Growing small-scale solar sales, still-surging China are bright spots in 2012’s otherwise gloomy green landscape.
Bloomberg New Energy Finance reported its second quarter 2012 global clean energy investment figures this week, and while they looked good compared to a horrendous first quarter, they painted a pretty rough picture by most other points of comparison.
Q2 2012 Global Clean Energy Investment
- Q2 2012 global capital investments in green energy projects was $59.6 billion.
- Q2 2012 global capital investments in green energy projects were up 24 percent from Q1 2012's $27 billion, which was the worst showing since the recession days of early 2009.
- Q2 2012 investments in green energy projects were down 18 percent from the near-record $72.5 billion recorded in the second quarter of 2011.
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Q2 2012's Global Clean Energy Key Trends and Developments
- Q2 2012 clean energy investment showed resilience in the face of global economic uncertainty and declining policy support in Europe. Overall investment rose 24% from Q1 to $56 billion but was off 18% compared to the near-record quarterly figure of $72.5 billion in Q2 2011.
- China contributed $18,3 billion, the most to the Q2 2012 bounce, while the Americas outside the US also surged to attract $2.9 billion in new financings. There was a clear split between investment in clean energy companies – which was depressed in Q2 – and project investment, which held up well.
- Among the various clean energy sub-sectors, solar accounted for the majority of new funds invested with $33.6 billion, up 19% from Q1 2012. This reflected continuing growth in new small-scale system installations. Wind accounted for $21.6 billion of investment in Q2 2012, up 47% from Q1 2012.
- Public markets investment in clean energy was weak, at just $1.2 billion in Q2 2012. The sector's continuing challenges were highlighted by a 15% quarterly retreat in the WilderHill New Energy Global Innovation Index (NEX) which touched a nine-year low during the period.
- Key European nations took steps to rationalize their support for the sector in the face of dropping equipment prices and tight fiscal conditions. Italy announced a move to hold reverse auctions for power contracts from onshore wind projects and cut its feed-in tariff (FiT) support for PV; Germany cut its PV FiT; and the UK introduced a new bill to move away from its green certificate scheme to a feed-in premium, with competitive price-setting later this decade.
- Japan introduced an aggressive FiT programme on 1 July 2012 covering biomass, geothermal, small hydro, solar and wind. The programme also provides opportunities for small- and micro-scale applications, such as wind projects smaller than 20kW in capacity and hydro projects below 200kW.
- Trade tensions between nations continue to mount. The US is moving toward finalizing import duties on solar cells and modules from China and wind-turbine towers from China and Vietnam. There are calls for similar action on PV imports in Europe.
- Both solar and wind equipment manufacturers are experiencing a period of market consolidation in the face of falling prices and compressed margins. Up to 20GW of solar cell manufacturing capacity could be off the market shortly as manufacturers scale back production or even enter bankruptcy. Declining wind turbine prices will force smaller suppliers without the relevant scale or technology to exit the market.
Global Clean Energy Investment Category Leaders
Across different classes of investment, utility-scale renewable power project asset finance marked the strongest gain at $35.9 billion. Once again, that was a 50-percent improvement from the first quarter’s $24.2 billion, but a 24-percent decline from the same quarter of 2011.
And these were the investment categories that included power generation assets, which have been able to take advantage of falling prices for the solar panels and wind turbines they’re putting up. That sector held up much better than categories such as public market finance and venture capital investment, where green technology and equipment companies have been fighting ongoing economic turmoil in Europe and political opposition in the United States, as well as a challenging stock market for green companies.
Greentech Venture Capital Investments
Earlier this week, the Cleantech Group reported second-quarter green venture investment of $1.6 billion, a drop from both first-quarter and year-ago figures, and a second-quarter green IPO tally of $1.8 billion, up from $1 billion in the first quarter but down from $2.2 billion in the same quarter last year.
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Bloomberg New Energy Finance’s figures, while not exactly aligned, showed similar trends, with VC and private equity investment falling to $1.5 billion in the second quarter, down 28 percent from the first quarter and 39 percent from the same quarter in 2011. The first quarter’s $1.2 billion in public market investment in clean energy, while nearly double the first quarter’s figure, was also a 75-percent drop from the second quarter of 2011, the firm reported.
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Indeed, only one new class of investment saw gains compared to the same quarter last year. That’s small-scale clean power generation, mostly solar power projects of 1 megawatt or less, which the firm estimated to be worth $21.5 billion in the second quarter, 13 percent more than in 2Q 2011. (It’s the first time Bloomberg New Energy Finance has reported small-scale project figures on a quarterly basis.)
That, of course, can largely be attributed to the plummeting prices of solar panels, which have fallen 75 percent over the past three years, BNEF CEO Michael Liebreich said in Wednesday’s release. Globally, solar accounted for $33.6 billion of investment in the second quarter, while wind accounted for $21.6 billion.
While Germany and Italy remain the largest solar markets, installations in the U.S. are catching up despite their higher cost: California passed 1 gigawatt of customer-owned rooftop solar power capacity in June, and Japan and China are growing strongly as well, the report found.
China’s booming green energy growth was particularly impressive in the second quarter, at $18.3 billion, a 92-percent increase from the same quarter last year. In comparison, European investment grew 11 percent to reach $20 billion and U.S. investment grew 18 percent to reach $10.2 billion.
Beyond being the world’s biggest wind turbine market, China has quadrupled its domestic solar installation targets, Liebreich noted. That could mean that the Chinese solar manufacturers that have driven down prices to record low levels and driven U.S. and European solar manufacturers into bankruptcy may start to see demand from within China start to absorb some of their excess supply, he said. The Shanlu & Shengyu Bayannur Wuyuan solar project was China’s single largest, at $316 million.
China also earned the distinction of hosting all nine of the green technology IPOs tracked by the Cleantech Group in the second quarter. The biggest was a $340 million May IPO for Chinese solar water heater company Jiangsu Sunrain Solar Energy, and others included renewables company Huadian Fuxin Energy for $322 million, silicon ingot maker Longi Silicon Materials for $250 million, and PV equipment maker Jingsheng for $173 million.
In other clean energy industry sectors, Bloomberg New Energy Finance found that smart grid and advanced transportation brought in $1.1 billion in the second quarter, which was up 74 percent from the first quarter but below second quarter 2011 figures. Smart grid in particular has seen venture capital investment dwindle over the previous several quarters, but merger and acquisition activity is on the increase.
Less impressive second-quarter stats were recorded for biomass and waste-to-power, which saw investment of $1.4 billion, down 22 percent from the first quarter, and biofuels, with $750 million, down 12 percent from the previous quarter, BNEF reported.
COMMENTARY: In a blog post dated April 17, 2012, I pointed out the negative impact that the end of federal tax incentives in the U.S. and the mounting debt problems in the Eurozone have had on overall clean energy investments, and Bloomberg's numbers reflect this for Q1 and Q2 2012 when compared to the same quarters in 2011. Venture capital investments have never been this low for quite a while.
Thanks to low cost government loans and lower labor costs, the Chinese have driven down the cost of PV solar cells and panels to historic low levels, and this has put tremendous economic pressures on both U.S. and Eurozone producers of PV panels. U.S. regulators recently slapped Chinese manufacturers of PV panels with substantial import duties stemming from wholesale dumping of cheap PV panels in 2011. China retaliated by placing import duties on U.S. automobile manufacturers, and this could signal the beginning of a limited trade war.
You can download a copy of the Bloomberg New Energy Finance Q2 2012 Global Clean Energy Investment Report by clicking HERE.
Courtesy of an article dated July 13, 2012 appearing in GreenTechMedia and Bloomberg New Energy Finance Q2 2012 Global Clean Energy Investment Report
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