Europe ‘being left behind’ in clean energy investment
London, 19 April: Europe’s share of venture capital (VC) and private equity (PE) investment in clean energy is falling, as investors favour opportunities in the US and Asia instead, according to New Energy Finance (NEF).
The London-based analysts say that VC and PE investment in clean energy companies was up 68% to $8.6 billion in 2006, from $5.1bn in 2005. However, while investment in the Americas was up 138% to $5.3 billion, and Asia saw growth of 45% to $1.3bn, investment in Europe dropped 2% to $1.9 billion.
In a white paper published this week, NEF describes Europe’s poor performance in clean energy VC and PE investing as “baffling”, particularly given how successful Europe’s public markets have been in attracting investors to the sector.
It also notes that what investment there has been in Europe has generated good returns, and says that “the figures will make depressing reading for European policy-makers, who have set great store by achieving leadership in clean energy, as well as in innovation.”
NEF suggests a number of reasons why Europe may be falling behind, including: the traditional weakness of Europe’s venture capital industry, compared with that of the US; ‘Balkanised’ national markets, each with their own regulations supporting clean energy; and bureaucratic processes for technology support.
The company makes eight recommendations for policy-makers:
1. Improve general macro-economics for innovation and entrepreneurship;
2. Identify and break down regulatory barriers to markets for new clean energy providers;
3. Reduce investment risk by improving stability and longevity of clean energy support mechanisms;
4. Use the public sector to create markets through preferential procurement of clean solutions;
5. Introduce pan-European standards for clean energy, fuels and technologies;
6. Promote the development of supporting services such as testing and certification, training, information provision and insurance;
7. Avoid the temptation to pick winners, whether through green funds or any other mechanism; and
8. Decouple technology support programmes from social and political goals.
“Europe has led the world in developing modern renewable energy technologies and introducing carbon trading. But its leadership position is threatened because the venture capital and private equity money is now flowing into the US and Asia, and bypassing Europe,” said Michael Liebreich, NEF chairman and CEO. “Europe needs to take urgent action or it will fall behind in one of its flagship emerging industries.”
