The Buzz around Renewable Energy – Is it real?

Renewable energy is seen as the next big thing that the whole world is betting on. Billions of investments are expected to go in this sector over the next 20 years. In 2009 investment in core clean energy was down 7% to USD162billion from $173 in 2008. This was attributed to global recession. According to a recent report Ernst and Young reported that Q3 US venture capital (VC) investment in CleanTech companies fell 55% compared to Q3 2009. Bloomberg reported that global wind installations have declined compared to 2009. Financial crisis around the world may hamper its exponential growth. Many developed countries across the world are adopting austerity plans mainly to avoid financial crisis. The cuts in subsidies and feed-in tariffs will decrease the pace of investment in the sun rise sector.

Here are some more indicators:

Spain has been a world leader in Renewable energy and it has announced that will slash subsidies for wind and solar power. Estonia recently announced renewable energy is getting unreasonable support and is planning to reduce the subsidies which are too high. Germany, France, Italy and the Czech Republic have all announced a cut in their over generous subsidies for RE. Also it is fair to note that The French Government announced that it will hold all plans for new solar projects to control the speculative investment in this area. China has delayed the Energy Stimulus Plan indefinitely because of the global price fluctuations especially with respect to PV technology. India is not very far away from all the chaos related to RE. The projects under solar mission are being delayed because it is felt that the costs in the bidding process are underestimated and it could haunt the companies implementing the project. In the US renewable projects and jobs associated with them are threatened if investment grants are not extended. (The grant program was a part of 2008 economic stimulus package that was created to encourage investments in renewable energy.)

Companies are also re-evaluating their strategies to hold the sliding profits. Vestas has already announced to cut jobs due to falling demand. US based Solyndra, manufacturers of PV systems, reportedly will close down a manufacturing unit. China reported that 40% of Wind power turbine output capacity is idle, reason being slower growth in wind farm construction and many players entering in this space. Huaneng  Renewables Corporation, the wind power unit of China Huaneng Group, cancelled its USD1.3 billion Hong Kong IPO due unfavorable market conditions. Elsewhere solar power plants have been put on hold mainly due to financing difficulties.

It appears the funding and investments should start getting mobilized in the later part of 2011. Also this is the time for the investors to really strategies their investments to justify the ROI.  Also all the glitter around this sector will have to tone down for investors to be more realistic.