Clean energy: ‘The sector has been hit by an oncoming train’
A number of reports released in the past few days are confirming that the investment drought hitting the clean energy sector is likely to last. The latest one, released Thursday by New Energy Finance, showed that global investments in the clean energy sector plummeted to $13.3 billion in the first quarter of 2009, a 44% drop from the fourth quarter of 2008 and a 53% drop from the same time last year.
The biggest single drop was investments,mostly in the form of project finance bank loans, supporting the construction of new wind or solar power projects. These totaled $11.5 billion during the first three months of 2009, which was down 44% from the fourth quarter of 2008.
Investments by venture capital funds fell to $1.8 billion during the first quarter, down 22% from to the fourth quarter. This contrast with data released yesterday by the Cleantech Group, a competing research firm, which showed $1 billion in venture investment during the first quarter. Unlike the Cleantech Group, New Energy Finance’s data includes private equity investment.
Global investments in clean clean energy reached $155 billion for the whole of 2008.
Commenting on these latest figures, New Energy Finance’s chief executive Michael Liebreich said the sector was hit “by an oncoming train” and called for greater government support:
“These figures highlight the need for policy-makers and administrators in the U.S. and elsewhere to ensure that stimulus funds start flowing immediately…. There is also a strong case for further measures, such as requiring state-supported banks to raise lending to the sector, providing capital gains tax exemptions on investments in clean technology, creating a framework for Green Bonds and so on, all targeted at getting investment flowing.”
Governments across the globe have already approved large, green-focused stimulus monies but these funds have yet to reach companies. The U.S. Treasury Department is drafting rules to distribute a large chunk of the stimulus money but has not offered a specific timeline on when it would start distributing funds. Liebreich does not expect stimulus money in the U.S. and abroad to reach companies for at least another year.
In the U.S., which has been adding the largest amount of wind and solar projects in the past couple of years, financing of greenfield projects totalled just $500 million during the first quarter, four times as less as the $2 billion invested in the previous quarter or the $5billlion invested during the same quarter a year ago.
Although not a source of direct investment capital, mergers and acquisition activity also took a hit, with about $8.8 billion in new deals registered for the first quarter, compared to $17.3 billion during the fourth quarter of 2008 and $18.8 billion in the year -ago period.
New Energy Finance does not expect a rebound anytime soon. “It will take a very sharp acceleration in investment in the remaining three quarters for this year to match 2008 levels,” it says.
