Q1 2012 Clean Energy Policy & Market Briefing, prepared for Clean Energy Solutions Center

Policy pullbacks, weak economies, market oversupply slow Q1 investment

Prepared by Bloomberg New Energy Finance for the Clean Energy Solutions Center, an initiative of the Clean Energy Ministerial.

New investment in clean energy projects, companies and technologies fell in the first quarter of 2012 amid weak economic conditions in Europe, narrowing profit margins for manufacturers, scaled back subsidy support from policy-makers and fierce competition from low-priced natural gas. Total new funds into the sector slipped to $26.7bn in the quarter, down 28% from Q4 2011 and 22% from Q1 2011. In this inaugural edition of the Quarterly Policy & Market Briefing for the Clean Energy Solutions Center, Bloomberg New Energy Finance outlines clean energy trends worldwide in Q1 2012.

● Several factors contributed to the investment fall. Certain nations where clean energy has historically thrived posted little or no economic growth in Q1. Oversupply plagues the industry with excess wind turbine, photovoltaic (PV) module and advanced battery manufacturing capacity available and equipment makers’ profit margins are getting squeezed. Budget belt tightening has prompted policy makers in developed markets to scale back support, in some cases quite dramatically. And record low natural gas prices in the US are crowding out opportunities.

● Financing for large-scale power generating projects fell to $24.2bn in the quarter from $34.7bn in Q4 2011 and from $27.9bn in Q1 2011. Long-term project financing has become harder to secure, with banks in the EU, in particular, extending project credit on a shorter term basis.

● Fundraising for companies via the stock exchanges totalled $0.6bn, down only slightly from $0.68bn in the prior quarter but off by a substantial 94% from the $4.6bn raised in Q1 2011. However, clean energy companies already trading on the world’s stock exchanges saw their values grow, on average. The WilderHill New Energy Global Innovation Index tracking 98 clean energy stocks rose 7.1% in Q1. Still, that trailed the performance of other major indices.

● Major policies backing clean energy were scaled back in the US and in key EU nations, including Spain, the UK and Germany. Meanwhile, governments in countries with less clean capacity such as India, China and Brazil appear to be stepping up their support.

● Prices for solar PV modules at the factory gate 17 April were $0.90-0.99/Watt, depending on type (monocrystalline vs. multicrystalline) and manufacturer location (China vs. anywhere else). That’s down from roughly $2/Watt at the start of 2011. Solar-grade silicon prices continued to slide during Q1 and were at $25.04/kg as of 17 April.

● The average price for utility-scale wind equipment hit a new low in the second half of 2011, dipping 4% from six months earlier, according to March data.

● The average price for an electric vehicle lithium-ion battery pack was $689/kWh in Q1, down from approximately $800/kWh a year earlier and from $1,000-plus levels in 2009.

● Falling wind and PV equipment costs have pushed down the levelised cost of electricity. As costs continue to decline, market demand for clean energy will rise, driven by basic economics. The industry’s short-term pain will ultimately lead to long-term gains after all excess costs are eliminated.

Please download the full report for more detailed analysis.

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