/ 8 July 2008

Today’s gold rush is green

The “clean tech” sector has bounced back from the credit crunch with global figures showing a resurgence of interest — labelled a “green Klondike” — from investors in alternative energy. The sums involved could reach $600billion a year by 2020.

New Energy Finance is the specialist consultant that compiled the latest figures for the United Nations environment programme (Unep). It predicts that more money will be raised and spent this year than last, even though 2007 was a bumper year in which annual investment levels grew 60% to reach almost $150-billion.

“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 Unep.

“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,” he said at the launch of the New Energy Finance report, Global Trends in Sustainable Energy Investment 2008.

In Africa last year $1,3billion of asset finance was raised for sustainable energy schemes, mainly in biofuels and geothermal energy, 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.

The UN admits that the past half-year was turbulent because of the credit crunch that sent shares reeling and dulled investors’ appetite for risk.

The amount of new money coming into the wind, solar and biomass energy sector from the capital markets diminished in the first three months of 2008, with $1billion in new investment compared with $12,8billion in the last quarter of 2007. The past 12 weeks have seen a recovery, with $4,3billion splashed out — in line with the average quarterly figures for 2007.

“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 $148billion seen in 2007,” he said.

Michael McNamara, clean-tech analyst at US investment house Jefferies, is also positive. “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 $450billion a year by 2012 and ­$600billion by 2020, says the UN. New investment in all forms of energy, including oil and gas, is now $1,3trillion, meaning clean tech has secured 10% of the new investment market already.

New Energy Finance points out that the amount of investment made by venture capitalists and private equity rose strongly in the last quarter to $4,7billion, compared with $2,5billion in the first three months of the year and an average quarterly figure between $3billion and $3,5billion in 2006 and 2007.

The figures for asset financing — the actual money being pumped into new projects such as wind farms — look less encouraging, with $37billion in the last quarter of 2007 falling to $28billion in the first three months of 2008 and $19billion in the past 12 weeks.

The general rise in investment levels has been driven partly by new political initiatives coming from governments keen to improve energy security at a time of soaring oil prices, as well as by the drive to cut carbon emissions.

The UN report shows wind power attracting the most new money in 2007 ($50,2billion) but solar growing at the most rapid rate year on year. The $28,6billion of new capital going into solar means that the sector has expanded by more than 250% each year since 2004.

Chinese wind group Goldwind broke new ground when it raised $243million in December in the Shenzhen stock exchange’s first IPO related solely to renewable energy.

Chinese solar companies raised $2.5billion on the United States and European equity markets in 2007, while India became the fourth-largest wind power producer in the world after attracting $2,5billion of asset financing for turbine projects.

Investment in energy efficiency last year reached a record of $1,8billion, 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 spent on energy efficiency on average avoids more than $2 needed to create new supply.

The report notes a change in attitudes in the formerly conservative financial sector. It cites as an example the recent move by 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. —