Finance » Clean Energy Investment

The Value Chain of Investment in Clean Energy

There are three different types of investment opportunities along the technology value chain:

Investors in Cleantech Companies

 

Research & Development pre-revenue

Most of the seed and early stage funding in clean energy is provided by governmental agencies, research bodies and corporations with a sufficient balance sheet such as utility companies. Governmental support is mostly in the form of a grant (that does not have to be paid back), sometimes requiring matching funds from private investors.

There is also venture capital money at this stage. However, VCs tend to invest in technologies that are "in vogue" in any year. In 2008, for instance, more than 40% was invested in solar, whereas in 2009 most VC money was received by the energy efficiency sector. One challenge is that energy and related sectors are significantly different from software or biotech, which have traditionally been venture- funded, as clean energy technologies require much more capital and time to develop and test than what many venture capital firms are comfortable with.

Manufacturing Scale-up

With technology risks significantly lower, but funding requirements higher, scaling up the manufacturing can only be financed by larger companies, private equity funds and by raising capital in the public stock or bond markets. At this stage, debt may be available from banks as well.

There have been a number of stock market entrances already from solar and energy-efficiency companies. These "exits" either through an IPO or acquisition are important if investors are going to keep funding energy-technology ventures.

Development of new Assets

Depending on the size of the installation, new assets are financed by private investors (small projects like rooftop solar panels), corporation's balance sheets, project finance or by issuing bonds.

Corporate Actions

A significant amount is invested in corporate actions including private-equity buy-outs, corporate M&As, as well as acquisitions and re-finance of renewable energy assets.

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Sources: Data on investment levels (2008) from New Energy Finance

 

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