Investment experts burst `green bubble' fears

Age
Monday 14/9/2009 Page: 3

THE world's rising energy demand and proper reporting of performance is predicted to save clean technology investment from inhabiting the same bubble that claimed previous victims such as the dot-corn boom, according to risk management experts. As governments around the world legislate to assist renewable energy technologies to compete on price with traditional forms of power generation, which is typically carbon intensive, some commentators are warning of a "green bubble" around investment.

Last week Solar Systems, the Melbourne-based company that was to build the world's largest solar energy station, went into receivership with investors reluctant to back the new technology. The Victorian Government has also urged the Federal Government to scale back the $1.5 billion Solar Flagships program, a centrepiece of the May budget, because of a lack of financial appetite for such projects.

However, Nick Kidehalgh, a climate change partner at PricewaterhouseCoopers, said that meeting energy demand in a carbon-constrained world would require support of emerging technologies. "Remember those old black and white movies of planes trying to take off - that is the sort of level we are at. It is trial and error in some instances but it is all about finding out the right approach," he said.

"If population is going to double in the next 50 years or whatever, it is then the world's energy requirements will need to be met and that will need to happen while keeping our carbon footprint to a minimum." Mr Ridelialgh said companies would need to provide transparent reporting on their business strategy and performance over time in a bid to lower the perceived risks and encourage investment. "That will give the right information to the analysts and the capital markets to make a decision between two separate companies in a portfolio," he said.

Andre Abadie, director of Sustainable Finance in the UK, says that even if there are little bubble bursts along the way, the viable technologies will have been elevated, in much the same way that the dot-coin crash sent many companies under but paved the way for success stories such as Google and Facebook.

"You are going to have some unfortunate accidents along the way. You will have technologies that go bust," he said. "[But] because there may be an impending bubble burst or a couple of little bubbles burst doesn't mean we have to stop going down that route. You just test the technologies and see where we get to." Mark Eckstein, VWVF's managing director of international finance, said the outcome of the December climate change talks in Copenhagen would give a clear indication as to where the world was heading on reducing carbon, and consequently whether investment in products and solutions was inflated.