Investment in renewable energy, biofuels and low carbon technologies will need to triple in the next five years if climate change abatement targets are to be met, says analysis company New Energy Finance.New investment in clean energy has grown from $28.6 billion in 2004 to a preliminary estimate of $117.2 billion for 2007, according to the London-based firm, which counts many of the leading investors in the sector among its clients. The venture capital and private equity industry invested $20.7 billion in clean energy companies and projects in 2007, up from just $3.3 billion only three years ago.Michael Liebreich, Chairman and CEO of New Energy Finance said: “The growth in investment activity in clean energy over the past three years has been impressive. From an almost standing start, around ten percent of all investment in the world’s energy infrastructure is now going into some form of clean energy solution. However, if the targets for renewable energy that are now being set by the politicians are to be achieved – and it is imperative that they are – then overall investment is going to need to increase further, by a factor of three or more over the next five years.”One area the company expects significant growth in investment activity is in technology development, whether by corporations, governments or venture investors. Earlier stage technology venture capital surged to $1.8 billion in 2007, from just $0.8 billion in 2006.

Over the past three years, many venture capitalists focused on snapping up clean energy technologies that were relatively mature, but had been struggling to gain commercial traction in an environment of low energy prices. However, such opportunities are now harder to find: later stage venture capital investment in companies dropped in 2007 to $1.1 billion, from $1.2 billion in 2006, and investors are now being forced to look earlier in the development pipeline. With the focus of international climate change negotiations apparently shifting towards technology development and transfer, New Energy Finance expects earlier stage investment to show further strong growth.The bulk of the money invested in clean energy, however, will go into asset finance – required to build out renewable energy generating capacity and biofuels refining volume. New Energy Finance’s preliminary estimate was that this absorbed $54.5 billion last year, up from $38.8 billion in 2006. The sector has seen an impressive compound annual growth rate of 65% since 2004. The industry needs to keep its growth rate above 20% for the next five years if global targets for clean energy are to be met – a challenge which becomes harder to achieve as a sector becomes mature.Mr Liebreich said: “The next five years will be crucial for the clean energy sector and its investors. Much has been achieved, we have seen the industry take huge strides towards maturity. We need to see that momentum continue. This will require four things: continued progress towards efficient and effective regulatory frameworks; further progress in lowering the unit cost of renewable energy; a healthy pipeline of next generation technology; and investment – a lot of investment.”