Institutional investors stated that the ‘US renewable energy investments are heading for a crash’. Given the ties between energy and other industries, this would be a disaster, to say the least. Thus, to all who it may concern (which is virtually the entire world economy) it is now officially the end of the world! Yes, it is! Or not? Or would a -quick- collapse be a good thing?
The future of the energy driven world, taken with a seasonal pot of salt.

Maybe the end…

The switch between two fiscal years started in a quite entertaining way. At the end of 2009, newspapers worldwide published articles about the apocalypse. Veja (Brasil), El Norte (Mexico), the Boston Globe (US), Al Raï (Kuwait), Vermia Novoster (Russia), El Païs (Spain), the Guardian (UK)… to name only a few.
Flipping through some recent investment reports feels very similar.

It starts with a soft version, an exclusive energy report published by Bureau van Dijk.  Their ZEPHYR data cruncher calculated that the investments in clean technology experienced a strong growth in regions like Ireland, France, Belgium, Norway, Italy, Estonia, Hong Kong, and Austria… but strand nevertheless globally at the level of two years ago, both in volume and value.

The report published by Deloitte did it’s best to keep people’s hopes up by stating that ‘although the fall in venture investment parallels the global economic decline, investment into clean tech declined less than other sectors’, before stating ‘with overall venture capital retreating to 2003 levels’.
Plummeted to the level of 2007 according to the former, the level of 2003 according to the latter. Not very comforting words …

Really the end!

The really alarming message came from Karl Miller , energy executive and institutional investor with a quite global experience. According to him, the growing number of financially pointless clean tech companies is strongly cannibalizing the economy:

Unfortunately, a renewable energy crash is already in process. There is difficulty in securing financing other than government hand-outs, and utilities are under pressure to meet renewable energy targets and are therefore signing contracts with little idea of how this will pan out. Many of the projects are not financeable, there are still technological difficulties and environmental issues. After all the analysis and forecasts, I came to the simple conclusion that the maths does not work.

A second recurring cancer is the contradictory combination of subsidized economy, in a framework that would need profound changes, and a more sound approach.

‘There are clearly hundreds of renewable energy companies in existence in the US, solely due to the subsidies on offer and whose long-term viability is extremely thin. When attempting to get to a 100 from nowhere in such a short space of time, you become reliant upon multi-million dollar subsidies, which involve creating a great deal of debt. Eventually, it will fall upon the utilities to create rate increases which will in turn lead to many assets being stranded. (…) What will happen is we will be left with stranded assets across the US which will become nothing but failures.’

In short, energy is great, but (especially American) green tech will end up in nothing. A dominoing crash, a fortiori if governments continue to pump endless amounts of money in a sector that, according to him, should be dominated by private investment.

2012. End of Times. Start over again.

The reality is obviously somewhere in between. Like other sectors, green tech and other energy related sectors will bounce back – the continuation of international market developments is the best proof. With ‘capitalism’ being obliged to downgrade/upgrade/evolve towards a softer version of itself, and buoyant M&As lowered, it is the good moment to rethink the drivers though.

In some geographical areas, there are indeed to many companies competing with each other. Many of them are competing with each other for subsidies, rather than competing for real market share or strong revenues. But is this the vast majority? No, it is not- or not everywhere to the same extend.
In parallel, many governments are indeed still focused on subsidizing, rather than on well balanced and targeted stimulation.

But private is not a basket full of waste. Neither is public a basket full of wasted money. It is, however, definitely time to clean up a bit. It is time to become serious again and grow up, for all parties involved in green tech.
Some weeks ago, the  FT  stated in one if its Lex articles about oil that ‘it is shocking how easily almost everyone forgot the laws of supply and demand when it came to the world’s most important commodity’. The same applies to other sectors. The new year just started, Copenhagen is over, so does the biggest chunk of the crisis. Now time has come to move on for green tech. Growing old is mandatory, growing up is an option. Time to work on that option.