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Charlotte Dudley

Charlotte Dudley

Charlotte is a writer for Environmental Finance.Environmental Finance is the leading global publication covering the ever-increasing impact of environmental issues on the lending, insurance, investment…

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Clean Energy Investments Slump in Q1

Global clean energy investment in the first three months of 2011 totalled $31.1 billion, a 34% slump on the previous quarter and down 10% on the corresponding period last year, according to Bloomberg New Energy Finance (BNEF).

Uncertainty around European renewable energy policy, rising US natural gas prices and a New Year lull all tempered investment, BNEF said.

The quarter was the weakest since the first quarter 2009 when, under the strains of global financial crisis, investment fell to $20.5 billion. However, public market investment in clean energy firms showed signs of recovery, with a 71% year-on year increase to $3.6 billion.

The analysis covers investment across asset financing in clean energy projects, public market investment in clean energy companies, and venture capital and private equity investment in unquoted clean energy firms.

BNEF attributed the lacklustre first quarter to policy uncertainty in Europe, particularly in Italy, Spain, France and the UK, while low natural gas prices in the US made it tougher for wind and solar developers to secure power purchase agreements. The drop may also reflect a “pause for breath” among investors following a rush to close deals – and in some cases secure subsidies – by the end of the year, BNEF said.

While the study points to spots of blue sky within the Brazilian and Chinese wind sectors, asset financing of utility-scale renewable projects dropped 30% from the previous quarter and public market investment plummeted 56%, to $3.6 billion, down from $8.1 billion in Q4.

However, compared to last year’s corresponding quarter, public market investment jumped 71%, buoyed by the $1.4 billion share sale by China’s Sinovel Wind and a $220 million offering by Chinese solar manufacturer Shandong Jinjing Science & Technology.

Venture capital and private equity investment rose nearly 6% from Q4 to $1.8 billion, but was down 38% from the first quarter of 2010.

The figures contrast with that of California-based Cleantech Group, which earlier this month put global clean-tech venture capital investment at $2.57 billion, up more than 50% on its Q4 figures, despite a drop in deal volume.

Emerging markets show 'encouraging' growth

Michael Liebreich, BNEF chief executive of Bloomberg New Energy Finance, said while 2011 clean energy investment to date has been slow, the results point to growth opportunities in developing markets.

"Predictably, the first quarter saw a bit of a hangover from the hectic investment activity seen in the final months of last year as financiers rushed to close deals to meet their internal targets or to catch feed?in tariffs due to expire in countries such as Germany, Italy and the Czech Republic. However the high level of investment in emerging economies, particularly China and Brazil, is encouraging,” he said.

The outlook for the year as a whole will depend on the interplay between policy support for renewables and the cost?competitiveness of the sector, Liebreich said.

“Neither the upheavals in the Middle East nor the Japanese nuclear crisis will have any short?term impact on clean energy, although in the long term it may be a different story,” he added.

Tom McColm, a clean-tech analyst at Allenby Capital in London, said the shift to low-carbon energy sources could take decades and investment trends are better considered over the long term.

“Even though the investment level has fallen for the quarter the overall long-term trend shows clearly that the clean-tech/renewable energy sector is coming,” he said. “If 25 years ago someone had predicted that in 25 years time over $30 billion dollars of investment would go into low-carbon technology investment in the first quarter alone, they would not have been believed.”

Ken Rumph, a London-based clean-tech analyst with Nomura Code Securities, said it was “ironic” that China and Brazil “see the benefit” in clean energy investment while the US and Europe appear to be faltering.

By. Charlotte Dudley

Source: Environmental Finance


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