Bloomberg New Energy Finance clocks a first-quarter drop in clean energy investment to $27 billion, the worst since Q1 2009.
Global green energy investment stumbled badly in the first quarter of 2012, falling to levels not seen since the financial crisis of 2009. Looks like expiring U.S. incentives, European economic crisis, well-publicized solar bankruptcies and the threat of more high-profile green tech companies going under has taken its toll.
Bloomberg New Energy Finance reported Thursday (PDF) that global clean energy investment fell to a mere $27 billion in the first three months of 2012, down 28 percent from the previous quarter and down 22 percent from the first quarter of 2011. It’s the worst showing since the first quarter of 2009, when the research firm counted $20 billion in venture capital, private equity, public markets and asset finance.
Broken out by sector, the first quarter of 2012 saw $24.2 billion in utility-scale renewable energy project asset finance, down 30 percent from the fourth quarter of 2011 and down 13 percent from the same quarter last year.
Bloomberg New Energy Finance CEO Michael Liebreich pointed to some key factors leading up to the decline. A combination of faltering incentives and ongoing financial uncertainty in Europe, and the expiration of stimulus supports and an uncertain political climate in the United States, has sapped investor confidence, he said.
This year has seen Germany and other key European countries lower their feed-in tariffs for solar power, as well as a string of bankruptcies of German solar companies unable to compete against cheap Chinese solar panel manufacturers. In the United States, a stimulus program that allowed solar power project developers to claim cash grants in lieu of investment tax credits expired, and an attempt to revive it failed last month.
There’s little to show that things will be getting much better over the next 12 months, Liebreich added. Wind power’s production tax credits are set to expire at the end of this year, for example. Renewal is never certain, but the general pall that’s been cast over federal support for green technology -- summed up in the conservative anger and accusations around the bankruptcy of U.S. loan guarantee-backed solar startup Solyndra -- makes it particularly hard to predict this year.
IPO activity took a particularly poor turn, with only $601 million raised on the public markets in the quarter. The two biggest IPOs of the quarter were the $74.8 million debut of Ceres, maker of genetically-modified energy crops, and the $68.8 million public launch of biodiesel maker Renewable Energy Group.
In the meantime, we’ve seen a host of companies delay or cancel their IPO plans amidst ongoing market turmoil and falling prices for publicly listed green technology companies. While solar microinverter maker Enphase raised $54 million in its IPO last week, it also reduced its initial share price by nearly half beforehand. And this morning, massive solar thermal power startup BrightSource suspended its IPO plans after a year of waiting for market conditions to improve.
Venture capital and private equity investment in “specialist clean energy companies” stood at $1.9 billion in the first quarter, down only 2 percent from the previous quarter and up 12 percent from the first quarter of 2011, Bloomberg New Energy Finance reported. Whether this indicates strength in the sector, or companies going back to private investors to manage their way through a poor climate for public market financing, is less clear, however.
For example, one of the first quarter’s biggest raises was the $263 million for beleaguered plug-in hybrid automaker Fisker Automotive, which has been struggling with production delays, recalls and the apparent freezing of its $529 million Department of Energy loan guarantee. In fact, the company has since gone back to investors for another $130 million, which may be aimed at meeting the financial benchmarks needed to restart access to that loan.
Another big first-quarter investment was solar installer and financier SolarCity’s $81 million from Silver Lake Kraftwerk, marking the first big investment for the fund started by billionaire George Soros and bigwigs from the VC and DOE greentech world. SolarCity is rumored to be seeking an IPO, but may feel safer sticking to private investors for the time being.
End To Clean Energy Federal Tax Incentives and Debt Problems in the Eurozone Hit Clean Energy Investments Hard
Michael Liebreich, BNEF chief executive, said the performance represented the lowest quarterly level of clean energy investment in several years. He said in a statement.
"A $27bn quarterly figure is not a disaster, but it is the weakest since the dismal $20bn seen in the first quarter of 2009, when the financial crisis was at its worst. The weak Q1 2012 number reflects the destabilising uncertainty over future clean energy support in both the European Union (driven by the financial crisis) and the US (driven by the expiry of stimulus programmes and the electoral cycle)."
He warned that after seeing clean energy investment reach record levels during 2011, the sector could face a relatively tough year, despite continued improvements in the cost and effectiveness of renewable energy systems. He said.
"There is no sign of a rapid turnaround in either of these regions in the next 12 months. Clean energy technologies, particularly solar photovoltaics and onshore wind, continue to fall in price and approach competitiveness with fossil-fuel power, but politicians in many countries appear to be ducking the decisions that would ensure the sector maintains its growth trajectory. We are seeing growth in some of the non-core markets around the world, but they will have a tough job replacing weakening demand in the developed world."
The clean tech venture capital market provided the one bright spot for the sector, with the report confirming that venture capital and private equity investment during the quarter rose six per cent year on year to $1.9bn. However, Liebreich warned that the wider clean energy sector could see investment levels stall this year, despite strong long-term prospects for the industry. He said.
"The outlook for investment in the remainder of the year remains difficult. The rapidly improving cost-competitiveness of renewable energy technologies is stimulating activity, particularly in developing countries. However, it is becoming harder to see the sector worldwide beating last year's record, unless the storm-clouds lift in Europe and US Congress stops bickering and sends some clear signals about the importance of new energy technologies. Meanwhile, continuing improvements in the sector's economics mean companies that survive these next few years, whether on the industry's supply or demand side, will be well positioned for the next growth phase."
U. S. Takes Lead Over China In Green Energy Investment in 2011
In spite of the huge drop in U.S. clean energy investment during the first quarter 2012, the United States has regained the lead in the clean energy race during 2011, investing $48 billion last year to surpass China, which held the world's top spending spot since 2009, said a study Wednesday.
The US surge in private investment was a 42 percent increase over 2010 and saw Washington maintain its lead worldwide in both venture capital and research and development cash, said the Pew Charitable Trusts annual report on clean energy.
However, the US boom was largely driven by expiring tax incentives, highlighting "a persistent phenomenon in which the country fails to deploy into the marketplace the clean energy innovations it creates in the laboratory."
China, which fell to second, invested $45.5 billion in 2011, a one percent increase over 2010, but maintained its global lead in wind energy investment and in solar manufacturing, said the report.
Experts say a key difference between the U.S. and China is in how they attract investment -- China by having solid green energy policies that reassure investors and the United States by offering tax breaks for investment.
Phyllis Cuttino, director of Pew's Clean Energy Program said.
"China has been able to fuel its growth by having very consistent and long-term policies in place that really tell investors there is an opportunity for them to make a profit. The United States has no renewable energy target but they have decided to try and incentivize clean energy investment through a variety of tax incentives, tax credits, tax subsidies, loan guarantees."
Some of those programs were instituted under the George W. Bush administration and some under President Barack Obama, she said.
A Review of The U.S. Solar Industry During 2011
It seems that only yesterday that the U.S. solar industry was experiencing incredible growth when we compared key indicators for Q1 2011 versus Q1 2010:
A Review of The U.S. Wind Energy Industry 2011
In a blog post dated January 29, 2011, I reported that wind energy installations in 2011 totaled 6,810 megawatts, an increase of 31% over the 2010 total. Q4 2011 wind energy installations were 3,444 megawatts, beating the 2010 Q4 total of 3,296 megawatts. And there hasn’t been so much wind capacity under construction since the middle two quarters of 2008, just before the recession hit. This time, however, it is not ambition but desperation that is driving growth.
AWEA CEO Denise Bode observed why wind energy installations had such a great 2011.
“This tremendous activity is being driven by the federal Production Tax Credit (PTC), which leveraged an average of more than $16 billion a year in private investment over the last several years and supported tens of thousands of manufacturing jobs.”
The wind industry’s PTC of 2.2 cents per kilowatt-hour tax credit expired on December 31, 2012. On February 17, 2012, Congress voted and refused to extend the PTC credits for 2012. As a result of the failure to extend PTC's, the wind energy industry is predicting massive layoffs and stalled or abandoned wind projects.
Just recently in a blog post dated April 12, 2012, BrightSource Energy, which had planned an IPO in May 2012, cancelled it after only three days, citing volatility in the stock markets, but it makes you wonder if the failure to extend federal tax incentives and PTC credits will impact clean energy IPO's during 2012. I have a feeling it definitely will.
What a difference a year makes. Once the clean energy investment tax credits and PTC credits ended, investors no longer saw green energy as a good investment, and they appeared to have abandoned clean energy in mass. Things look very gloomy for clean energy investments throughout the remainder of 2012.