Clean-tech and energy investment halves in first quarter
London, 2 April: Investment in clean technology and clean energy plummeted in the first quarter of 2009, according to figures published this week.

Just $13.3 billion was invested in clean energy in the first quarter of 2009 – down 53% year-on-year and 44% on the last three months of 2008, according to New Energy Finance (NEF).

Meanwhile, figures from the Cleantech Group and Deloitte show a similar decline in global clean technology venture capital (VC) investment. Their first quarter analysis revealed $1 billion of clean-tech VC investments in 81 companies, down 41% from the previous quarter and 48% off the first quarter of 2008.

“It took until the first quarter of 2009 for the credit crunch and the recession to catch up fully with investment in renewable energy, low-carbon technologies and energy efficiency,” said NEF, a London-based analysis firm. “It suffered in Q1 2009 from a severe shortage of bank finance for projects and the parlous state of overall stock market confidence.”

Broken down by asset class, the first quarter saw asset finance of new-build renewable energy projects fall to just under $11.5 billion, down half for the same period last year.

Venture capital and private equity finance was relatively more robust, falling to $1.8 billion, down 22% compared with the fourth quarter, and its lowest level for more than two years.

Brian Fan, senior director of research at the Cleantech Group in San Francisco, said: “As the economy continues its descent into recession, investors are becoming more conservative.”

This conservatism is reflected in fewer VC deals and less investment per deal. “There was no single $100 million round this quarter. We haven’t seen that for two years,” he said.

Fan noted that VC funds are suffering from a lack of liquidity – as investors have less free cash to play with – and are having a hard time raising money. However, he had not heard of any VC funds collapsing.

NEF said public investment – in listed clean energy companies – almost evaporated in the first three months of 2009. Just $100 million was invested in listed “pure-play” clean energy companies, down from $2.1 billion in the same period of 2008, and $1.1 billion in the previous quarter.

Even mergers and acquisitions (which are not counted in the overall figure, as they don’t represent new capital coming into the sector) were heavily down, to $8.8 billion from $18.8 billion the previous year and $17.3 billion in the last quarter. But such activity is expected to rise, as well-capitalised firms swoop on distressed assets.

“Green stimulus plans may represent the light at the end of the tunnel for clean energy companies, but meanwhile the sector has been hit by an oncoming train,” said Michael Liebreich, NEF’s chairman and CEO. “These figures highlight the need for policy-makers and administrators in the US and elsewhere to ensure that stimulus funds start flowing immediately, not in a year or so.”

While government support for green industries is promising for the clean-tech sector, Fan said it will take at least six months before the government money kicks in. And much of the government support will go to support later-stage companies, not those seeking early-stage funding. “There’s really no substitute for venture funding,” he said.

Fan expected the VC markets to recover after the equity markets bounce back. “These markets tend to lag public markets by one or two quarters,” he said.

Last year, investment in clean energy reached $155 billion, up slightly from $148 billion in 2007, according to NEF.