First quarter of 2015 saw the lowest investment for two years, as financiers of large projects and specialist quoted firms paused for breath after busy 2014. Global investment in clean energy was $50.5bn in the first quarter of 2015, down 15% from Q1 2014, as deal-making slowed in big markets such as China, Europe and Brazil.
Today’s authoritative statistics from research company Bloomberg New Energy Finance show fewer large-ticket transactions in the January-March period of this year than in Q1 2014. Financings of wind projects and public market equity raisings 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 1 January. Q1 2015 continued this trend, with investment at $50.5bn down sharply from $67.6bn in Q4 2014, but it was also lower than Q1 2014?s $59.3bn. The last quarter to show a weaker figure was Q1 2013, with $43.1bn.
Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance, 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.
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 six US cents 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.
The Q1 figures show that investment in Europe slipped 30% compared to first quarter 2014, to $9.7bn, while that in China fell 24% to $11bn. Investment in the US edged up 2% to $9.6bn, but Brazil slid 62% to $1.1bn and the rest of the Americas dropped 17% to $2bn. The strongest performance came from South Africa, where investment in Q1 surged to $3.1bn from almost nothing in the same quarter a year earlier.
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. 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 $1.6bn. In Asia-Oceania excluding India and China it fell 15% to $11.2bn, with Japan’s small-scale solar boom continuing but overall investment in that country edging down 3% to $8.8bn. 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 $4.3bn.
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 $27.9bn. The largest asset finance deals included $1.3bn for Germany’s 322MW Nordsee One offshore wind project, $888m for the 100MW Xina Solar One solar thermal complex in South Africa and $427m 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 $20.3bn, with Japan, the US and China the most active markets.
Equity raising by specialist clean energy companies on public markets tumbled 66% to $2.2bn, 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 $460m convertible issue by US solar company SunEdison and a $405m 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 $1bn. The largest deals included $76m in expansion capital for UK biofuel and biochemical producer Green Biologics and $75m for US rooftop PV company Leaf Solar Power .
By sector, the Q1 2015 investment figures show solar up 7% from a year earlier, at $31.8bn, wind down 30% at $15.1bn, biomass and waste-to-energy up 94% at $1.7bn, and biofuels down 64% at $447m. Investment in energy smart technology companies slumped 91% to $281m.
The 2015 Bloomberg New Energy Finance Summit runs from Monday 13 to Wednesday 15 April in New York. More than 1,000 senior executives, investors and policy-makers from the energy sector will discuss the future of energy. For further details, please see http://about.bnef.com/summit/.
Note: total investment in clean energy in 2014 was $310bn, up 16% from 2014 and the second highest annual figure ever, behind only 2011?s record of $317.5bn. The annual totals include research and development spending and asset finance of digital energy and storage, neither of which are tracked in the quarterly numbers. In addition to the asset finance, small distributed capacity, public markets and VC/PE figures, there was also a small adjustment, of $0.9bn, for re-invested equity. That took the quarterly total investment figure to $50.5bn.