Total new investment in clean energy worldwide rose 4.4% during the course of 2008 and exceeded the $150 billion mark for the first time, according to full-year figures released yesterday.
The growth rate in investment is dramatically down from the 60% compound recorded over 2006 and 2007, and the data also show a very strong first half giving way to a much weaker second half, analysts New Energy Finance said. This pattern suggests that 2009 will get off to a subdued start, although policy moves, particularly in the US, may restore momentum later in the year.
Record $155 Billion
The total new investment in the sector in 2008 was a record $155 billion, compared with $148 billion in 2007. That investment in 2008 ended up higher than in 2007 is testament to the powerful drivers that are pushing the clean energy sector forward–concern about climate change, worries about energy security and the need to build new generating capacity to keep up with economic growth in developing countries and to replace aging power stations in Europe and North America.
The largest single element in the investment total was asset finance–investment in projects such as wind farms, solar parks, biofuel plants and biomass and waste-to-energy installations. Asset finance new build in 2008 was $97 billion, up from $84.5 billion in 2007. The main reason for this increase was hectic financing of wind and solar projects, particularly in the European Union and North America but also increasingly in less obvious territories such as China, Eastern Europe and Latin America.
VC Investment
A second important element was venture capital and private equity investment in clean energy companies, totalling $13 billion in 2008, up sharply from $9.8 billion in 2007. Venture capital and private equity investors were to some extent taking up the slack from the public markets, where 2008’s sharp falls in share prices made it hard for clean energy firms to raise fresh capital.
Total public market net investment last year was $10.3 billion, down more than half from 2007’s record of $23.4 billion. The biggest public market financing of 2008 was EDP Renovaveis’s EUR 1.6 billion initial public offering in Portugal, while the many significant VC/PE deals of the year included the EUR 300m (US$398 million) raised by Dutch renewable energy project developer Econcern and the $300 million raised by US thin-film solar panel producer Nanosolar.
Year of Two Halves
However the statistics also show that 2008 was a year of two halves: the first half saw new investment (excluding government and corporate R&D and small-scale projects) reaching $65.5 billion, up a very respectable 40% on the same period in 2007, while the second half saw a deceleration to $54.4 billion–a drop of 17% on H1 and down 23% on the same period in 2007.
"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. So it looks likely that total investment levels in the first half of this year will be more subdued than the first six months of 2008," Michael Liebreich, chairman and chief executive of New Energy Finance, said.
"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. President-elect Obama has committed to doubling US renewable energy capacity within three years, which would not be a particularly ambitious target if it were not for the problems of the world’s capital markets," he concluded.
2009 Outlook
As far as the outlook is concerned, New Energy Finance sees clean energy moving from supply-constrained markets in 2007-08 to demand- and finance-constrained markets in 2009. Renewable energy technologies are becoming cheaper as they reach scale and gain operating experience. This trend has been obscured recently by surging commodity prices and supply chain bottlenecks, but with new industrial capacity coming on-line we are about to see prices drop as they come back in line with costs and a buyer’s market develops.
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