New investment in the worldwide clean energy sector in 2Q09 has already surpassed that in 1Q by a third, with several weeks still to go, according to industry analysts.
However, this is in comparison to a disastrous 1Q, which saw investment down 44% from 4Q08, and down 53% from the peak in 1Q08, according to New Energy Finance.
Analysts expects new investment to finish 2009 between $95 billion and $115 billion, a drop of between 26% and 39% on last year’s total of $155 billion.
Total global new investment in clean energy jumped from $35 billion in 2004, to reach last year’s record. However in a report entitled “Green Investment: Towards a Low-Carbon Energy Infrastructure”, published earlier this year by the World Economic Forum, New Energy Finance argued that annual investment in clean energy has to more than treble from $155 billion to $500 billion between 2008 and 2020 to ensure that carbon emissions peak before the end of the next decade.
Today’s release of a full-year forecast for 2009 shows that the financial crisis and recession have knocked these plans considerably off track, New Energy Finance said in a release.
Looking on the bright side, however, figures indicate that 1Q09 is likely to prove the low point for clean energy investment in this downturn. Already in 2Q, investment in clean energy companies via the public markets has rallied sharply, with well over $2 billion of completed secondary issues by the likes of Vestas (VWS.Co), SunPower (Nasdaq: SPWRA, SPWRB), Q-Cells (QCE:DE), Evergreen Solar (Nasdaq: ESLR) and Suntech Power (NYSE: STP).
Even more importantly, the biggest single obstacle facing the sector this year–the sudden shortage of debt finance for wind farm, solar parks and other clean energy projects caused by the banking crisis–may also be past its worst. In a Research Note published this week for its clients, New Energy Finance describes bankers active in the sector as being optimistic about a gradual improvement in the availability of project debt during the remainder of this year.
Although spreads on debt finance for wind farms and solar PV projects have risen sharply from their lows in 2007, this change has been almost entirely offset by falls in central bank interest rates. New Energy Finance’s figures show the number of clean energy project financings accelerating somewhat from their nadir in 1Q this year.
Another key issue is the timing of the arrival of “green stimulus” money from government programs aimed at alleviating the recession. Since September 2008, major economies announced some $184.9 billion of stimulus funds aimed at clean energy or energy efficiency. However, New Energy Finance estimates that more than two-thirds of this money will be spent in 2010 and 2011, with 15% or less, only around $28 billion, this year.
“It is disappointing that 2009 looks likely to show such a significant fall in new investment in clean energy," Michael Liebreich, chairman and CEO of New Energy Finance, said. "However, the good news is that it does look as though the worst is past. It is also worth remembering that our forecast investment figures for 2009 are still above the figures for 2006. There are plenty of other industrial and infrastructure sectors that would be delighted to be at the same level of activity this year as 2006."
“And a wave of stimulus money is about to break over the clean energy sector. The funding is certainly welcome, but unfortunately, administrative delays mean it barely started to flow in Q1 and Q2 this year, when it was most needed." Liebreich said. "The bulk of it is likely to arrive next year and thereafter, by which time the clean energy sector may be well on the way to recovery under its own steam. There is a strong chance that the bulk of the stimulus funding may end up being pro-cyclical for the sector.”
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