Oil and gas companies are buying in the hunt for cleaner fuels and financial buyers are searching for stable long-term cash flow - the overall effect has been to push valuations up to record levels. The report indicates that 50 % of respondents, and nearly two-thirds in Europe, agreed that there is a real risk of a bubble in the renewable energy sector.
The KPMG press release also reported:
"On a more micro level, there are other issues including the fact that many sites have difficulty connecting to electricity grids and there is a shortage of turbines to build new wind farms. All this is also putting aside one the most basic risks of all - that investors are putting money into technology that could become obsolete very quickly."
While I agree that investors should be cautious, I think that is always good advice. Although the KPMG report has raised some important questions about supply chain bottlenecks, and uncertainty in government incentives, I would argue that the renewable energy and cleantech sectors are relatively robust, despite the fact that many companies have yet to turn a profit.
In the U.S., a lot depends on what (if anything) comes out of Capitol Hill to stabilize the incentive structure for investment in clean energy technologies. I will argue, as I have before, that even if this current Congress does not pass meaningful extensions this year, some sort of tax credit will be passed early next year, and there is a good chance they could extend it retroactively.
Photo: Limbo Poet via flickr under a Creative Commons License