Wind power moves investors

Green energy overtook fossil fuels in attracting investment for power generation for the first time last year, according to figures released last month by the United Nations.

Wind, solar and other clean technologies attracted $140-billion in investment compared with $110-billion for gas and coal for electrical power generation, with more than one-third of the green cash destined for Europe.

The biggest growth for renewable investment came from China, India and other developing countries, which are fast catching up with the West in moving away from fossil fuels to improve energy security and tackle climate change.

“There have been many milestones reached in recent years, but this report suggests renewable energy has now reached a tipping point where it is as important—if not more important—in the global energy mix than fossil fuels,” said Achim Steiner, executive director of the UN’s Environment Programme. It was encouraging that a variety of new renewable sectors were attracting capital, and various countries, such as Kenya and Angola, were also entering the field, he said.

The UN still believes that $750-billion needs to be spent worldwide between 2009 and 2011 and this year has started ominously, with a 53% slump in first-quarter renewables investment to $13.3-billion.

Counting energy efficiency and other measures, more than $155-billion of new money was invested in clean-energy companies and projects, even though capital raised on public stock markets plunged 51% to $11.4-billion and green firms saw share prices slump more than 60% in 2008, according to the report, Global Trends in Sustainable Energy, which was drawn up for the UN by the New Energy Finance (NEF) consultancy in London.

Wind power, in which the United States is now the global leader, attracted the highest new worldwide investment, $51.8-billion, followed by solar at $33.5-billion. The former represented annual growth of only 1%, whereas the latter was up by nearly 50% year on year.

Biofuels were the next most popular investment, winning $16.9-billion, but down 9% on 2007, as the sector was hit by overcapacity issues in the US and political opposition, with ethanol being blamed for rising food prices.

Europe is still the main centre for investment in green power, with $50-billion being pumped into projects across the continent, an increase of 2% on last year, whereas the figure for the US was $30-billion, down 8%.

But although overall spending in the West dipped nearly 2%, there was a 27% rise to $36.6-billion in developing countries, led by China, which pumped in $15.6-billion, mostly in wind and biomass plants.

China more than doubled its installed wind turbine capacity to 11GW, and Indian wind investment was up 17% to $2.6-billion, as its overall cleantech spending rose to $4.1-billion in 2008, 12% up on 2007 levels.

Several new green deals—government reflationary packages designed to kickstart economies and boost action to counter climate change—have been laid out by ministers around the world.

The slump in global renewable investment during the first quarter of 2009 has alarmed the UN and NEF.
Michael Liebreich, chief executive of NEF, said the second quarter had revealed “green shoots” of recovery, which indicated this year could end up with investment at the upper end of a $95-billion to $115-billion range, but still a quarter down on 2008 at the least.

About $3-billion of new money had been raised through initial public offerings or secondary issues on the stock markets in the second quarter, compared with none in the first three months of the year.

But Steiner and Liebreich are still anxious that politicians do more to stimulate growth. “There is a strong case for further measures, such as requiring state-supported banks to raise lending to the sector, providing capital-gains tax exemptions on investments in clean technology, creating a framework for green bonds and so on, all targeted at getting investment flowing,” said Liebreich.

It is important stimulus funds start flowing immediately, not in a year or so, he said: “Many of the policies to achieve growth over the medium term are already in place, including feed-in tariff regimes, mandatory renewable energy targets and tax incentives. There is too much emphasis among some policy-makers on support mechanisms and not enough on the urgent needs of investors right now.”—

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