The United States, Europe and other nations will spend about $100 billion on projects to fight climate change under economic stimulus plans, raising questions about how much support the renewable energy industry needs. Spending money through a recession to boost jobs is well established, but the long term value-for-money of current support for clean energy is now being questioned.
Political and business leaders have called for "green growth" spending over the next two to three years to boost fossil fuel alternatives and cut carbon emissions, and create jobs and help a sector wilting in the downturn.
However, many energy alternatives including wind and solar are not yet cost-competitive with fossil fuels, and so need incentives.
"The fiscal stimulus simplifies things. It says -- let's not worry about cost efficiency but get things moving ... give the money to somebody making something we want," said Nick Mabey, head of the London-based environment group E3G.
The EU will force all west European utilities from 2013 to pay for every ton of carbon emissions, a strong driver for them to invest now in wind power, for example.
But utilities argue that the economics of offshore wind projects, in particular, are finely balanced as a result of lower oil and gas prices. Exactly how much support they need is difficult to predict.
One area that public investment is needed is in power grids and other networks to connect new, renewable sources of energy.
"The argument of value for money can only be pushed to a certain level, for example you need significant investment in new infrastructure," said HSBC analyst Joaquim de Lima.
The United States is expected this month to agree about $75 billion spending on climate change related projects. European countries have proposed about 10 billion euros (US$13.03 billion), and other countries have similar plans.
But it is not just public equity financing that clean energy companies need. Bank lending is a key plank of project financing and has come to a standstill. Zero growth in investment in climate-related companies is expected this year, at about $150 billion, compared with 60 percent annual growth from 2006-07, and this assumes a better last six months for the year says analysts New Energy Finance.
Falling oil prices have not helped as one of the cheapest forms of alternative energy, onshore wind, is competitive at a $55 oil price well above the current oil price of $44.
