Renewable Energy - So Three-Months-Ago

This piece from the Financial Times is one of a series of reports about falling investment in the renewable energy sector. The sector is getting squeezed between the crisis in the financial markets on the one hand, and falling oil prices on the other.

When a group of us spoke in June to physicist and 3rd-Generation solar photovoltaics researcher Alan Heeger, he said he thought much of the investor motivation was driven by the high price of gasoline and not by a sincere commitment to alternative energy development. I thought this was a bit cynical at the time, but he is turning out to be correct.

The test will be what happens when the global recession keeps oil prices weak as the credit markets stabilize. If alternative energy investment doesn't come back then - even when helped by large state investment in China and perhaps even in the US - then Prof. Heeger will be, to his great sorrow, proven correct.

I personally believe the last line of the piece below.

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Clean energy investment falls sharply

By Fiona Harvey in London, Richard Waters in San Francisco and Sheila McNulty in Houston
Published: November 10 2008 18:08 Financial Ties

Investment in low-carbon technologies is suffering its first reversal after several years of record growth, as the financial crisis dims the sector’s prospects.

Worldwide investment in clean energy companies and new clean energy capacity fell sharply in the third quarter of 2008, compared with the previous quarter, according to New Energy Finance, a market analyst company.

Venture capital and private equity investment totalled $4.4bn in the third quarter, down 24 per cent from the $5.8bn in the second quarter of 2008.

Brent Goldman, partner at BDO Stoy Hayward, said: “We are seeing less activity across the whole market.

“There will be more and more businesses without enough funds, and they will struggle.”

Clean technology investment has soared in the past four years, on the back of high conventional energy prices and fears over climate change and energy security. The cost of renewables has come down and governments have increased their subsidies.

But many clean technology companies are at an early stage, and have found it more difficult to raise funds. Longer established companies have suffered less, but some have found it harder to find funds and credit for expansion.

Capital raising in the public markets was down in the third quarter, at about $2.6bn of new money raised – most of which came from convertible issues rather than flotations or rights issues – compared to $4.9bn in the second quarter.

The biggest public capital raising was by EDF Energies Nouvelles, the French renewable energy company, raising $734m through a secondary issue.

The biggest IPO recorded by New Energy Finance from July to September, at $87m, was Energy Recovery, a Californian energy efficiency specialist.

M&A activity among clean technology companies also fell, by 21 per cent to $2.9bn in the third quarter.

But the financing of new capacity in the clean energy market, such as the building of new wind farms, remained strong at $19bn in the third quarter, only marginally down on the $23bn in the second quarter of this year.

However, as clean technology investment remained relatively strong for the first half of this year, new investment in clean energy worldwide is likely to be only about 4 per cent lower in 2008 than last year, according to New Energy Finance.

Michael Liebreich, chief executive of New Energy Finance, predicted investment would return to its previous high levels next year.

He said: “There will be a hiatus of about six months, but then capital will return. The fundamentals of this business still look good.”