Wednesday, February 29, 2012

2012 Forecast: Clouds and Opportunities on the Horizon

In 2011, the conventional wisdom on cleantech investing went something like this:
'cleantech is too reliant on government subsidies and bound to fail once subsidies inevitably run out, a poor environment for initial public offerings is making investors cautious in all sectors, economic instability in Europe is advancing the cause of austerity over investment, lack of progress on U.S. federal energy policy gives American investors ample cause for continued caution, and, meanwhile, a glut of cheap natural gas is crowding cleantech offerings from the marketplace.'
And yet, globally nearly nine billion dollars in venture and corporate capital were invested in cleantech in 2011, up 13% over 2010.  Solar led the way with $1.8 billion in investments in 111 deals.  Mergers and acquisitions grew by 153% in 2011 to $41 billion, as many cleantech startups sought their exits with mature companies seeking new innovations.  

In the U.S., gloom and doom dominated conventional wisdom in the business environment in 2011 as well, and yet cleantech investments here grew 30% over 2010, with U.S. solar installations growing more than 65% year-over-year. 

As we look forward, 2012 looks like a challenging year for investors, as some markets will face increasing financial constraints, especially within the Eurozone.  In the U.S., a shortfall of tax equity and supply-demand mismatch may limit growth in solar and wind power development, as forecast by Ernst and Young's All Renewables Index.  The potential sunsetting of the production tax credit, or PTC, for wind power in December 2012 could also put a crimp in wind power investment if this is not extended.

Yet 2012 will present opportunities and could represent a pivotal year for cleantech.  Around the world, governments seeking answers to their fiscal challenges are engaged in a global dialog over how to best stimulate sustainable growth, and many continue to look for answers from cleantech innovation.  In his State of the Union address on 23 January 2012, President Obama confirmed his support for renewables, stating that he “will not walk away from the promise of clean energy.”