Clean tech: Green energy is the modern gold rush

Alternative power Investors are falling over themselves to put cash into the search for cleaner fuels
Terry Macalister
The Guardian,
Wednesday July 2, 2008

The "clean tech" sector has bounced back from the credit crunch with new global figures showing a resurgence of interest from investors in alternative energy - labelled a "green Klondike" that could reach $600bn annually by 2020.
New Energy Finance, a specialist consultant which has compiled the latest figures for the United Nations environment programme, says money raised and spent during 2008 should be ahead of 2007, a banner year when annual investment levels grew 60% to reach almost $150bn (£73bn).
"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," said Achim Steiner, the head of the UN's environment programme.
"More than a century later, the key difference is that a higher proportion of those looking for riches today may find them. With world temperatures rising and fossil fuel prices climbing higher, it is obvious to the public and investors alike that the transition to a low-carbon society is both a global imperative and an inevitability," added Steiner as he launched the report, Global Trends in Sustainable Energy Investment 2008.
The UN admits that the last half-year has been a turbulent period as a result of the credit crunch which has sent shares reeling across most sectors and undermined investors' appetite for risk. The volume of new money coming into the wind, solar and biomass sector from the capital markets fell off in the first three months of 2008, with $1bn of new investment compared with a figure of $12.8bn in the last quarter of 2007. The most recent 12 weeks have seen a recovery, with $4.3bn splashed out - in line with the average quarterly figures seen in 2007, which was a bumper year for clean tech, according to London-based New Energy Finance.
"There are clear signs that the clean tech sector is proving more resilient than other sectors such as mainstream construction which is in recession in some parts of the world," said Michael Liebreich, chief executive of New Energy Finance. "We saw 60% growth in 2007 and the overall expectations for this year will be that the numbers will either move sideways or slightly up on the $148bn seen in 2007," he said.
Michael McNamara, clean tech analyst at US investment house Jefferies, is also upbeat: "The credit crunch did have some impact, but only on marginal projects and for every one cancelled there is always another one popping up. I am not seeing any shortage of calls."
The latest figures suggest the world is on track to spend $450bn per annum by 2012 and hit $600bn a year by 2020, according to the UN. New investment in all forms of energy, including oil and gas, is currently $1.3tn, meaning clean tech has already secured 10% of the new investment market. New Energy Finance points out that the amount of investment made by venture capitalists and private equity had risen strongly in the last quarter to $4.7bn, compared with $2.5bn in the first three months of the year and an average quarterly figure of between $3bn and $3.5bn during 2006 and 2007.
The figures for asset financing - the actual money being pumped into new projects such as wind farms, look less encouraging with $37bn in the fourth quarter of 2007 falling to $28bn in the first three months of 2008 and $19bn in the last 12 weeks.
The general rise in investment levels has partly been driven by new political initiatives coming from governments keen to improve energy security at a time of soaring oil prices as well as the drive to cut carbon emissions.
Last week, the British government set out a new set of ambitious policies to kickstart more investment in wind, wave and biomass.
The UN report shows wind attracting the most new money in 2007 ($50.2bn), but solar is growing at the most rapid rate year on year. The $28.6bn of new capital going into solar means that the sector has expanded annually at more than 250% since 2004.
The wind sector was given a huge boost by the $7.2bn flotation in December of the wind power development arm of the Spanish power group Iberdrola, the largest ever initial public offering in Spain.
The Chinese wind group Goldwind broke new ground when it raised $243m in December, in what was the Shenzhen stock exchange's first IPO-related solely to renewable energy.
Meanwhile Chinese solar companies raised $2.5bn on the US and European equity markets during 2007 while India became the fourth largest wind power producer in the world after attracting $2.5bn worth of asset financing for turbine projects.
Even in Africa, $1.3bn worth of asset finance was raised for a variety of sustainable energy schemes, mainly in biofuels and geothermal, reversing a gradual decline since 2004. Sub-Saharan Africa - "arguably the region that has most to gain from renewable energy" - remains largely unexploited, says the report.
Investment in energy efficiency last year reached a record of $1.8bn, an increase of 78% from 2006 with North America attracting the most funds despite the fact that its legislation lags behind that of Europe. The International Energy Agency claims that each $1 ploughed into energy efficiency on average avoids more than $2 needed to create new supply.
The report notes a change in attitudes that has taken place in the formerly conservative financial sector citing, as an example, the recent move by the top Wall Street investment banks Citi, JP Morgan Chase and Morgan Stanley, to launch a set of Carbon Principles to guide the way they lend to and advise power companies in the US