How China’s troubles are affecting greentech

The second quarter brought a slew of greentech developments: We saw near-record investment in utility-scale clean energy projects but falling valuations for clean-energy stocks; big investments in solar thermal projects but struggling markets for solar photovoltaic systems; and rising private equity green investment while green VC took a slide. What should we make of the schizophrenic nature of this activity?

There’s a common thread running through all of this conflicting information: China. The country that has provided the world’s key growth engine for clean energy and green technology over the past few years has begun to see some economic cracks, with signs of bubbles emerging in everything from real estate markets to public company valuations. That, in turn, could have ramifications for every other economy in the world, both in the greentech sector and writ large.

Last week, Bloomberg New Energy Finance reported that global investment in clean energy reached $41.7 billion in the second quarter, up 27 percent from the previous quarter and up 22 percent from the same quarter last year. In particular, the figure was boosted by solar thermal projects such as startup BrightSource Energy’s 392-megawatt Ivanpah project in California.

But while solar thermal stole the show, the bigger solar photovoltaic industry’s second quarter saw falling prices and faltering markets. That’s driven down shares of solar PV companies that make up a key portion of publicly traded cleantech companies, such as the WilderHill New Energy Global Innovation index, which reported a 13-percent decline in the second quarter as compared to a flat S&P 500 index.

China leads the world in solar panel manufacturing, but lately they’ve begun to feel some pressure themselves. The weakening of key European solar markets in the second quarter has seen Chinese solar companies’ share prices drop, and concerns about potential financial irregularities among Chinese companies have also spread to its solar industry in recent weeks, with a number of solar companies under scrutiny as they replace key financial executives. Overall, China’s economy is showing alarming signs of overheating, with power shortages predicted over the summer. This makes China’s dropoff in clean-energy investment that much more noteworthy.

China remained the single-largest country for green-energy investment in the second quarter, but its $12 billion figure represents an 11-percent drop from the first quarter. This troubled investment climate is also the likely driver for the reduction in greentech public equity investments, which fell 7 percent to $3.4 billion in the second quarter. This fall is largely because of a dropoff in initial public offerings. China has been the fount of the biggest cleantech IPOs of the past 12 months or so (big wind power IPOs from Goldwind and Sinovel stand out), but that roster of gigantic public offerings slowed substantially in the second quarter.

If China is losing steam as a greentech powerhouse, where does that leave the rest of the world? Well, while Europe’s solar-power market may be in a slump, we can expect falling solar power equipment prices from China to help make up the difference, up to a point. Then there’s the United States, which saw green-power investment nearly double, to $10.5 billion in the second quarter, up from a slack first quarter. But at the same time, U.S. wind power growth has been sliding and solar PV projects aren’t growing as fast as expected, and the country is flirting with a double-dip recession.

China, on the other hand, was supposed to be growing reliably. One quarter does not a year make, and China’s government is doubtless going to continue its massive support for its domestic clean-energy, smart-grid, green-transportation and energy-efficiency industries, both for export and for internal development. But if the country’s green economy continues to suffer, it could have an enormous impact on the rest of the world. After all, China will someday be the biggest greentech market in the world, not just the world’s workshop for green manufactures.

Question of the week

How will China’s economic uncertainty impact its green-technology dominance?

Today in Cleantech

Good news for clean technology this morning. The second quarter of 2011 saw global clean energy investment jump to $41.7 billion, up from the first quarter’s dismal $31.1 billion and the third highest quarterly figure on record, according to Bloomberg New Energy Finance. Amidst a host of data pointing to the upsurge, it looks like financing for several large-scale solar thermal power plant projects, including BrightSource Energy’s Ivanpah project in California, really helped push up the second quarter’s figures. At the same time, China kept its top spot in total clean energy investment at $12 billion for the quarter, higher than the U.S. figure of $10.5 billion, although China’s investment level fell while U.S. investment rose. Europe’s second-quarter green investment rose to $8.9 billion and India’s jumped 45 percent to $2.5 billion. As for private equity green finance, BNEF counted up $3.1 billion in the second quarter, which is the highest since the pre-economic collapse third quarter of 2008 (note that this figure differs from the lackluster $1.87 billion in second quarter green venture capital investment reported by the Cleantech Group last week).

Today in Cleantech

2010 greentech investment numbers are out, and it was a good year — compared to 2009’s disappointing one. Global venture investment into green technologies stood at $7.77 billion last year,up 28 percent from 2009’s $6.1 billion, according to figures from the Cleantech Group this morning. North America led the world with $5.28 billion raised — more than 2009’s $3.65 billion, though less than the $6.25 billion raised in the go-go year of 2008. European green VC kept sliding, however, with only $1.62 billion raised in 2010, down from $1.75 billion in 2009 and $1.84 billion in 2008. Asia’s VC investment grew to $771 million last year, up from $655 million in 2009 and $620 million in 2008 — not impressive in its own right. But in terms of green IPOs, it was China that dominated in 2010, with eight of the 10 biggest public offerings for the year garnering $9.79 billion, or two-thirds of global capital raised. Most of those companies weren’t venture-backed firms, as compared to many U.S. greentech IPOs of the year, which drew a combined $4.06 billion. I’ll have more details from this and other 2010 greentech reports for you in next week’s weekly update — stay tuned.

Today in Cleantech

While U.S. venture capitalists have led in global greentech startup investment, it’s developing economies that have driven the green public markets in 2010. That’s according to HSBC, which reported Wednesday that “climate-related” equities in emerging markets saw returns of 2.5 percent in 2010, compared with a 1.2 drop for developed markets. That’s no surprise, given that developing nations are doing well while U.S., European and Japanese economies remain sluggish. Brazil’s market led with 18 percent growth, followed by South Africa at 11.9 percent and South Korea at 6.8 percent. Still, the weight of developed markets dragged down global climate equity returns 0.7 percent for the year, the bank reported. HSBC also found that emerging markets gave out $77 billion in green stimulus, compared with $68 billion from developed nations. China led the way with 1.5 times more stimulus than the United States.

Today in Cleantech

Nobody expects a newly Republican-tilted Congress to do much about clean energy or climate change, so states are reasserting their dominance as greentech incubators. That’s the gist of Clean Edge’s new U.S. Clean Energy Leadership Index, which gives a snapshot of state-by-state greentech support as 2010 draws to a close. To nobody’s surprise, the best state to do green business remains California. Along with its lion’s share of venture capital and industry-boosting renewable energy mandates, California also voted down an oil industry-backed ballot measure that would have crippled the state’s landmark greenhouse gas reduction law, AB32. Even so, Washington state edged out California to take top rank for green-supporting policies, while Massachusetts had the most energy and environmental regulations and mandates and Illinois won for financial incentives. Michigan took top spot for greentech patents, largely based around the state’s huge role in plug-in hybrid and electric vehicles and supporting battery technology. Oregon, Colorado are New York, Connecticut, Minnesota and New Jersey rounded out the list.