The challenge for wind investment

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Adam Barber
February 21, 2014
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This content is from our archive. Some formatting or links may be broken.
The challenge for wind investment

“We are all familiar with the J-curve in private equity. Well, for Calpers, clean-tech investing has got an L-curve for ‘lose’.”

So said Joseph Dear, Chief Investment Officer at private equity fund, Calpers, in an article in the fund management section of Monday’s Financial Times. It was a wry, if not damning, indictment of how the private equity community regards investing in clean energy.

The article was sparked by a survey report by fellow PE firm, Altius Investments, in which it warned that in 2014 “the bloom [would] finally fall from the rose of renewable energy”.

Funds such as Terra Firma (Infinis), Greencoat and the Renewables Infrastructure Group may have had success in fundraising in this sector, but it appears that some of their colleagues in the fund community believe that this may soon come to an end.

If we want to strike a more optimistic note then we can argue that this would not happen because the renewable energy markets of a determined exit by the private equity community. Rather, there may be more competition from other energy sources and asset classes that draw more capital.

This is, of course, exacerbated by policy decisions in recent years that have seen support subsidies in Europe retroactively reduced or, in the UK, the building of political support for gas fracking.

It’s perhaps why renewable energy assets, and wind energy in particular, have seen more interest from the pension fund community. These are investors who can afford to take more risk on policy as they look to the longer term.

There are then two questions that we have to ask.

Will alternative investors be able to pick up the slack if interest slows from private equity funds? And will firms in the renewable energy sector be able to innovate in the way they seek to attract investors; or in the way they provide assets for investment?

After all, it’s not that renewable energy assets can’t generate favourable returns at the 6% or 7% mark. But they do have to compete with more mature assets that have longer track records.

So is this something that should vex developers and utilities who have half a mind on offloading some of their assets? In our view, not yet. Their efforts should be focused on persuading the policy makers to increase political support for renewables.

However, it should add some impetus into the way that developers seek to secure capital.

It’s too early to tell whether 2014 is indeed a slow year for wind energy investments. But, while the cost of energy remains a tricky issue for politicians and markets to navigate, it won’t be easy to keep wind energy on the minds of investors.

“We are all familiar with the J-curve in private equity. Well, for Calpers, clean-tech investing has got an L-curve for ‘lose’.”

So said Joseph Dear, Chief Investment Officer at private equity fund, Calpers, in an article in the fund management section of Monday’s Financial Times. It was a wry, if not damning, indictment of how the private equity community regards investing in clean energy.

The article was sparked by a survey report by fellow PE firm, Altius Investments, in which it warned that in 2014 “the bloom [would] finally fall from the rose of renewable energy”.

Funds such as Terra Firma (Infinis), Greencoat and the Renewables Infrastructure Group may have had success in fundraising in this sector, but it appears that some of their colleagues in the fund community believe that this may soon come to an end.

If we want to strike a more optimistic note then we can argue that this would not happen because the renewable energy markets of a determined exit by the private equity community. Rather, there may be more competition from other energy sources and asset classes that draw more capital.

This is, of course, exacerbated by policy decisions in recent years that have seen support subsidies in Europe retroactively reduced or, in the UK, the building of political support for gas fracking.

It’s perhaps why renewable energy assets, and wind energy in particular, have seen more interest from the pension fund community. These are investors who can afford to take more risk on policy as they look to the longer term.

There are then two questions that we have to ask.

Will alternative investors be able to pick up the slack if interest slows from private equity funds? And will firms in the renewable energy sector be able to innovate in the way they seek to attract investors; or in the way they provide assets for investment?

After all, it’s not that renewable energy assets can’t generate favourable returns at the 6% or 7% mark. But they do have to compete with more mature assets that have longer track records.

So is this something that should vex developers and utilities who have half a mind on offloading some of their assets? In our view, not yet. Their efforts should be focused on persuading the policy makers to increase political support for renewables.

However, it should add some impetus into the way that developers seek to secure capital.

It’s too early to tell whether 2014 is indeed a slow year for wind energy investments. But, while the cost of energy remains a tricky issue for politicians and markets to navigate, it won’t be easy to keep wind energy on the minds of investors.

“We are all familiar with the J-curve in private equity. Well, for Calpers, clean-tech investing has got an L-curve for ‘lose’.”

So said Joseph Dear, Chief Investment Officer at private equity fund, Calpers, in an article in the fund management section of Monday’s Financial Times. It was a wry, if not damning, indictment of how the private equity community regards investing in clean energy.

The article was sparked by a survey report by fellow PE firm, Altius Investments, in which it warned that in 2014 “the bloom [would] finally fall from the rose of renewable energy”.

Funds such as Terra Firma (Infinis), Greencoat and the Renewables Infrastructure Group may have had success in fundraising in this sector, but it appears that some of their colleagues in the fund community believe that this may soon come to an end.

If we want to strike a more optimistic note then we can argue that this would not happen because the renewable energy markets of a determined exit by the private equity community. Rather, there may be more competition from other energy sources and asset classes that draw more capital.

This is, of course, exacerbated by policy decisions in recent years that have seen support subsidies in Europe retroactively reduced or, in the UK, the building of political support for gas fracking.

It’s perhaps why renewable energy assets, and wind energy in particular, have seen more interest from the pension fund community. These are investors who can afford to take more risk on policy as they look to the longer term.

There are then two questions that we have to ask.

Will alternative investors be able to pick up the slack if interest slows from private equity funds? And will firms in the renewable energy sector be able to innovate in the way they seek to attract investors; or in the way they provide assets for investment?

After all, it’s not that renewable energy assets can’t generate favourable returns at the 6% or 7% mark. But they do have to compete with more mature assets that have longer track records.

So is this something that should vex developers and utilities who have half a mind on offloading some of their assets? In our view, not yet. Their efforts should be focused on persuading the policy makers to increase political support for renewables.

However, it should add some impetus into the way that developers seek to secure capital.

It’s too early to tell whether 2014 is indeed a slow year for wind energy investments. But, while the cost of energy remains a tricky issue for politicians and markets to navigate, it won’t be easy to keep wind energy on the minds of investors.

“We are all familiar with the J-curve in private equity. Well, for Calpers, clean-tech investing has got an L-curve for ‘lose’.”

So said Joseph Dear, Chief Investment Officer at private equity fund, Calpers, in an article in the fund management section of Monday’s Financial Times. It was a wry, if not damning, indictment of how the private equity community regards investing in clean energy.

The article was sparked by a survey report by fellow PE firm, Altius Investments, in which it warned that in 2014 “the bloom [would] finally fall from the rose of renewable energy”.

Funds such as Terra Firma (Infinis), Greencoat and the Renewables Infrastructure Group may have had success in fundraising in this sector, but it appears that some of their colleagues in the fund community believe that this may soon come to an end.

If we want to strike a more optimistic note then we can argue that this would not happen because the renewable energy markets of a determined exit by the private equity community. Rather, there may be more competition from other energy sources and asset classes that draw more capital.

This is, of course, exacerbated by policy decisions in recent years that have seen support subsidies in Europe retroactively reduced or, in the UK, the building of political support for gas fracking.

It’s perhaps why renewable energy assets, and wind energy in particular, have seen more interest from the pension fund community. These are investors who can afford to take more risk on policy as they look to the longer term.

There are then two questions that we have to ask.

Will alternative investors be able to pick up the slack if interest slows from private equity funds? And will firms in the renewable energy sector be able to innovate in the way they seek to attract investors; or in the way they provide assets for investment?

After all, it’s not that renewable energy assets can’t generate favourable returns at the 6% or 7% mark. But they do have to compete with more mature assets that have longer track records.

So is this something that should vex developers and utilities who have half a mind on offloading some of their assets? In our view, not yet. Their efforts should be focused on persuading the policy makers to increase political support for renewables.

However, it should add some impetus into the way that developers seek to secure capital.

It’s too early to tell whether 2014 is indeed a slow year for wind energy investments. But, while the cost of energy remains a tricky issue for politicians and markets to navigate, it won’t be easy to keep wind energy on the minds of investors.

“We are all familiar with the J-curve in private equity. Well, for Calpers, clean-tech investing has got an L-curve for ‘lose’.”

So said Joseph Dear, Chief Investment Officer at private equity fund, Calpers, in an article in the fund management section of Monday’s Financial Times. It was a wry, if not damning, indictment of how the private equity community regards investing in clean energy.

The article was sparked by a survey report by fellow PE firm, Altius Investments, in which it warned that in 2014 “the bloom [would] finally fall from the rose of renewable energy”.

Funds such as Terra Firma (Infinis), Greencoat and the Renewables Infrastructure Group may have had success in fundraising in this sector, but it appears that some of their colleagues in the fund community believe that this may soon come to an end.

If we want to strike a more optimistic note then we can argue that this would not happen because the renewable energy markets of a determined exit by the private equity community. Rather, there may be more competition from other energy sources and asset classes that draw more capital.

This is, of course, exacerbated by policy decisions in recent years that have seen support subsidies in Europe retroactively reduced or, in the UK, the building of political support for gas fracking.

It’s perhaps why renewable energy assets, and wind energy in particular, have seen more interest from the pension fund community. These are investors who can afford to take more risk on policy as they look to the longer term.

There are then two questions that we have to ask.

Will alternative investors be able to pick up the slack if interest slows from private equity funds? And will firms in the renewable energy sector be able to innovate in the way they seek to attract investors; or in the way they provide assets for investment?

After all, it’s not that renewable energy assets can’t generate favourable returns at the 6% or 7% mark. But they do have to compete with more mature assets that have longer track records.

So is this something that should vex developers and utilities who have half a mind on offloading some of their assets? In our view, not yet. Their efforts should be focused on persuading the policy makers to increase political support for renewables.

However, it should add some impetus into the way that developers seek to secure capital.

It’s too early to tell whether 2014 is indeed a slow year for wind energy investments. But, while the cost of energy remains a tricky issue for politicians and markets to navigate, it won’t be easy to keep wind energy on the minds of investors.

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Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.