Policy uncertainties in developed economies dampen clean energy investment in Q1
Brazilian and Chinese wind sectors are two of the brightest areas in first quarter, along with European offshore wind transmission
London and New York – New financial investment in clean energy suffered its weakest quarter in the first three months of 2011 since the depths of the financial crisis two years earlier, according to the latest authoritative figures from research company Bloomberg New Energy Finance.
New financial investment worldwide in Q1 2011 totalled $31.1bn, down by a third from the record $47.1bn figure recorded in the fourth quarter of last year. The Q1 2011 number was also down 10% on the equivalent figure for the first quarter of 2010 of $34.5bn, but it is up over 50% from the low of $20.5bn recorded in Q1 2009.
The subdued investment level in the most recent three months reflected in large part the influence of policy uncertainties in Europe, including in Italy, Spain, France and the UK. Low natural gas prices in the US have played a role – since cheap gas-fired electricity makes it harder for developers of wind and solar projects to secure power purchase agreements. Investors may also have had a “pause for breath” after their rush to close deals in the closing months of 2010, in some cases to catch attractive subsidies before they expired.
Bloomberg New Energy Finance’s quarterly figures for new financial investment cover three types of funding – asset finance of utility-scale renewable energy projects such as wind farms, solar parks and biofuel refineries; public market investment in clean energy companies; and investment by venture capital and private equity players in unquoted clean energy firms. They do not cover investment in distributed power generation, which boomed by 91% last year, or investment in research, development and deployment.
Two of the three asset classes covered saw significant declines in activity between Q4 2010 and Q1 2011.
Taking asset finance first, there was a decline to $25.7bn in the first quarter of 2011 from $36.6bn in the last quarter of 2010. The biggest reductions in asset finance in terms of absolute dollars came in US wind and European solar. The brightest spots of January-March 2011 were Chinese wind, up 25% on the same quarter of 2010 at $10bn, and Brazilian wind, which saw investment double to $2.1bn from a year earlier.
Key projects going ahead included the 211MW IMPSA Ceara wind auction portfolio and 195MW Renova Bahia portfolio, both in Brazil, and the 200MW Hebei Weichang Yudaokou village wind farm in China. Although European wind was down around 10% at $4.4bn, this figure was bolstered by several large offshore wind infrastructure commitments, including the Dan Tysk project off Germany, the Skagerrak 4 project off Denmark, and the Randstad project off the Netherlands.
In public market investment, the first quarter saw a sharp fall from Q4’s $8.1bn to $3.6bn – although this was above the equivalent figure for the same quarter in 2010 of just $2.1bn. Transactions included a $1.4bn share sale by Sinovel Wind in China, and a $220m offering by solar manufacturer Shandong Jinjing Science & Technology, also in China.
Venture capital and private equity investment was up slightly at $1.8bn in Q1, from $1.7bn in the fourth quarter of last year. However the latest figure was down 38% from the equivalent total for the first quarter of 2010. By far the biggest sector for VC/PE investment in the first three months of this year was energy-smart technologies, with deals including a $112m Series B round for US electric vehicle company Fisker Holdings. The largest transaction of the quarter however was a $143m expansion capital round for US biomass and waste-to-energy specialist Plasma Energy.
Michael Liebreich, chief executive of Bloomberg New Energy Finance, commented: "Predictably, the first quarter saw a bit of a hangover from the hectic investment activity seen in the final months of last year as financiers rushed to close deals to meet their internal targets or to catch feed-in tariffs due to expire in countries such as Germany, Italy and the Czech Republic. However the high level of investment in emerging economies, particularly China and Brazil, is encouraging.
“Whether 2011 turns into another record year for clean energy investment will depend in part on whether the improving cost-competitiveness of renewable power, particularly solar photovoltaics, can outweigh policy uncertainties that continue to dog several important developed economy markets. Neither the upheavals in the Middle East nor the Japanese nuclear crisis will have any short-term impact on clean energy, although in the long term it may be a different story,” Liebreich said.
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