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Investment in renewable energy and low-carbon technologies eased slightly in the first half of 2006, according to figures from New Energy Finance. The sector saw investment of $19.3 billion during the period, down 1.5% from $19.6 billion in the last half of 2005. The figures are up 12% year-ton-year from the $17.2 billion invested in the first half of 2005.

"Although the conditions for investment remain strong, the industry is nudging up against the limits to growth in various areas," says Michael Liebreich, CEO of New Energy Finance, which provides specialist financial information to renewable energy and energy technology companies and investors. "After a period of rapid growth in investment from 2003 to 2005, the industry is now facing a number of bottlenecks that must be resolved for growth to continue. This is where we expect investors to concentrate for the next 18 months."

The $19.3 billion invested in the first half of 2006 was made up of $3.8 billion of venture capital and private equity, $5.6 billion raised on public markets and $9.9 billion of project and other asset financings.

The U.S. ethanol market led recent investment activity, driven by high gasoline prices, a supportive subsidy regime, the phasing out of gasoline additive MTBE and growing pressure from consumers for action on climate change. Investors' love affair with solar photovoltaic (PV) technologies continues.

In wind, manufacturers of large turbines have full order pipelines into 2008 and there are difficulties securing key sub-assemblies such as gearboxes. This has led to deals such as Suzlon's purchase of Hansen Transmissions from two private equity firms for $565 million, but a slow-down in the financing of new wind farms. Investors have been looking instead to acquire existing wind farms, and the merger and acquisition market has been very active.

As other sectors of the clean energy industry reach industrial scale, they risk hitting similar limits on growth, according to Liebreich.

"We are not anticipating that growth will stop. What we are seeing is the growth rate bumping up against a natural ceiling. We expect this to lie between 15% and 25% in most clean energy industry sectors and countries. The good news is that this is still a very healthy growth rate, and we expect it to be sustained over the foreseeable future, as long as oil prices remain where they are. We expect the volume of investment to pick up again in the second half of 2006, and we will end the year ahead of 2005."

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