The weak housing market, turmoil in the financial industry, the credit crunch and economic slowdown are hitting renewable energy investment but sizable amounts of capital are still flowing into the sector, according to research published by London-based New Energy Finance this week.
Some US$ 2.4 billion of investment flowed into renewable energy in this year’s first quarter compared to US$ 3.7 billion in Q1 2007. Private equity investments fell sharply – down 64% – to US$ 878 million while venture capital investors put US$ 1 billion to work in the renewable energy sector in Q1 this year as compared to $668 million in Q1 last year, a 57% increase.
New equity issuance in the public markets came to a virtual standstill after Iberdrola Renovables’ US$ 7.2 billion IPO in December. US$ 807 million was raised via public IPOs in Q1 compared to $5.2 billion in the year ago quarter.
In terms of sectoral investment, investors put more capital to work in solar power this Q1 – $3.2 billion – than they did in the corresponding period last year, when $1.9 billion flowed into solar power projects. Solar thermal electricity generation is the new darling of the sector, according to New Energy Finance.
Wind power investment fell to US$ 6.6 billion during Q1 from $7.2 billion in the year ago quarter, as industry participants and investors in the US await Congressional action to renew the Production Tax Credit, which is due to expire at the end of the year.
Growing resistance and questioning of US biofuels targets, policies and standards led to sharply reduced investments in the sector. Investment in US ethanol plants shrank to US$ 311 million in Q1 2008 from $1.7 billion in Q1 last year. Newer markets are developing in countries such as Mozambique, Russia and Thailand, however, and biofuels investment continues to grow in Brazil, bringing total biofuels investment to $3.1 billion in Q1, down 15% year-to-year.
Mergers and acquisition activity increased sharply along with growth and development of what’s emerging as a global renewable energy market and industry. Corporate M&A transactions more than doubled, to $7.7bn, compared to $3.5 billion in the year ago period. Large acquisitions, such as Scottish & Southern Electric’s $3.2 billion acquisition of Airtricity helped make Q1 2008 the second-largest quarter after last year’s third quarter in terms of M&A activity, according to New Energy Finance.