June 21, 2010 / 3:00 PM / 10 years ago

EU, U.S. clean energy support under threat -HSBC

* EU austerity measures may lead to “green” support retreat

* U.S. faces climate bill uncertainty, lower gas prices

LONDON, June 21 (Reuters) - New austerity measures threaten support for renewable energy but some cleantech stocks have been over-sold, HSBC analysts said on Monday.

Governments last year agreed a global stimulus to kick-start the global economy, including about $500 billion for clean energy and infrastructure, but rhetoric had shifted towards austerity ahead of this week’s G20 summit. [ID:nLDE65I0AM]

Renewable energy incentives were under threat especially in key demand markets, the United States and the European Union, despite long-term support for carbon curbs and energy security — rhetoric given new impetus by the BP (BP.L) Gulf oil spill.

“Regulatory risk is on the rise again and regulatory uncertainty has led to very poor wind and solar share price performance year to date,” said the report, “Carbon default - real or imagined?”.

Many low-carbon, renewable sources of electricity require government support to be competitive with fossil fuels, incentives now at risk especially where funded by public treasury rather than passed to consumers. [ID:nLDE64I25Y]

The BP oil spill may drive support for a U.S. clean energy bill, but the shape of that was unsure and time “rapidly running out” for passage before November mid-term elections.

The competitiveness of U.S. renewable energy faced an additional threat from low gas prices as a result of shale finds.

In Europe, the countries most at risk of support cuts were Spain, Italy, the Czech Republic and Slovakia, and especially for feed-in tariffs guaranteeing higher premiums for solar power, with retroactive cuts possible in Spain.

One result may be that countries met targets to cut carbon emissions and install renewable energy later than planned.

“Aggressive targets for clean energy are not being set, or where set, are not consistently being supported with effective planning and financing mechanisms,” the report said.

Britain’s new coalition government, for example, announces on Tuesday a budget to wrestle with the country’s budget deficit, which is at nearly 11 percent of GDP.

The previous government made ambitious plans to install offshore wind farms but experts identified a funding gap of more than 100 billion pounds ($148.3 billion). [ID:nLDE64J1F9]

Wind and solar power stocks had been over-sold, however, the HSBC report argued, down on average 30 percent and 10 percent respectively in the past 12 months. Factors underpinning the sector included continuing cash from a “green” economic stimulus and falling costs which had made wind competitive in most parts of the world.

A recent halving or more of capital costs could make solar competitive without subsidies as early as this year in sunny parts of southern Europe and the United States.

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