Alternative Energy Watch: Investment in Clean Energy Fall; France Cancels Permits for Shale Gas Drilling; MEMC Meets Canadian Rule for Feed-in-Tariff (TOT, DVN, MEMC, CSIQ)

Today’s review of developments in alternative energy includes a look at the drop in investment in clean energy projects, the likely cancellation of shale gas drilling permits in France, as well as a first in Canada and wind energy news from China.

Total new investment in clean energy posted its weakest quarter in two years during the first quarter of 2011, according to Bloomberg New Energy Finance.  New investment reached $31.1 billion, a third less than the $47.1 billion in investment during the fourth quarter of 2010. In the first quarter of 2010, investment totaled $34.5 billion and in the first quarter of 2009 investment reached only a meager $20.5 billion.

Bloomberg reported new venture capital investment of $1.8 billion, less than the $2.6 billion we noted last week in a report from Cleantech Group. Political uncertainty regarding government support for alt energy projects gets most of the blame for the drop. Low prices for natural gas makes project financing more difficult too, because alt energy developers have a harder time competing with gas-fired generation for power purchase agreements. Without a power purchase agreement, financing goes nowhere.

The largest declines in asset financing, according to Bloomberg, were in US wind and European solar development. Wind investments were strong in both China and Brazil. Offshore wind energy in Europe got some support from several large projects.

Investment in publicly traded alt energy stocks fell to $3.6 billion, from $8.1 billion in the same period a year ago. This includes IPOs and follow-on share offerings.

For 2011,  Bloomberg believes falling prices for solar PV could overcome the policy uncertainties in the developed nations of Europe and North America. If prices for for renewable electricity don’t get closer to fossil-fuel generation, 2011 could be a long year for renewables.

After dithering around for a year the French government looks to be on the verge of banning drilling for shale gas. Last year the government granted three drilling permits to explore for shale gas, one to Total SA (NYSE: TOT) and its partner Devon Energy Corp. (NYSE: DVN), and the other two to small US drillers partnered with GDF Suez. Now the government has introduced legislation that would cancel the permits and ban all exploration for shale gas in France.

The expressed reason for the change of heart is the possible environmental impact on the hydraulic fracturing techniques used to extract shale gas. Far more likely, however, is that France does not want to add any additional pressure on its nuclear generation industry, which produces about 80% of the country’s electricity. Nuclear power generation has enough opposition now without adding any more.

In Canada, the SunEdison subsidiary of MEMC Electronic Materials, Inc. (NYSE: MEMC) has received official notice from the government of Ontario that the company has met the 60% domestic content requirements and is eligible for the province’s feed-in-tariff (FIT) program for solar projects. Ironically, Canadian Solar Inc. (NASDAQ: CSIQ), which is headquartered in Ontario, may not qualify because all its manufacturing takes place in China.

Japan has challenged the so-called “local-content” requirement of Ontario’s FIT as a subsidy that is forbidden under World Trade Organization rules. The European Union and the US have joined with Japan.

Finally, China’s State Grid Corp. says it plans to increase the wind energy generation capacity connected to the country’s power grid. Currently about 30,000 megawatts of China’s 44,500 megawatts, or 67%, is grid-connected. By 2015 the country wants 90,000 megawatts connected to the grid and 150,000 megawatts connected by 2020, virtually 100% of expected capacity.

Paul Ausick