BNEF’s Liebreich: Reasons for Optimism in 2013’s Investment Numbers

Global clean energy investment fell 12 percent in 2013, to $254 billion from $289 billion in 2012, according to figures release last week by Bloomberg New Energy Finance.

The dip comes on the heels of another down year for the sector in 2012, when 9 percent less capital flowed into the space than in 2011.

Factors behind the decline include expiring subsidies and policy uncertainty in Europe (where investment plummeted by 41%), cheap natural gas and a lack of policy support in the U.S. (where cleantech saw 8.4% less investment than 2012) and also—in what’s actually good news for the sector—a drastic reduction in the cost of photovoltaic systems.

The one sub-sector that saw a boost in 2013 was “energy smart technologies,” like smart grids, storage, electric vehicles and efficiency; investment in that category rose to $34.6 billion from $32.7 billion. When the categories are sliced by investment type, the only two areas that emerge as winners in 2013 are the public markets and government research and development. Government R&D improved to $14.3 billion from $13 billion the previous year—even as corporate R&D fell to $14.9 billion from $15.8 billion in 2012—and public market investment leapt to $12.9 billion from 2012’s $4.8 billion. Corporate clean energy M&A also took a step up, to $13.1 billion from $11 billion the year prior.

Despite the dip overall, the BNEF report revealed some positive trends, which Michael Liebreich underscored in his presentation at last week’s Investor Summit on Climate Risk at United Nations headquarters in New York:

1. The geographical diversity of clean energy investment is improving.

Though Japan is a still a relatively small player in cleantech investment, its growth in 2013 was dramatic. Investments in the sector jumped 55% in 2013 (to $35.4 billion from $22.7 billion), contributing to Asia’s 27% investment increase. Liebreich explained that Japan’s growth was driven by a boom in small-scale solar installation as the country continued reassessing its energy portfolio following the damage 2011’s tsunami caused to its nuclear plants.

In India, too, investment in clean energy was up to $7.8 billion from $7.6 billion; Canada saw its numbers rise to $7.5 billion from $5.7 billion.

Additionally, Liebreich points out that many  regions and countries new to clean energy are showing very strong growth, such as North Africa and the Middle East, Chile, Thailand, and Vietnam.

2. The public markets are looking up.

“The public markets clearly believe that the sector’s consolidation is behind it,” Liebreich said. The WilderHill New Energy Global Innovation Index, or NEX, soared by over 50% in 2013, reflecting the performance of the 102 clean energy stocks it tracks worldwide. At the same time, the equity raised by quoted clean energy companies more than doubled in 2013.

3. Falling costs obscure the fact that installations are not down.

In fact, installations were flat in 2013, and BNEF can already ascertain from planned projects that MW installations will grow by 36 percent over the next two years.

Additionally, BNEF reports that China’s solar developers installed a record  12GW of photovoltaic projects in 2013, tripling its 2012 levels, and making it the biggest solar market last year. Furthermore, the firm expects China to add 14 gigawatts of solar capacity in 2014.

4. New investment vehicles that put money to work in clean energy are attracting new sources of capital.

Examples of clean energy focused investment vehicles gaining major interest from investors, including institutions and high-net-worth investors, are YieldCos and green bonds.

To read the full BNEF report, click here

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