US Clean Tech Sector Attracts Investment from Abroad

Gold Coins and plant isolated on white backgroundBy Erin Ailworth, Boston Globe

Foreign investors are pouring millions of dollars into US alternative energy companies, seeking new technologies and markets even as enthusiasm for the once hot industry wanes among their American counterparts.

Last week, for example, Japan’s NEC Corp. paid roughly $100 million for a Westborough-based division of the advanced battery maker A123 Systems LLC, which was acquired by a Chinese company, Wanxiang Group, in 2012. Also last week, Cape Wind said it secured $400 million in financing from financial institutions in Japan, France, and the Netherlands to build an offshore wind farm in Nantucket Sound. A month earlier, Cape Wind announced that the Danish Export Credit Agency, EKF, would loan it $600 million.

Analysts say several factors are driving the trend, starting with inconsistent US policies on climate change and clean energy technology. It remains uncertain if and when the federal government might adopt climate change laws to limit greenhouse gas emissions, making it difficult for US investors to gauge when alternative technologies would become competitive with fossil fuels, the leading source of greenhouse gases such as carbon dioxide.

“Given the US has no overarching energy policy, much less a price on carbon, it’s hard for startups to find investors who have the long-time horizons that clean energy ventures require,” said Richard Martin, editorial director for Navigant Research in Colorado.

Meanwhile, many other countries are adopting such climate and energy polices. In booming China, Martin noted, cutting energy consumption and pollution has become an urgent priority for the central government, which is creating markets for clean energy technologies and spurring a worldwide drive by the Chinese to acquire them.

Despite rebounding a bit a the end of last year, US private investment in clean technology has declined sharply from its peak in the second quarter of 2010, according to data on the sector from PricewaterhouseCoopers, a Big Four accounting firm, and the National Venture Capital Association. Investors have cut their support for the industry by more than 70 percent, to about $418 million in the last three months of 2013 from roughly $1.5 billion in mid-2010.

Brian Carey, US clean tech advisory leader for PricewaterhouseCoopers, said part of the reason may be that certain clean technologies, such as wind turbines, have matured, so there’s not as much need for venture capital, which typically goes into early stage firms.

“There will continue to be some,” he said, “but not the heavy, capital type investments that we saw three or four years ago.”

Foreign investors, however, are still pumping money into the sector.

Wanxiang, the Chinese auto parts conglomerate that purchased A123, has made several investments in US clean technology firms. In 2012, the company invested $1.25 billion to help GreatPoint Energy, a Cambridge startup, build a plant in Western China to convert coal into a clean burning, synthetic natural gas. Earlier this year, Wanxiang spent roughly $149 million to buy Fisker Automotive, a bankrupt California company that makes the Karma electric car.

In 2011, Chinese government and private investors pumped $155 million into Boston-Power, a lithium-ion battery company headquartered Westborough, to get the company to expand in China, where it now has research and manufacturing operations.

Analysts say that many foreign investors see potential in the US market. European investors from countries such as Germany and Netherlands, where climate policies have led to quick adoption of renewable technologies, are seeking new opportunities across the Atlantic, analysts said.

Meanwhile, energy technology companies from Japan and Korea are willing to take risks for the chance of breaking into the huge American market.

“The US is fertile ground for that kind of investment,” said Mackinnon Lawrence, research director with Navigant Research in San Francisco.

US investors appear less willing to take such risks these days, analysts said. The federal government has cut back its support of energy technology following high profile bankruptcies of government-backed firms, such as California solar company Solyndra, A123, and Fisker, and private investors have followed.

As foreign investors fill the gap, the United States risks losing its leadership in clean technology and share of a global market that has the potential to grow rapidly in the future, analysts said. In addition, the nation could lose control of technology developed with the support of American taxpayers.

“The political climate in the United States is just poisoned around anything in clean tech,” said Mark Bunger, with Boston-based Lux Research Inc. “We’re not just shooting ourselves in the foot, we’re shooting our whole leg off.”