PRINT THIS PAGE Clean energy in Italy12/03/2008. Source: SJ Berwin. Fabio Cigna, Angus Evers 
European venture investors are clearly enthusiastic about the future for cleantech, according to SJ Berwin. Investments are reported to have increased by 34 per cent to €808m last year, and there is a continuing appetite from LPs in 2008. One of the key characteristics of this re-emergence of venture - perhaps the key difference to the technology boom - is the role of national government and European Union policy in creating opportunities. One important area where policy is creating investment opportunities is renewable energy. For instance, in 2001 the European Union adopted a Directive on the promotion of renewable sources for the production of electricity (known as the "Renewables Directive"). This set targets to increase the proportion of green electricity produced from 14% to 22%, to increase the proportion of green energy consumed from 6% to 12%, and to comply with the commitments made by the European Union under the 1997 Kyoto Protocol on greenhouse gas emissions - all by 2010.
The Italian experience provides a useful example of how policy targets can drive investment opportunities. In Italy, the Renewables Directive was implemented in 2003, but the implementing legislation provided for further regulations specifically addressing solar electricity. Those regulations would define, among other things, the targets for solar power capacity to be installed in Italy, and a specific incentive tariff of a decreasing amount to guarantee a fair return on the investments made and the operating costs incurred.
But it was not until July 2007 that the Italian Ministry for Production Activities issued those regulations, which say that the target nominal photovoltaic generation power to be installed is 3000 MWp by 31 December 2016. They also establish the so called "energy account", through which the Italian government will pay an amount for each kWh produced - the "base rate" (which is higher than that paid by customers for electricity, and is subject to annual adjustment) - and a 20 year fixed incentive bonus. This latter bonus varies according to the architectural integration of the photovoltaic generator (PVG) and its date of construction: the highest bonuses are paid for PVGs that are built and operational before 31 December 2008.
It is likely that the current European Union targets for green electricity production and green energy consumption will soon be increased. In January 2008 the European Commission proposed a new Renewables Directive as part of its "Climate Change and Renewable Energy Package". The proposed Directive would set a mandatory target for 20% of total energy in the European Union to come from renewable sources by 2020, with Member States being allocated individual targets. This will in turn increase the proportion of green electricity required to be produced - for example, in the United Kingdom (which has a proposed target for 15% of its total energy to come from renewable sources) it is estimated that approximately 40% of electricity would have to be produced from renewable sources to ensure that 15% of all energy consumed came from renewable sources. Italy's proposed target is for 17% of its total energy to come from renewable sources.
Given the existing targets in the Renewables Directive, and the lack of progress to date, investments in solar electricity of approximately €18 billion will have to be made in Italy between now and 2016. However, if and when the new targets in the Climate Change and Renewable Energy Package are implemented this figure will increase even further. That will create huge opportunities for investors, especially since there are not enough Italian companies making the semi-finished products (photovoltaic modules) necessary to manufacture the PVGs, and given the general reluctance of Italian banks to finance these projects. It is opportunities like these, often driven by legislative change, which will keep cleantech investors busy in the coming decade.
SJ Berwin is a pan-European law firm with a particular focus on private equity. It has offices in London, Frankfurt, Munich, Berlin, Madrid, Paris and Brussels. If you would like further information on its services to the private equity industry please contact Jonathan Blake or Simon Witney in its London office +44 (0)20 7533 2222 or visit our website at www.sjberwin.com.
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