Environmental Law

Clean Energy Technologies Investment Outlook: Partly Cloudy

By Dennis Pfaff and Kevin Livingston, Editors

Anyone who can figure out the economy is probably too rich to be reading this, anyway, but a recent survey of reports conducted by a U.S. Department of Energy publication suggests the puzzling, if not downright contradictory nature of the situation, as it faces the clean energy industry.

"Divergent trends for clean energy investments suggest that some companies may need to tighten their belts, even as they prepare for significant future growth," began the article in EERE Network News.

The item cited a report from New Energy Finance, an international private research company, that found private equity expansion capital had fallen significantly to $1.6 billion in the third quarter of the year. That was down from the previous quarter's $4.5 billion, according to the energy department report. 

A press release from the research firm described investment in clean energy firms via public markets as "well down this year," driven down by a number of factors, including plunging oil and gas prices and investors fleeing to other types of stocks. 

At the same time, the company found some brighter signs. For instance, it described early-stage venture capital as "buoyant," suggesting that "investors continue to see exciting new technology in the clean energy sector." And it said financing of new capacity, such as wind farms, solar parks and biofuel plants, was at a "high level" during the quarter, at $18 billion, a figure the energy department compared to the second quarter total of $21.9 billion.

The New Energy statement also noted that despite Congress' passage of renewable energy tax credits recently bank lending has been hampered by the recent financial crisis.

The company found that mergers and acquisitions in clean energy were also down in the third quarter. But it projected that activity to accelerate in the coming quarters as bargain-hunters look for lower valuations and the fact that some companies might run short of capital.

Overall, New Energy's chairman summed up the situation this way:

“The reassuring message of these latest figures is that investment in clean energy is continuing at a high level, with early-stage venture funding one of the highlights. However it is clear that that the sector, despite its exciting medium- and long-term growth fundamentals, cannot be immune to the problems in the wider economic world."

The up-and-down nature of the current situation was reflected in a couple of other items mentioned by the energy department article. It cited a statement from the Social Investment Forum, an organization advancing "socially and environmentally responsible" investing, noting that a new survey had found strong demand for clean energy investment vehicles and that there were plans for several new offerings next year.

But at the same time, the energy department noted a blog entry from the chief executive officer of Tesla Motors, a new manufacturer of all-electric cars, regarding production delays and "modest" workforce reductions.

--Dennis Pfaff of Thelen LLP

Photo: Arizona solar farm; courtesy U.S. Department of Energy-National Renewable Energy Laboratory 

Full post as published by Climate Law Update on October 27, 2008 (boomark / email).