The growth rate in investment is dramatically down from the 60% compound recorded over 2006 and 2007. The data also show a very strong first half giving way to a much weaker second half, which suggests that 2009 will get off to a subdued start, although policy moves, particularly in the US, may restore momentum later in the year.
The largest single element in the investment total was asset finance – investment in projects such as wind farms, solar parks, biofuel plants and biomass and waste-to-energy installations. Asset finance new-build in 2008 was US$97bn, up 15.5% from 2007. The increase was largely due to hectic financing of wind and solar projects, particularly in the EU and North America, but also increasingly in territories such as China, Eastern Europe and Latin America.
A second important element was venture capital and private equity investment, totalling US$13.0bn in 2008, up from US$9.8bn in 2007. VC/PE investors were to some extent taking up the slack from the public markets, where 2008’s sharp falls in share prices made it hard for clean energy firms to raise fresh capital. Total public market net investment last year was US$10.3bn, less than half of 2007’s record US$23.4bn.
Year of two halves
The first half of 2008 saw new investment (excluding government and corporate R&D and small-scale projects) reaching US$65.5bn, up 40% on the same period in 2007, while the second half saw a deceleration to US$54.4bn – a drop of 17% on the first half and down 23% on the same period in 2007.
Michael Liebreich, Chairman and Chief Executive of New Energy Finance, comments: “The dearth of debt finance will continue into 2009. In addition, public stock markets remain fragile, and this will deter clean energy firms wanting to launch IPOs or secondary issues...
“What happens after mid-year will depend on two things: whether the banks start to translate historically low central bank rates into lending to companies and projects, and whether administrations around the world deliver on their promises to make a push for clean energy part of any fiscal stimulus packages.”
Wind was once again by far the largest in terms of new investment, while solar, in second place, increased the gap over third-placed biofuels. Total third party investment in wind was US$52.9bn, down 1.5% from 2007. The equivalent total for solar was US$31bn, up 31.9%, while biofuels reached US$20.7bn, down 3.7%.
Other renewables such as geothermal and mini-hydro jumped to US$6.4bn, but there was a sizable fall to US$5.6bn in investment in biomass and waste-to-energy. Other low-carbon technologies such as fuel cells and energy efficiency devices saw a pronounced fall in investment, particularly via the public markets, their total declining 62.5% to US$3.2bn.
Government research and development grew around 7% during the course of the year, as did to a large extend RD&D investment by companies, growing 5%.
Total mergers and acquisitions activity, including private equity buy-outs and projects changing hands was US$57.2bn in 2008, compared to US$59.1bn in 2007. This is not included in the new investment figures above, because it represents money moving from one investor to another rather than new money coming into the sector.
As far as the outlook is concerned, New Energy Finance sees clean energy moving from supply-constrained markets in 2007-08 to demand- and finance-constrained markets in 2009. Renewable energy technologies are becoming cheaper as they reach scale and gain operating experience. This trend has been obscured recently by surging commodity prices and supply chain bottlenecks, but with new industrial capacity coming on-line, we are about to see prices drop.