WALL OF MONEY FOR NEW ENERGY

Fast facts: 2% of current global power comes from New Energy but 18% of investment goes to it. Worldwide investment in New Energy is expected to double 7 times in the next 10 years to $750 billion.

Why? Because Asian energy demand is growing 30% every year. China’s goal is 10% New Energy by 2020. India’s goal is 10% New Energy by 2012.

‘Wall of money’ set to flow into Asian renewable energy
William Barnes, October 28, 2007 (Financial Times of London via Yahoo News)

WHO
Investors, pension funds and private equity managers

WHAT
A "wall of money" is poised to flow into renewable energy ventures in Asia. The only problem is how to select the right investment.

China's New Energy ambitions promise big returns for suppliers. (click to enlarge)

WHEN
New Energy investment 2005 -- $80 billion; 2006 -- $100 billion.

WHERE
- Asian governments (ex: India, Thailand) want no food crop investment or resources diverted to biofuels.
- 70% of New Energy investment comes from the US and the EU. China accounts for 9% and growing.
- Biggest investment is in wind and biomass.

WHY
- Demand for energy is growing at the rate of 30% per year.
- Asia, where there are few government subsidies, will be a proving ground for New Energies prospering from incentives in Europe, Japan and the States. Biomass generation seems to be the 1st to fall.
- Investment resources uncertain of which New Energies to choose can choose companies with good performance records (Ex: The Henderson Industry of the Future fund: Suntech Power and JA Solar in solar, China High-Speed in wind)
- Asia-Pacific Carbon Fund, backed by the Asian Development Bank: $150+ million.
- The Peony Fund (seed money from Bill and Melinda Gates, clean technology in China): $100 million.
- Man Investments (China Methane Recovery fund): $300+ million.

This chart is not easy to read but the essence is that the boom is already on. China and India are in the world's top 6 countries for New Energy activity. (click to enlarge)

QUOTES
- Melissa Brown, executive director, Association for Sustainable and Responsible Investment in Asia: "We are kind of stuck at the moment. We've got quite high-risk capital coming in but not much in the way of investment one step up from that…It's the classic Asian dilemma: immense potential but you don't know when you are going to get the commercial structures to make it work…"
- Ben Warren, Ernst & Young renewables: "Asian governments can learn from Europe. If national grids will guarantee to take energy from a renewable plant for 25 years, all of a sudden you have a project that, tied with others, will interest a pension fund looking for a safe, decent yield. In the end it comes down to risk and return…"
- Eric Usher, head, United Nations Environment Programme/Renewable Energy and Finance Unit: "Every country will do it differently but the combination of pressures is going to produce something important. Three or four years ago there wasn't much investor interest. Now there's a lot…"