble Mechanism: Why Interest Rates Are the Destroyer
The green bubble theory is based on simple logic: renewable energy projects require large initial capital to build wind farms, solar panels, or batteries and returns come slowly over time. When interest rates are low, cheap loans cause investments to surge. However, when central banks like the Federal Reserve or Bank Negara Malaysia raise interest rates to control inflation, loan costs spike suddenly. Projects that looked profitable on paper with low discount rates suddenly become unprofitable. Added to this is the inflation of material costs such as silicon, lithium, and steel, further shrinking profit margins. According to a McKinsey report, large-scale solar projects in Southeast Asia require an internal rate of return IRR of at least 8-10% to attract investors, but with loan costs of 6-7%, achieving this IRR is difficult. The result: stalled projects, falling stock prices, and investors fleeing.
Counterargument: Will Technology Save Us?
But don't jump to conclusions. Those who oppose the green bubble theory argue that this industry is different from the dot-com or housing bubbles. They claim that technological advancements and economies of scale will continue to reduce costs. Just look: solar panel costs have dropped 90% since 2010, and lithium-ion battery prices have fallen 85% over the same decade. Large companies like NextEra Energy or Ørsted continue to acquire weaker small competitors, creating stronger entities. Moreover, government policies such as subsidies, carbon credits, and renewable energy mandates for example, Malaysia's target of 40% renewable energy capacity by 2035 provide support not seen in other bubbles. However, data shows that this price drop is also caused by excessive production capacity—a classic sign of a bubble. When the market is saturated, only companies with strong cash reserves can survive. Others will go bankrupt, leaving behind debt and half-finished projects.
Implications for Malaysia and Southeast Asia
What does this mean for us in Malaysia? Our country is actively investing in solar and hydro power, with plans to reduce carbon emissions by 45% by 2030. However, if the green bubble actually bursts, these projects may be affected. Take for example the wind farms in Kedah or the massive solar projects in Sabah—these all depend on bank loans with rising interest rates. Bank Negara Malaysia has raised its overnight policy rate OPR by 125 basis points since 2022, and this is already being felt by local clean energy companies. Furthermore, the depreciation of the ringgit increases the cost of importing solar panels and other components. If this trend continues, we may see clean energy projects in our country either delayed or canceled, leaving behind unrecouped debt.
Conclusion: Between Hope and Reality
The green bubble is not a theory to be outright rejected, nor is it an absolute disaster forecast. What is certain is that the renewable energy industry is going through an unstable growth phase—where too much money is chasing too few truly viable projects. Investors need to be more selective, governments must plan subsidies wisely, and consumers must realize that today's low green prices may be paid for with tomorrow's debt crisis. If not, we may witness that the green mark is actually a warning signal. As Per Wimmer said, "Not everything that glitters is gold, and not everything that is green is sustainable."
Rujukan: Green bubble — Wikipedia https://en.wikipedia.org/wiki/Green bubble
