I will be at a seminar in Edinburgh later this week on the "Green Crunch"; does the current economic downturn mean that efforts to green the UK, EU and global economies will fail because of a lack of investment?
On the face of it there are two competing "bads". One is that availability of credit for investment in alternative energy has constricted along with the general availability of credit in the economy. Sources of energy still at the development phase - particularly wave and tidal devices - are already finding it more difficult, and in some cases very difficult, to sustain previous levels of investment. The other is that as the global economy contracts so GHG emissions will reduce, leading some to claim that we are doing more than enough already without the need for further action.
There is a good analysis here of the impact of the credit crunch on the new energy sector; it is one of several recent pieces of research that examine whether the sector is about to go back into a period of steep decline, similar to that experienced in the US in the early 1980s. At one level, the current oil price, combined with the lack of investment, represents a clear threat to the industry. However, the reality is that unlike the 80's there is now a clear policy committment, shared by many governments, to increase the generation of renewable energy. This manifests itself in both encouraging the supply of clean energy and in better managing energy demand.
In some markets - principally the US, where the tax credit support mechanism for renewables has been badly hit by the disappearance of available tax equity, there are short-term concerns. But these negatives are compensated by other (un)intended positive consequences. So, for example, a slow down in the US wind sector means better availability of turbines at better rates for developers in other parts of the world, particularly in the EU.
In short, the immediate future will see consolidation in the clean-tech sector with more realistic multiples being applied to development companies. It is an opportunity for companies with cash and a passion for development.
Comments