Tuesday, July 01, 2008

Record-Setting Year For Renewable & Efficiency Investments

Jul 1: A new report, Global Trends in Sustainable Energy Investment 2008, prepared by UK-based New Energy Finance for United Nations Environment Programme's (UNEP's) Paris-based Sustainable Energy Finance Initiative indicates that climate change worries, growing support from world governments, rising oil prices and ongoing energy security concerns, combined to fuel another record-setting year of investment in the renewable energy and energy efficiency industries in 2007. Over $148 billion in new funding entered the sustainable energy sector globally last year, up 60% from 2006, even as a credit crunch began to roil financial markets.

Achim Steiner, the head of UNEP said, "The clean energy industry is maturing and its backers remain bullish. These findings should empower governments-both North and South-to reach a deep and meaningful new agreement by the crucial climate convention meeting in Copenhagen in late 2009." Wind energy again attracted the most investment($50.2 billion in 2007), but solar power grew most rapidly:attracting some $28.6 billion of new capital and growing at an average annual rate of 254% since 2004, driven by the advent of larger project financings.

The picture since the end of 2007 has been somewhat subdued across the sector, with only mergers and acquisitions up as several substantial wind developers sold their portfolios -- many realizing that with the tightening up of the credit markets they could not finance the growth themselves -- and the U.S. ethanol industry undergoing restructuring. But in the second quarter of 2008 most areas of investment rebounded, even as global financial markets remained in turmoil. Sustainable energy venture capital and private equity in Q2 2008 was up 34% on Q2 2007, new build asset finance was up 8% and public market investment showing a strong recovery with the IPO of Portuguese utility EDP's renewable energy business, EDP Renovaveis.

Steiner, who is also a UN Under-Secretary General said, "Just as thousands were drawn to California and the Klondike in the late 1800s, the green energy gold rush is attracting legions of modern day prospectors in all parts of the globe. A century later, the key difference is that a higher proportion of those looking for riches today may find them. With world temperatures and fossil fuel prices climbing higher, it is increasingly obvious to the public and investors alike that the transition to a low-carbon society is both a global imperative and an inevitability. This is attracting an enormous inflow of capital, talent and technology. But it is only inevitable if creative market mechanisms and public policy continue to evolve to liberate rather than frustrate this clean energy dawn. What is unfolding is nothing less than a fundamental transformation of the world's energy infrastructure."

Most of the new money flowed into Europe, followed by the USA. However, China, India and Brazil are drawing growing investor interest -- their share of new investment growing from 12% in 2004 to 22% in 2007, an increase in absolute terms of 14 times, from $1.8 billion to $26 billion. Total 2007 sustainable energy transaction volume was $204.9 billion, of which $98.2 billion went into new renewable energy generation (especially wind in the US, China and Spain), $50.1 billion went into technology development and manufacturing scale-up, and $56.6 billion changed hands through mergers and acquisitions. With 31 gigawatts of new installed generation, sustainable energy accounted for 23% of new power capacity added globally in 2007, about 10 times that of nuclear.

Sustainable energy companies accounted for 19% of all new capital raised by the energy sector on the global stock markets in 2007. The report indicates that, "Investment in the sustainable energy sectors must continue to grow strongly if targets for greenhouse gas reductions and renewables and efficiency increases are to be met. Investment between now and 2030 is expected to reach $450 billion a year by 2012, rising to more than $600 billion a year from 2020. The sector's overall performance during 2007 and into 2008 sets it on track to achieve these levels."

Access a lengthy release from UNEP with additional details and links to extensive related information (click here). Access links to the complete report, executive summary, and PowerPoint presentation (click here). [*Energy, *Climate]