The stock market bubble in the world’s alternative energy producers may have burst. After years of dramatic growth, shares in the wind, solar and biofuels energy sectors have slumped since the start of the year on growing investor fears of recession in large economies.

Green energy stocks have fallen 25 per cent this year after peaking at the end of 2007, according to Financial Times research, using a selection of companies in the solar, wind and biofuels sectors.

These stocks had risen 200 per cent between January 2006 and the end of December 2007 as governments and industry stepped up their commitments to the use of alternative energy. Some stocks have underperformed their benchmark indices by more than 30 per cent since January 1.

“We have seen a big sell-off in alternative fuel stocks. Worries over recession have been the main factor driving them lower,” said Terry Coles, head of the F&C Global Opportunities Fund.

“In a recession, there is less money around and demand for any source of energy will fall, but alternative energy will fall further as it is less established than conventional sources of energy.”

Edmund Shing, European equities strategist at BNP Paribas, added: “Alternative fuels are very likely to be absolutely crucified in the coming months. People are not going to buy stocks where future earnings are in big doubt. If we enter a fully blown bear market, which looks likely, it is difficult seeing these stocks recovering.”

Suntech Power, the Chinese solar cell manufacturer listed in the US, has underperformed the benchmark S&P 500 index by about 35 per cent this year after its share price soared close to 300 per cent at the end of 2007 from its launch in 2005.

Clipper Windpower, the UK-listed company, has underperformed the FTSE All Share by 17 per cent since January 1. Its share price had risen 250 per cent at the end of 2007 from its launch in 2005.

In the biofuels sector, US-based Pacific Ethanol, one of the leading producers, has underperformed the Nasdaq by 15 per cent this year after hitting three-year highs at the end of 2007.

One company that has bucked the trend is Vestas Wind Systems, the world’s largest turbine manufacturer. Its shares are marginally up on the year, underpinned by strong fourth quarter results. However, this was a company that saw its share price surge 700 per cent at the end of 2007 from the start of 2005.

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