Earlier this month research company Bloomberg New Energy Finance (BNEF) released data that identified global investment in clean energy was $50.5 billion in Q1 of 2015, down 15% from Q1 2014, as deal-making slowed in big markets such as China, Europe and Brazil.
The statistics from BNEF show less “large ticket” transactions in the January-March period of this year compared to that in Q1 2014.
Financing of wind projects and public market equity by clean energy companies were particularly subdued, although there were some bright spots, including small-scale solar worldwide and renewable energy project investment in South Africa.
The first quarter tends to be the weakest of the year for clean energy investment, as bankers and equity investors rebuild their deal pipelines after the traditional end-year rush, and as developers digest any changes in renewable power support policies taking effect from January 1.
Trends in the investment market
According to BNEF, Q1 2015 continued this trend with investment at $50.5 billion down sharply from $67.6 billion in Q4 2014, but it was also lower than Q1 2014’s $59.3 billion. The last quarter to show a weaker figure was Q1 2013, with $43.1bn.
Chairman of the advisory board at BNEF Michael Liebreich commented: “The big question, of course, is whether and how hard clean energy investment would be hit by the slump in oil and gas prices. These figures indicate the answer is not so much.”
“We said in January that we thought 2015 would struggle to match last year’s dollar investment total because of exchange rate moves. The US currency has strengthened 15% against a basket of currencies in the past year, and 29% against the euro. There were also a few more lumpy offshore wind investments in Q1 2014 than in Q1 2015. Without those factors, investment in Q1 this year would have been pretty much level-pegging with last year,” Liebreich added.
Liebreich continued: “But there’s a lot of ground still to cover this year. No one knows whether the oil price is going to bounce back or collapse further. There is good momentum towards some sort of climate deal in Paris in December. And there are certainly plenty of ground-breaking developments in the low-carbon sector, from solar at $0.6 per kWh, to storage, energy efficiency, electric vehicles and smart grid.”
“The question of whether clean energy investment is on the way up or down is sure to be a topic of debate at the Bloomberg New Energy Summit in New York next week,” Liebreich said.
The Q1 figures show that investment in Europe slipped 30% compared to first quarter 2014, to $9.7 billion, while that in China fell 24% to $11 billion. Investment in the US edged up 2% to $9.6 billion, but Brazil slid 62% to $1.1 billion and the rest of the Americas dropped 17% to $2 billion. The strongest performance came from South Africa, where investment in Q1 surged to $3.1 billion from almost nothing in the same quarter a year earlier, BNEF stated.
Foreign investment opportunity
Luke Mills, analyst, clean energy economics at Bloomberg New Energy Finance, said: “Since 2012, South Africa has emerged as one of the most important centres for clean energy investment, as it seeks to expand power capacity and take advantage of its sunshine and wind resources.”
Mills continued: “The first quarter saw the financing of a series of large projects in solar thermal, wind and PV that won through in the latest round of the country’s auction programme.”
Investment in India rose 59% to $1.6 billion. In Asia-Oceania excluding India and China it fell 15% to $11.2 billion, with Japan’s small-scale solar boom continuing but overall investment in that country edging down 3% to $8.8 billion. The busiest market in Europe was the UK, where a deadline of 31 March for solar accreditation under the Renewables Obligation programme fuelled hectic building of PV projects, pushing overall investment in the quarter up 12% year-on-year to $4.3 billion.
Utility scale investment
Looking in turn at the different types of investment, asset finance of utility-scale renewable energy projects fell 19% in Q1 from a year earlier, to hit $27.9 billion. The largest asset finance deals included $1.3 billion for Germany’s 322MW Nordsee One offshore wind project, $ 888 million for the 100MW Xina Solar One solar thermal complex in South Africa and $427 million for the 300MW Apex Kay wind farm in Oklahoma, US.
Investment in small distributed capacity (principally rooftop photovoltaics) rose 11% in Q1 2015 compared to year earlier, reaching $20.3 billion, with Japan, the US and China the most active markets.
Equity raising by specialist clean energy companies on public markets tumbled 66% to $2.2 billion, despite a rally by clean energy share prices. The WilderHill New Energy Global Innovation Index, or NEX, which tracks more than 100 stocks worldwide, gained 9% to 194.84% during Q1. The biggest public market deals of the quarter were a $460 million convertible issue by US solar company SunEdison and a $405 million secondary share issue by US renewable energy ‘yieldco’ TerraForm Power.
Venture capital and private equity investment in clean energy fell 21% in Q1 compared to the first quarter of 2014, to $1 billion. The largest deals included $76 million in expansion capital for UK biofuel and biochemical producer Green Biologics and $75 million for US rooftop PV company Leaf Solar Power.
Individual energy sector investment figures
By sector, the Q1 2015 investment figures show solar up 7% from a year earlier, at $31.8 billion, wind down 30% at $15.1 billion, biomass and waste-to-energy up 94% at $1.7 billion, and biofuels down 64% at $447 million.
*This report is courtesy of Bloomberg New Energy Finance