Investors like clean energy, growth dips: survey

Half of institutional investors plan to increase their funding of clean energy compared with 12 months ago, but that will not be enough to drive global growth in the sector this year, a survey published on Wednesday said.

Shares in clean energy companies under performed other stocks in 2008 because of their dependence on growth, technology advances and high oil prices. More expensive debt has curbed installation of clean energy projects, for example in wind and solar power.

But investors told a London conference, where the survey was published, they expected measures to fight climate change and secure energy supplies would help lift the low-carbon sector out of recession before others.

"Despite the economic downturn I believe the growth prospects for clean energy remain as strong or stronger than 12 months ago," said John Browne, managing director at U.S.-based private equity firm Riverstone and former chief executive of oil firm BP.

"It's some combination of concerted policy intervention at a scale we haven't seen yet or a bombshell out of Copenhagen … commitments above what's expected from China, India, the United States," Liebreich said, referring to three of the world's top carbon emitters, none of which are bound by the Kyoto Protocol which expires in 2012.

Recession would have a negligible impact on global carbon emissions, which would continue to rise at amounts about 3 percent below levels otherwise expected, NEF said on Wednesday.

"We can say with some confidence that when project finance comes back it will come back first for low-carbon energy projects," he told the conference hosted by research group New Energy Finance (NEF).

Some 49 percent of a survey of 106 institutional investors including pension, banking and insurance funds with $1 trillion assets under management planned to increase their exposure to the sector now.

Global investment in clean energy fell in the second half of 2008 and is on track to fall in the first three months of 2009 compared with the same period last year, NEF said, after hitting a plateau last year at about $150 billion.

Worldwide economic stimulus packages have allocated about $200 billion to clean energy in an effort to create jobs and diversify energy supplies, analysts say. Those funds would not become widely available until 2010, said Michael Liebreich, the head of NEF.

One additional hope for the industry is a step-change in political action to fight climate change, for example at U.N.-led climate change talks meant to agree on a successor to the Kyoto Protocol in Copenhagen in December.

TRENDS

Clean energy is more expensive than conventional fossil fuels. Deployment in the medium-term would also be aided by falling costs, now exacerbated by a glut for example in solar panels as a result of slowing growth.

"We have a massive over-supply," said Jenny Chase, NEF solar power analyst, estimating a possible glut in photovoltaic (PV) solar panels through 2011, which could lead to mothballed plant, and retail prices to fall more than 40 percent before a supply-demand balance was restored.

In a separate study, New Energy Finance estimated the clean energy sector required $500 billion investment annually by 2020 to avert more dangerous climate change, versus an expected $350 billion under current trends.

That compared with about $1,500 billion annual energy investment now, the group said.

Extra investment depended on more political support.