Clean energy funds invest in the value chain of clean energy development. In this article John Joshi of ICE Capital Partners explores clean energy investments sector and the opportunities available to investors.
The growth of sector specialist fund focused on clean energy investments has channeled significant capital to the clean energy sectors. Investment funds are involved in the full value chain of clean energy investments, from private-equity investments in upstream manufacturing firms to downstream project finance projects. The clean energy value chain is large and complex and can include the following:
Resources - feedstock, bio-feedstock
Generation - solar farms, wind farms, bio-fuel and fuel cell plants
Transmission - Inverters, grid connection
Distribution - Microgrid, Storage, thermal storage and battery
Consumption - On-site generation, Net Zero Solutions,
Investments in the sectors can include equity investments (start-up capital, growth capital), various types of listed stock equity investments, debt funding, project finance including strategic equity, tax-equity, senior debt, and mezzanine or subordinated debt.
What sectors have been growth areas for Clean Energy?
Clean energy investors were very active in 2011 according to data reported by Bloomberg New Energy Finance (BNEF). The graph accompanying this piece highlights the top 20 funds involved in the sector. The funds rage from private-equity investors, project finance investors, dedicated specialist hedge-funds as well as investment banks and bilateral organizations. BNEF estimated the sector attracted a record USD 250 billion in 2011.
Statistics on Clean Energy
A key observation for the clean energy sector is that growth has been skewed towards solar and wind development projects and these sectors captured a significant part of the investments directed in the clean energy space. Additionally developed countries led the growth in investments in solar while developing countries outpaced in the wind sectors.
Global Clean Energy Investments ($Bn)
The renewable investment sector is sourcing capital from a myriad of investors and has had considerable growth over the recent past as shown in the graph below, despite the global recession and financial crisis.
A brighter and sustainable future is expected for clean energy development and the opportunities for investors to participate will grow in the value chain of investments. In solar we are by all estimates now at grid parity and companies like SolaireDirect are now meeting the challenge to be completive around the world, including in emerging economies to meet the power needs of a growing world. We are moving closer to an energy democracy around the world for sustainable safe, reliable and cleaner energy.
* Illustration source: Bloomberg New Energy Finance, UNEP.
[Editor’s Note: John Joshi is a member partner at ICE Capital Partners, an early stage startup firm focused on clean energy investments. Mr. Joshi can be reached at JohnJoshi@ICEcp.com.]