Energy efficiency boom leads 9 clean technology predictions for 2009

Cleantech Group forecasts upswing in energy efficiency and wind sectors, but predicts stalled global climate talks, a rash of failed startups and delayed U.S. cap and trade bill

SHANGHAI, China, December 4th, 2008 – Continuing an annual tradition, the Cleantech Group™, founders of the cleantech investment category and providers of leading global market research and financial services for the cleantech ecosystem, today issued nine predictions for clean technology markets in 2009, forecasting progress in some sectors, but delays and setbacks in others.

A reflection of undercurrents in the global clean technology category from the company’s conversations with industry and government leadership worldwide, the nine predictions include a global focus on energy efficiency as a job creation and economic engine, and an increase in valuations of global wind companies.

At the same time, challenges are predicted in the year ahead, including a doubling in the failure rate of cleantech startups, delays in global climate change and U.S. carbon cap and trade legislation, a decline in clean technology venture investment from an all-time peak in 2008 and a shakeout in thin film solar.

“This list reflects input from industry and government figures in places like Singapore, Mumbai, Tel Aviv, Dubai, London, Barcelona, San Francisco, Washington D.C. and Johannesburg,” said Cleantech Group Executive Chairman Nicholas Parker, introducing the predictions at a press conference at the company’s Cleantech Forum™ event in Shanghai, an industry gathering of hundreds of the world’s leading clean technology investors, entrepreneurs, policy makers and large corporate buyers of clean technologies.

The Cleantech Group’s nine predictions for 2009 are as follows:

1. Energy efficiency infrastructure boom initiated
The Cleantech Group sees a quadruple bottom-line benefit driving a global focus on energy efficiency in 2009. Energy efficiency drives job creation, boosts secular competiveness, addresses the need for carbon reduction and reduces the demand for imported energy. And with a relatively short lead time to enter the market, the company thinks energy efficiency will be a common denominator around investments in generating green jobs and renewed clean infrastructure in 2009 and moving forward.

2. Global climate talks bog down – no serious deal until 2011/12
Governments have reiterated their commitments to moving the climate change agenda forward, but the Cleantech Group forecasts that governments are going to find themselves distracted, and conversations are going to become more complex than realized. Technology transfer to India and China, for instance, is expected to be a conflict point. The company does not see a global deal in 2009, possibly not even in 2010.

3. U.S. passes national RPS, but cap & trade bill only in 2010
U.S. president-elect Barack Obama says he’s committed to a carbon cap and trade bill, but the Cleantech Group expects it will take the U.S. Congress until 2010 to get it passed, forecasting slow progress because of the complexity of issues, and political pushing and shoving. Cleantech Group projects a U.S. national RPS (renewable portfolio standard) to be passed beforehand in 2009.

4. Wind stocks come back; thin film PV shakeout
Many clean technology stocks are currently under siege on worldwide markets. However, the Cleantech Group expects wind stocks in particular to surge in 2009, partly driven by a new national RPS in the U.S., continued growth in China and emerging awareness of wind as one of the most cost competitive alternative energy asset classes. At the same time, the company cites over-investment in thin film photovoltaics (PV) in the private capital markets and inflated valuations in the public capital markets as driving failures and consolidations in thin film solar in 2009.

5. Clean technology VC stabilizes at $7B globally; PE more active
While a robust amount of capital has entered the clean technology space over the last 6-8 weeks, Cleantech Group sees a slight decline globally in venture capital (VC) investment, down from a predicted 8 billion in 2008 to 7 billion in 2009, forecasting a possible decline in venture capital entering the sector for the first time in the history of cleantech. It also forecasts more private equity (PE) players entering venture capital, and perhaps a slight retreat for hedge funds.

6. Failure rate of cleantech startups doubles
The Cleantech Group believes clean technology investors, as in other sectors, will focus in 2009 on the most promising companies in their portfolios, and allow the weaker or cash-constrained ones to merge, be acquired or fail. It expects the failure rate of early stage cleantech companies to potentially double this year, up from the typical 20 percent to about 40 percent.

7. IT turns to the energy opportunity
While forward-looking IT and telecom companies like IBM, Autodesk, Cisco, Intel and Applied Materials have been engaged in clean technology for some time, the Cleantech Group predicts the IT industry will seize energy as a significant 2009 revenue opportunity. Growth sectors are expected to include integrated energy management systems, smart grid, carbon content reduction in supply chains, next generation solar materials and systems, among others.

8. R&D stagnates; corporates acquire green growth assets
With government and large corporation research and development (R&D) spending on energy and other clean technologies largely flat, the Cleantech Group predicts 2009 will be a year of acquisitions of green growth assets. For example, a notable deal in late November was Panasonic’s acquisition of Sanyo in Japan, primarily because of its solar and battery divisions.

9. Energy-water-food nexus emerges
There is increased recognition of the relationship between energy and food – as evidenced this past year regarding the tradeoffs of grain based ethanol. And there is some understanding of the relationship between energy and water (much energy is used move water for agricultural purposes.) But there isn’t yet a wide understanding of the confluence of the three. The Cleantech Group forecasts an increasing awareness of this nexus in the coming year, and predicts that smart entrepreneurs and investors bringing solutions to the table will enjoy triple returns if helping to address all three of these challenges at once.

About the Cleantech Group, LLC
The Cleantech Group pioneered the cleantech investment category in 2002. Today, it accelerates the development and market adoption of clean technologies globally through membership in the largest global network of investors and companies representing more than $3 trillion in assets. Member investors, growth companies/vendors, enterprises, service providers, and others receive access to capital, investment deal flow, market leading research and data, insight, sales leads, human capital, and promotional opportunities. The Cleantech Group also produces the premier Cleantech Forum events worldwide. Details at http://www.cleantech.com.