We may be going through tough economic times, but the growth and importance of the clean-energy sector has never been clearer. In November 2008 the European Energy Venture Fair and New Energy Finance released findings from their third-annual European Clean Energy Venture Returns Analysis and the results were encouraging.

Fifty-four investors participated in the survey and the analysis covered EUR 1.7 billion of invested capital -- more than half of all European clean-energy investments. North American investments were also included this time around and represented 28 per cent of companies under review.

As of summer 2008, the pooled, cumulative internal rate of return (IRR) of investments made in 302 companies was 67.7 per cent. This included 26 companies that were publicly listed and 32 that saw exits through a trade sale. About 7.5 per cent of all investments were written off or liquidated. The fully realized investments returned an IRR of about 60 per cent. The survey also found that exits since January 2007 enjoyed average returns of 2.8x.

This leaves significant value for unrealized investments. However, we must keep in mind that follow-on rounds of financing might correct those valuations. We must also consider that only a limited number of companies will be able to achieve a public listing or a successful trade sale during 2009, given continuing tightness in the capital markets.

But the broader message is that the fundamentals of the clean-energy sector have not changed. The year ahead is a time to grow companies until the markets begin to open up again. In the meantime, the main challenge will be limited access to project finance, particularly for large-scale power projects. As we've seen, this reality has dragged down the share prices of publicly listed clean-energy companies.

The price of oil is having an impact. Studies by New Energy Finance on the correlation of the WilderHill New Energy Global Innovation Index (NEX) with oil prices show a relatively low but increasing correlation since the second half of 2007. The correlation with the MSCI is more significant. (See Energy Spot Prices: Should We Care? in the Industry News section)

In a report released in January 2009, the World Economic Forum and New Energy Finance concluded that cleantech investments this year will need to more than triple, compared to 2008, to address the demand for renewable energy and efficient ways to distribute, store and consume energy. This means governments will have to set up longer-term policy frameworks, in addition to the many short-term stimulus packages under development.

The bottom line: a positive future for cleantech investments.

In this edition >>

New Investments: FMI NewCoal, Schmack Biogas
Portfolio Update: Spotlight on SDC Materials, Xunlight
Industry News: Spot prices for fossil fuels

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