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New investment in clean energy worldwide rallied in the second quarter of 2009, reaching $24.3 billion, according to figures published today by New Energy Finance. The data, based on actual deal and project transactions, show that Q2 was a big improvement on the first quarter of 2009, when investment was just $13.3 billion, but it was nevertheless well down on the same quarter of last year, when the figure was $36.2 billion.
Behind the improvement compared to Q1 were two main changes – a jump in asset finance of projects such as wind farms and solar parks, and a sudden resumption of equity issuance on public market by quoted clean energy firms.
However the most striking aspect of the data is the geographical split. New investment in Q2 was remarkably weak in the US, with new-build asset finance at just $1.6 billion, down two thirds on the same quarter in 2008, while in Europe, Middle East and Africa it reached $14.4 billion, the highest quarterly figure on record. This was mainly thanks to some big deals in offshore wind and solar.
The global data will boost hopes that the clean energy sector is through the worst of the downturn, but also leave many worried that the pace of investment in clean energy will be insufficient to bring carbon dioxide emissions to a peak before 2020. The second quarter investment figure of $24.3 billion is 37 percent below the quarterly average for last year. New Energy Finance recently predicted that total new investment this year would end up between $95 billion and $115 billion, well down on 2008’s record figure of $155 billion.
The biggest problems for the sector remain the shortage of debt finance caused by the banking crisis – this may not be quite as acute as in the first quarter but is still delaying many renewable energy projects – and general investor caution. The biggest boost on the way should come from “green stimulus” programs from governments in the major economies. New Energy Finance’s latest estimate is that these total $162.8 billion. However the vast majority of this money has yet to arrive and the bulk of it is unlikely to be spent until 2010 and 2011.
A detailed breakdown of the second quarter statistics shows that new investment in clean energy companies on public stock markets jumped from less than $100 million in Q1 2009 to $2.4 billion in Q2, with Vestas, SunPower and Suntech among the companies raising money in share issues. This figure was however still far down on the $5.7 billion raised in the second quarter of 2008, or the record $12.8 billion raised in Q4 2007.
The biggest gain in new investment in the second quarter, in absolute terms, came in asset finance. New-build finance of wind farms, solar parks, biofuel plants and other projects rose to $20.5 billion in Q2, from $11.4 billion in the first quarter. The key to this was a strong pick-up in financings in Europe, particularly in offshore wind and solar thermal electricity generation. However global asset finance in Q2 was still well down on the $27.1 billion figure achieved in the second quarter of last year.
Venture capital and private equity investment slipped in the second quarter, to $1.4 billion, from $1.8 billion in Q1 2009 and $3.5 billion in Q2 2008. VC/PE players were more resilient than other investors during the worst of the banking crisis, but worries about exit opportunities have helped to put them in a more cautious mood, particularly towards immature technologies, than they were in 2007 or early 2008.
Michael Liebreich, chairman and CEO of New Energy Finance, said: “It is a relief to see new investment in clean energy up from the feeble levels in the first quarter. But it would be wrong to celebrate – the sector continues to face big challenges, particularly in the financing of projects and new technologies. Our Global Futures analysis of energy markets in the next two decades shows that world new investment in clean energy will have to reach $500 billion-a-year if emissions are to be brought under control before 2020. That figure is a very long way off, and the downturn in investment between 2008 and 2009 has only made it more difficult to achieve. The sector’s growth prospects are good, but if governments are to limit the increase in global temperatures to two degrees Centigrade, they will have to take further steps to force change on the energy and transport sectors."