Bloomberg New Energy Finance: Q1 Clean Tech Investment Up, Sign of Possible Rebound

Strong clean energy investment in the first quarter of 2014 could signal an upward trend after two years of declines, suggest figures released last week by Bloomberg New Energy Finance. Worldwide investment totals in the industry reached $47.7 billion in the first three months of 2014, up 10 percent over the same period 12 months before.

“It is too early to say definitively that 2013 was the low point for clean energy investment worldwide and that 2014 will show a rebound,” Michael Liebreich, chairman of the advisory board for Bloomberg New Energy Finance, said in a statement, “but the first-quarter numbers are encouraging.”

Pulling the first-quarter investment numbers apart reveals areas where investment pulled back, and other areas where investment enthusiastically made up for those declines. In Europe, clean energy saw 30 percent less investor capital than it did a year ago, largely thanks to an uncertain public funding environment. Worldwide, venture capital and private equity investment contracted 26 percent compared to the first quarter of 2013.

But other investment trends were strong enough to offset those dips. Spending on small-scale projects (those of less than 1 megawatt) jumped 42 percent over first-quarter levels last year, mainly in the U.S. and Japan. Beyond the small-scale craze, it’s becoming clear that the locus of clean tech investment is no longer as exclusively centered in the few geographies it has been historically. Emerging economies are seeing investment in the sector rise, and the first quarter of this year, two of the top four asset finance deals took place in Indonesia and Kenya, reports BNEF. The country that saw the most clean energy investment was Brazil, where funding flows were up 211 percent in the first quarter; the U.S., up 95%, and the Middle East and Africa, where collective investment rose 82%. China saw an 18% quarter-on-quarter bump.

By sector, investment in energy-smart technologies like smart grid, efficiency, power storage and electric vehicles rocketed up by 243 percent, compared to the first quarter of 2013. Solar was up by a healthy 23 percent, while investments in wind fell 16 percent, and biofuels saw a 28 percent drop in investments compared to a year prior. Also important to note is that corporate merger and acquisition activity (which is not included in the overall investment figures) leapt 57 percent on the quarter versus a year ago.

In his keynote speech at the BNEF Summit in New York on April 8, Liebreich considered the direction of clean tech investment in the rest of 2014 and beyond, and emphatically made the case that the energy industry has reached a “critical point” at which fossil fuels’ stranglehold has begun to weaken, and clean energy can be seen to be building capacity at an unstoppable clip.

“This is about a future that is structured differently than the past,” became his keynote’s refrain.

Most significantly, he explained, various clean energy sectors now boast prices that are competitive with fossil fuels. In fact, about 80 percent of the investment declines the industry observed in 2012 and 2013 were due to falling prices on clean energy. And the capacity balance may be at a tipping point: according to BNEF forecasts, clean energy will see a 37 percent growth in capacity over the next two years. Looking further out, to about 2030, Liebreich says he’s confident that the capacity being added to build out clean energy will allow it to begin to outgrow fossil and nuclear

What’s more, he continued, natural gas prices are normalizing into ranges that pull it out of the bargain basement, and batteries used for electric vehicles also falling in price and increasing in capacity. In other words, clean energy is likely to benefit over the next several years from many streams of tailwinds. And it’s affecting the balance of the energy market overall: in China, he said, 68 percent of new capacity additions last year were in clean energy, and in developed markets, net oil imports are declining as cars grow more fuel efficient and people drive less.

In wrapping up his keynote at the summit, Liebreich drew an analogy: “Distributed energy is to the utilities as social media is to newspapers.” It took 26 years, he explained, after the interest was invented for the newspaper industry to see its final ad revenue peak.  It’s impossible to say for sure how long it’ll take in energy, he explained, but fossil fuels are bound to similarly lose their dominance.

“The point we are at in the public debate about energy is where it becomes abundantly clear that the future doesn’t look like the past,” Liebreich says. “The old heuristics don’t work.”

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