Friday October 14 2005

Investment in renewable energy heats up

By Mark Tran / Trendwatching

Renewable energy is a field ripe for entrepreneurs, judging by the growing investor interest in the area.

The London Stock Exchange yesterday hosted a renewable energy capital markets day, an event designed to match new companies in clean energy with potential investors.

The first event of its kind at the LSE to focus on renewable energy, it drew an impressive number of investors. They expected about 30 investors to show up. Instead about 90 came, including some of the biggest names in the financial world: UBS, Merrill Lynch, Barclays and Goldman Sachs.

"It is no surprise that investors are showing a growing awareness of the sector and the returns that are beginning to be generated," said Martin Graham, the head of Aim, the LSE's alternative, smaller market. "To date, over £70m in new investment has been raised by renewable energy companies on Aim, a clear sign of investor interest."

While interest is growing, big investors face several dilemmas when it comes to renewable energy. They have to take into consideration a wide variety of factors, covering geography, technology and business models.

Some companies have tried to keep things simple for investors. Tersus Energy, an energy investment and advisory firm that buys minority stakes in small companies has focused on the unglamorous area of energy efficiency, rather than on solar, wind or tidal power, the stuff that tends to get media attention.

It has recently invested, for example, in Navitas Technologies, a company that makes control panels for vehicles such as golf buggies and forklift trucks. The panels even out the supply of power from the batteries, prolonging their life.

"It's not intellectually shattering, but it involves technology that works and it makes money," said David Wilson, the finance director of Tersus.

For Mr Wilson, energy efficiency is a safe area to invest in. Even if oil prices come down from their current highs of over $60 a barrel, the drive for energy efficiency is not going to go away, he argues.

"Why wouldn't you do it anyway, it's going to save you money," he says.

As for the wider picture, Mr Wilson believes it has never been a better investment climate for the renewable energy and energy efficiency sectors, not just because of high oil prices but because of the political imperatives that arise from the climate change debate.

"It is easier to make money now," Mr Wilson said. "But it is also easier to lose it."

Currently, only around $20bn (£11.3bn) a year is invested worldwide in renewable energy capacity; mainly wind and solar, with some in biomass and biofuels, according to New Energy Finance, a London-based energy research company. A further $5bn is spent on research each year, particularly into hydrogen and fuel cells.

New Energy Finance expects the figure to increase to over $100bn within a decade - a sustained compound annual growth rate of 15-20%. That means there will be opportunities to make money for entrepreneurs and investors - provided they make the right call. From yesterday's event at the LSE, the big money is certainly showing interest. If there is money to be made, the large players do not want to left out of the action.

http://blogs.guardian.co.uk/businessinsight/
archives/2005/10/14/investment_in_
renewable_energy_heats_up.html