Date: 02-Jul-09

Country: UK

Author: Gerard Wynn

A worker sits on the head of one of the three turbines that a Kosovo-German company is building in the hills of Goles, near Pristina airport May 12, 2009.

Photo: Hazir Reka

LONDON - Global investment in clean energy and climate-friendly technologies leapt in the last three months but full-year levels won't recover until 2010 or 2011, analysts said on Wednesday.

Falling energy demand and more expensive debt have hurt large renewable projects for example in wind and solar power. Recession has cut risk appetite, curbing funding for clean technology start-ups.

But global clean energy investment rebounded in the past three months, after a 44 percent collapse in the first quarter, and stimulus spending could spur a return to last year's funding levels in 2010, according to research group New Energy Finance.

"It's a big bounce back," said Michael Liebreich, NEF chief executive, referring to preliminary numbers to be published later this week or next.

"We've lost two years," he added, comparing similar figures in the second quarters of 2009 and 2007.

In addition to stimulus spending, bright spots for the sector included some return to bank lending, easing on margins above interest rates, a proposed U.S. climate bill and falling costs of components including solar-grade silicon and steel for wind turbines. Concerns include fears of a drawn out recession.

In rough calculations, Liebreich expected $62 billion stimulus funding for clean energy in 2010 in addition to about $90 billion from capital markets to return the sector to 2008 investment levels of $155 billion, or to beat that.

Governments worldwide plan to spend about $3 trillion in programs to boost flagging economies and a portion of that on green measures.

Some investors and analysts expect a longer dip. "Deal volumes will certainly be down this year and I suspect down in 2010 as well, over 2008 levels," said Tom Murley, head of renewables at private equity firm HgCapital.

BURST

Venture capital deals help smaller companies grow, and that sub-category of finance is down further than wider investment.

Total venture capital (VC) funding for the cleantech sector reached $1.2 billion in the last quarter, up 12 percent from the first three months of 2009 but down 44 percent from the same period last year, a bigger drop than in wider finance.

The biggest VC deals in Q2 were in the autos sector, including $100 million for lithium-ion company A123, which supplies batteries for electric cars, said Cleantech Group.

Some analysts have argued the VC finance model doesn't fit the cleantech sector, because many energy technologies in particular are very capital intensive and do not have the fast rollout preferred by this type of investor.

Share indices tracking climate-friendly firms are down 40 percent from 2007 partly as a result of recession and partly following a correction to perceived over-valuations.

(Editing by James Jukwey)

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