Washington D.C., United States — ESI-AFRICA.COM — 04 October 2011 – By mid-2011, it was clear that the energy markets, including the renewable sector, were feeling the impact of the global economic downturn and the effects of depressed economic conditions.

Renewable Energy World reports that the faltering economy was not the only reason for the downshift in investment, however.  Q2 of 2011 saw rotation in the sector as money left the capital-intensive biomaterials/biofuels and solar sectors and began to move into the more capital efficient energy space.  

As the impact of the economic downturn was felt across all sectors, enterprises increasingly sought ways to cut energy-related costs, and this new focus is responsible for turning the tidal flow of investment dollars in the sustainable sector.  

While the effects of the current economic downturn will be felt across all sustainable industries, it is expected that this shift in investment focus will generate new growth and activity through the remainder of 2011, and into 2012, the report added.

Driving the flurry of investment activity in the sustainable sector will likely be energy efficient mergers and acquisitions (M&A). As the economy struggles, the growing abundance of buyers means that mature, scalable energy efficiency technologies are set to become hot commodities.  

Energy efficiency companies are likely to welcome this wave of suitors, as the barriers to entry into the market, both from a regulatory and sales perspective, are extremely high.

Solar power has also been a driving force in the sustainable sector through Q1 and Q2.  The sector has a stronghold on market share as a percentage of renewable energy generation, and solar projects are expected to continue to outperform wind projects and to garner an increasingly large share of the renewable energy mosaic.  

Solar projects continue to be driven by geographic location and local- and state-level incentives, and the growth rate of new installation continues.   Solar projects do not have the same environment impact as wind farms, and are a more accessible technology.  Both utility scale and distributed generation projects are likely to see continued growth and investment activity through the second half of 2011.

Despite strong growth potential, energy prices are expected to decline in the second half of 2011 as the economy slows.  Energy prices are economically sensitive, and prices will start to drop across all sectors “’ from traditional sources such as oil, to sustainable sources including wind and solar “’ as the effects of the economic downturn are felt.