Europe Encouraging Clean Energy Industry

A commitment by European governments to helping out “clean energy” entrepreneurs is creating a more welcoming environment than America, where erratic support, a lackluster market for taking companies public, along with more onerous financial rules, have given pause to some start-ups and investors.

Europe is experiencing a new wave of interest in ventures that develop energy from less polluting or renewable sources, like sun and wind, as well as from tides, agriculture and geothermal heat. It is not clear, though, if the interest will turn into a passing fad or a bubble, like the rush into Internet stocks during the late 1990s.

The United States has not signed on to the Kyoto Protocol, an international accord aimed at stabilizing emissions of greenhouse gases in the atmosphere. Even so, North American industry has set the investment pace, pouring $3.5 billion of private equity and venture capital money into start-up clean-energy developers in 2006, according to New Energy Finance, a research firm based in London.

Europe has signed the Kyoto Protocol, but private equity and venture capital investment into clean energy has been smaller there than in the United States over the last two years. Together, Europe, the Middle East and Africa have raised only about one-third as much as the United States for new clean energy ventures, according to New Energy Finance.

But Ken Bruder, the executive director of New Energy Finance, warned that those numbers were an unreliable guide to the overall development over the sector. He said that ready access to green-minded consumers and long-term government support would do more to create fertile territory for generating profits.

Another incentive in Europe for clean energy companies is lighter regulation over publicly listed companies. More than half of the world’s 22 most valuable publicly traded wind and solar companies are based in Europe, according to the Jefferies Group, an investment bank based in New York.

Among the most prominent firms to have emerged in Europe is Vestas, a Danish company supplying turbines that generate 35 percent of the electricity worldwide that comes from wind power.

Vestas has forecast improved profit margins for 2007, and its shares rose about 130 percent in 2006 — a sign that the drive for clean energy and alternatives to oil is pushing up valuations.

Apax Partners, a buyout firm based in London, multiplied its initial investment of 11.5 million euros by 27 times when it sold most of its stake in the German solar company Q-Cells between October 2005 and January 2006. Such success is helping to motivate small incubator funds in Europe, like Mr. Hertzberg’s, to compete with the cash-rich venture capital firms and giant utilities to find and finance renewable energy ventures and start-ups.

Years ago, raising large amounts of money for scalable renewable energy sources was more a concept than a practice, even as governments publicly sought to curb global warming, secure new supplies of energy and still meet rising demand.

But last year, clean-energy companies raised about $4.4 billion on European stock markets, about four times the amount raised in stock markets in North America, according to New Energy Finance.

High government taxes have forced Europeans for a long while to pay more than Americans for their energy, and the search for cheaper energy sources has helped spur research and development in competing wind and solar technologies, particularly after an oil embargo by Arab countries prompted oil shortages starting in late 1973.

In response, research and development in European countries like Denmark ramped up substantially beginning in the mid-1970s. Investors also have welcomed moves by large utilities to expand into renewable energy.

The European Union has imposed mandatory caps on pollution generated by carbon dioxide emitting industries, such as coal-fired electricity generators, helping to create openings for new kinds of energy companies. Many European governments also back the use of new technologies with generous subsidies. In Germany, for example, consumers who sell renewable energy, like solar power to the central electricity grid, are offered highly attractive tariffs. That helps consumers pay back the cost of buying expensive new equipment like solar cells.

Countries like Britain, France and Norway also encourage renewable energies, with incentives to switch to low-carbon-emitting alternatives.

Because of the recognition shown by the European government to the use of renewable energy through the providence of subsidies, Kyoto is often said to be the real thing in Europe.