The clean energy sector powered ahead in 2007, according to analysts
New Energy Finance. In spite of difficult conditions on the credit
markets, the amount of new money invested in the sector grew to
$117.2 billion, up 41% from 2006’s $83.0 billion*, and more than $20 
billion ahead of predictions.




The clean energy sector weathered last summer’s credit crunch well,
partly because nonfinancial drivers such as regulation, political
will and fears over energy supplies remain strong. It was also
helped by a shift in focus from more mature wind and biofuels
markets in Western Europe and the US towards Asia, Brazil and other
developing countries. Wind power continued to lead the way, but the
year also saw strong growth in solar power and energy efficiency.
Investments in biofuels fell back from 2006’s record year, hampered
by surging feedstock costs.

• The biggest portion of investment funds went to asset financing,
  up 40% on 2006, at $54.5 billion.
  
• The highest growth rate was in public markets, where investment
  was 80% higher than in 2006, at $18.9 billion, the biggest portion
  being the $6.6 billion flotation of Iberdrola Renovables
  (Iberenova). If this IPO is excluded, public market new investment
  grew by a more sedate 17%.
  
• Venture capital and private equity new investment grew by 27% to
  $8.5 billion. Investors retreated from later stage investments and
  returned to early stage deals, as their familiarity with the sector
  and technologies grew and the pipeline of commercialisationready
  opportunities dried up.
  
• 
  The year was marked by the launch of clean energy funds by several
  high street asset management companies, including HSBC, F&C,
  Schroeders, Virgin and DWS.
  

Michael Liebreich, Chairman and CEO of New Energy Finance
commented: “At the start of 2007 we said that the clean energy
industry had to deliver clean, cost-effective power and fuels
in large volume in order to justify investors’ enthusiasm. That
remains just as true today: investors’ enthusiasm still outstrips
the industry’s current contribution to solving the world’s
environmental and energy security problems. However, progress is
being made on scaling up a number of sectors, particularly wind,
solar, biomass and energy efficiency. The wave of liquidity
washing through the sector shows no signs of abating and, despite
the dark clouds still massed over the world’s credit markets, 2008 
looks set to be another banner year.”



Asset financing


Clean energy asset financing was resilient in 2007 in the
face of turmoil on the world’s debt markets, with a record $54.5 
billion invested. Investors were forced to shift their emphasis from
project finance deals to on-balance-sheet financings, which made up
64% of total asset financing activity, up from 44% in 2006. Much of
this came from the South American biofuels industry and wind,
biomass and waste-to-energy deals in China.


Wind investment accounted for nearly half of the total new
investment in projects, or $24.8 billion. Much of the growth in wind
investment in 2007 took place in Asia and Oceania, whose $8.4 billion
of deals outstripped the Americas ($6.6 billion) while investment in
the EMEA region grew to $9.8 billion after falling by $1.5 billion
in 2006. The remaining $29.7 billion investment was largely in
biofuels projects ($14.5 billion); biomass & waste ($7.1 billion);
and solar ($5.9 billion).



The 30% increase in investment in biofuel assets contrasted with
2006’s 171% growth, which was driven by the US’s love affair with
corn-based ethanol. In 2007, much of the activity took place in
South America, chiefly in Brazil, while the US ethanol industry
stalled under difficult market conditions, with many producers
shelving plans for capacity expansion. The ratification in December
of the US energy bill, with its ambitious renewable fuels standard
that calls for 36 billion gallons of alternative fuels by 2022,
should considerably improve the outlook for US ethanol. New
investment in biomass & waste grew by 51% from $4.7 billion in 2006.
As with wind,
most of the surge took place in China, where the government has
great hopes for biomass.



Solar project investment of $5.9 billion was 82% higher than 2006,
as Spain and Italy continued their drive for larger photovoltaic
projects. Spain has seen a great rush as investors tried to push
their projects to qualify for the a 400MW subsidy cap. Greece and
France are largely markets-in-waiting, constrained by bureaucracy
and the lack of mature building-integrated photovoltaic products.



Public markets


In 2007, $18.9 billion of new money was raised by clean energy
companies on the public markets, up 80% from $10.5 billion last
year. Much of the increase was driven by one deal: the landmark
flotation of Iberdrola Renovables, which raised $6.6 billion, six
times more than the previous record deal, REC of Norway’s $1.1 
billion IPO last May. Although the IPO was priced at the bottom end
of its lead coordinators’ price range at €5.30 per share, it
represented a hefty market capitalisation
of €22.4 billion ($33 billion) at the start of trading on 13 
December.


Solar companies raised $5.8 billion of new equity on the public
markets during 2007, once again chiefly Chinese cell and module
makers listing on US markets. Biofuels groups managed to raise $1.0 
billion, almost $2 billion less than in 2006, and energy efficiency
groups caused excitement,by raising $0.8 billion, led by EnerNOC and
Comverge, as policy makers and investors realised the potential of
the sector.



The WilderHill New Energy Global Innovation Index (NEX), which
tracks the fortunes of 88 clean energy companies worldwide, rose
nearly 60% in 2007, taking its increase over the past two
years to over 110%.



Venture Capital / Private Equity



In 2007, venture capital and private equity investment increased to
$8.5 billion, up 27% from 2006. Early-stage VC made strong gains,
increasing to $1.8 billion from $0.8 billion in 2006 as investors
found
it harder to find value in later stage deals due to greater
competition and were driven to make earlier-stage bets. Late stage
VC was the only investment stage to attract less money than last
year, falling by a little over $100m to $1.1 billion. Solar became
the leading sector for VC and PE, attracting $3.0 billion of new
equity, and biofuels decreased slightly on last year to $2.0 
billion. The two
other leading sectors were wind ($1.8 billion) and energy efficiency
companies ($1.2 billion).



Much of the increase in solar investment was down to young US solar
companies attracting early-stage VC investment. In 2006, just $181m
was invested in such firms, in 2007 this increased to $702m. In
Europe, where the solar industry is more mature, a meagre $59m of
early-stage VC found its way to solar companies. Some of bigger
solar investments worldwide were in thin-film technology, which
offers a way around the currently limited supply of solar
silicon. HelioVolt raised $101m, while Solyndra raised $80m and
SoloPower attracted $30m. Solar installation companies also featured
prominently, pushed into the spotlight by Arnold Schwarzenegger’s
California Solar Initiative. Early stage venture investment in
energy efficiency companies more than doubled in both North America
and Europe, to $316m and $96m respectively.



* Note: The previously reported figures of $71 billion to
$75 billion for 2006 excluded certain categories of investment such
as
solar water heating, which are now included – hence the restated
2006 figure of $83.0 billion.