Clean energy investment limps over $150bn in ‘08

www.environmental-finance.com/
London, 15 January:

Investment in clean energy companies and projects grew by 4.4% in 2008, to breach $150 billion for the first time, according to figures from New Energy Finance (NEF). But strong growth - of 40% year-on-year - in the first half of 2008 gave way to a drop of 23% in the second half of the year, compared with the same period in 2007. Preliminary 2008 figures from NEF released in December anticipated a fall of 4%.

Nonetheless, the slightly improved final numbers compare dismally with 60% growth in investment between 2006 and 2007. However, the London-based analysis company suggests that, after a "subdued start" to 2009, policy developments in the US particularly could restore the sector's momentum later in the year.

A total of $155 billion was invested last year, with investments directly in renewable energy assets reaching $97 billion (up from $84.5 billion in 2007) and by venture capital (VC) and private equity (PE) players in clean energy companies hitting $13.0 billion (up from $9.8 billion). However, investments via the public markets shrank, to $10.3 billion, from $23.4 billion in 2007. NEF said that the rise in VC and PE investment took up some of the slack from the public markets, where sharp falls in share prices in 2008 made it difficult for clean energy firms to raise fresh capital.

"It is encouraging to see that clean energy investment was so strong in 2008, despite everything that was going on in the world economy," said Michael Liebreich, chairman and chief executive of NEF. "Having said that, the big change late in the year was that debt and tax credit finance for renewable energy projects became much harder to find because of the problems of the banks.

This meant that investment in wind farms, solar plants and the like slowed fairly dramatically in the second half." He added: "The dearth of debt finance will continue into 2009. In addition, public stock markets remain fragile, and this will deter clean energy firms wanting to launch IPOs or secondary issues." NEF is predicting that the first half of 2009 will see lower investment than last year.

"What happens after mid-year will depend on two things: whether the banks start to translate historically low central bank rates into lending to companies and projects, and whether administrations around the world deliver on their promises to make a push for clean energy part of any fiscal stimulus packages," said Liebreich.

The company sees clean energy "moving from supply-constrained markets in 2007-08 to demand- and finance-constrained markets in 2009". It adds that renewable energy is continuing to become cheaper, but the trend has been obscured by high commodity prices and supply chain bottlenecks, that new industrial capacity is set to unblock.