By Gerard Wynn
LONDON (Reuters) - Half of institutional investors will increase funding in clean energy now compared with 12 months ago, but that will not be enough to drive global growth in the sector this year, according to a survey published on Wednesday.
Clean energy shares under performed other stocks in 2008, because of their dependence on growth, new technologies and high oil prices. More expensive debt has also slowed installation of clean energy such as wind and solar power.
But guaranteed long-term subsidies, meant to help fight climate change and diversify energy supplies, will help lift clean energy out of recession and will be among the first of all sectors, investors and analysts expect.
Some 49 percent of a survey of 106 institutional investors including pension funds, asset managers and insurance companies expected to increase their exposure to companies and projects now, research group New Energy Finance said.
However that would not prevent flat or falling global investment in clean energy in 2009, the research group said.
"Quarterly investment figures have dropped off year-on-year," Michael Liebriech, head of New Energy Finance, said, referring to falling investment in the second half of 2008 and an expected fall in the first three months of 2009 compared with the same period last year.
Global investment in clean energy projects and companies reached a plateau in 2008 at about $150 billion, the same as 2007, the group estimates.
Global economic stimulus packages have allocated about $200 billion to clean energy in an effort to create jobs and diversify energy supplies, analysts say.
But those funds would not likely become materially available until 2010, Liebreich added.
One hope for the industry is that there may be a step-change in political action to fight climate change, for example at U.N.-led climate change talks meant to agree on a successor to the Kyoto Protocol in Copenhagen in December.
CURRENT TRENDS
In a separate study, New Energy Finance estimated the clean energy sector required $500 billion investment annually by 2020 to avert more dangerous climate change, versus an expected $350 billion under current trends.
That compared with about $1,500 billion annual energy investment now, the group said.
Extra investment depended on more political support.
"It's some combination of concerted policy intervention at a scale we haven't seen yet or a bombshell out of Copenhagen ... commitments above what's expected from China, India, the United States," Liebreich said, referring to three of the world's top carbon emitters, none of which are bound by the Kyoto Protocol which expires in 2012.
Recession would have a negligible impact on global carbon emissions, which would continue to rise at amounts about 3 percent below levels otherwise expected, the group said.
Clean energy deployment in the medium-term would be aided by falling costs, currently higher than conventional fossil fuels, exacerbated by a glut for example in solar panels as a result of slower growth in the sector now.
"We have a massive over-supply here -- to manufacturers that will be something of a worry," said Jenny Chase, solar power analyst at New Energy Finance, referring to a possible over-supply of photovoltaic (PV) solar panels through 2011, which could lead to mothballed plant.
Retail prices for solar PV panels would fall more than 40 percent before that supply-demand balance was restored, Chase added.
(Editing by Sue Thomas)
