January 2, 2007 (IHT) – Despite the global credit crunch in 2007, new investment in clean energy industries like wind and solar power rose sharply to break through the $100 billion barrier for the first time, a research group, New Energy Finance, said Wednesday.
Michael Liebreich, chief executive of the group, which is based in London, said investments had risen 35 percent to reach $117.2 billion in 2007, from $86.5 billion the year before.
The sector had performed well because important factors that drive investment in clean energy, like fears about dwindling supplies of traditional sources of energy, remained strong even as financial markets plunged into turmoil amid the crisis over subprime mortgages in the United States in the second half of the year.
Liebreich said a “wave of liquidity washing through the sector shows no signs of abating,” adding that significant technological strides were taking place in areas like wind, solar, biomass and energy efficiency.
Even so, Liebreich warned investors to be careful to identify technologies and business models that were good bets.
“Inevitably, there are sectors where investors’ excitement is running ahead of what can be delivered,” Liebreich said. “There will also be volatility, as in any growth sector where valuations are driven more by expectation than by proven historical cash flows.”
The study issued Wednesday was the fourth of its kind by New Energy Finance. Comparable figures for clean energy investment in 2005 and 2004 were $54.6 billion and $28.6 billion, respectively. Wind power accounted for $24.8 billion, or nearly half of all new investments in projects in 2007, with many of these initiatives concentrated in Asia.
New investment in projects that involve deriving energy from biomass and waste grew by 51 percent to $7.1 billion. As in the case of wind, most of the surge in biomass took place in China.
Another large chunk of new investment, $14.5 billion, went to biofuels, even though the ethanol industry had stalled in the United States and many producers there had dropped their expansion plans. Instead, investments in biofuels were strongly buoyed by a shift in focus to Brazil.
The solar sector captured most venture capital and private equity investments, with young solar companies in the United States attracting $702 million in 2007 compared with $181 million in 2006.
In Europe, where the solar industry is comparatively mature, investment of early-stage venture capital totaled a comparatively meager $59 million.
Early stage venture investment in energy efficiency companies more than doubled in both North America and Europe to $316 million and $96 million respectively.
Money raised by clean energy companies on stock markets rose by a whopping 80 percent compared with 2006 – but much of that increase was due to the flotation by the giant Spanish utility Iberdrola of its renewable energy arm, Iberdrola Renovables.
That deal raised $6.6 billion, or six times more than the previous record. Stripping out the Iberdrola deal, new investment raised on stock markets grew just 17 percent.