Thu, Jan 25, 2007 - Page 9 News List

Europe encouraging clean energy industries

More than half of the world's 22 most valuable publicly traded wind and solar companies are based in Europe, with ready access to green-minded consumers and long-term government support being the incentives


The cloudy Welsh coast may seem an odd choice for making solar panels, especially for a bigwig like Robert Hertzberg, a Californian who has hobnobbed with California Governor Arnold Schwarzenegger. But a commitment by European governments to helping out "clean energy" entrepreneurs is creating a more welcoming environment than the US, where erratic support, a lackluster market for taking companies public and more onerous financial rules have given pause to some start-ups and investors.

"California does have this great image," said Hertzberg, a former speaker of the California State Assembly and the co-founder of an investment firm, Renewable Capital. "But Europe still is much greener than anywhere in the United States, by several orders of magnitude," he said.

Besides, said Hertzberg, his thin and flexible solar panels even work in overcast conditions.

"Hey, don't you get it? It works in the rain!" he likes to tell the bemused Welsh.

Europe is experiencing a new wave of interest in ventures that develop energy from less polluting or renewable sources, like sun and wind, as well as from tides, agriculture and geothermal heat. It is not clear, though, if the interest will turn into a passing fad or a bubble, like the rush into Internet stocks during the late 1990s.

The US has not signed the Kyoto Protocol, an international accord aimed at stabilizing emissions of greenhouse gases in the atmosphere. Even so, US industry has set the investment pace, pouring US$3.5 billion of private equity and venture capital money into start-up clean-energy developers last year, according to New Energy Finance, a research firm based in London.

EU countries are signatories to the Kyoto Protocol, but the private equity and venture capital investment in Europe into clean energy has been smaller than in the US over the last two years. Together, Europe, the Middle East and Africa have raised only about one-third of the amount the US has into new clean energy ventures, according to New Energy Finance.

But Ken Bruder, the executive director of New Energy Finance, warned that those numbers were an unreliable guide to the overall development over the sector. He said that ready access to green-minded consumers and long-term government support would do more to create fertile territory for generating profits.

"Setting up power lines to reach wind and solar farms is a major task and not accomplished overnight," Bruder said.

"Europe may be doing a better job than America in setting up these new infrastructures," he said.

Another incentive in Europe for clean energy companies is lighter regulation over publicly listed companies. More than half of the world's 22 most valuable publicly traded wind and solar companies are based in Europe, according to the Jefferies Group, an investment bank based in New York.

Among the most prominent firms to have emerged in Europe is Vestas, a Danish company supplying turbines that generate 35 percent of the electricity worldwide that comes from wind power.

But Vestas lost 192 million euros (US$252 million) in 2005, on 3.6 billion euros in sales, partly because of weak results in the US. Rebates on wind power have lapsed several times in the US, creating what Soren Madsen, a Vestas sales executive, called "wild swings in demand."

Vestas has forecast improved profit margins for this year, and its shares rose about 130 percent last year -- a sign that the drive for clean energy and alternatives to oil is pushing up valuations. Apax Partners, a buyout firm based in London, multiplied its initial investment of 11.5 million euros by 27 times when it sold most of its stake in the German solar company, Q-Cells, between October 2005 and January last year. Such success is helping to motivate small incubator funds in Europe, like Hertzberg's, to compete with the cash-rich venture capital firms and giant utilities to find and finance renewable energy ventures and start-ups.

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