Venture capital firms and other investors are racking up investments in renewable energy projects in Asia as government incentives, the rising demand for electricity, and the region's energy potential sweeten the promise of renewables while Europe and the United States experience problems.

China and India continue to be the leading destinations for renewable energy investors. But interest has been growing in countries in South and Southeast Asia as well. A Reuters report says the governments in these nations are setting their targets for renewable industry expansion and extending subsidies and tax breaks.

The U.S. and Europe, meanwhile, are cutting back on subsidies.

Slowdown in E.U., U.S.

Global investments in renewable energy went down 22 percent in the first quarter of 2012 compared with the same quarter of the previous year. This was the lowest the industry reached in terms of investment since the 2008-2009 financial crisis, following a record year where an estimated $263 billion was poured into renewable energy, according to Bloomberg New Energy Finance.

This result is said to attributable partly to subsidy cuts in Spain, Germany, and Britain, plus tax credits uncertainty in the U.S. The European sovereign debt crisis also caused affected countries to decrease renewable energy investment. The already two-year crisis has caused cuts in the region's credit rating, including the region's bailout fund, the European Financial Stability Facility.

The U.S., though not as troubled as Europe, has seen its fair share of reduced government spending and investments, as the government tax credits and grants continued to face the question of whether they would be extended or not. This is even if the Brookings Institution warned that not extending the tax credits and grants would put more clean technology companies either bankrupt or consolidated.

"People are shying away from cleantech, and it's clearly slowed down," Pierre Lamond, a partner at venture capital firm Khosla Ventures, was quoted in a MercuryNews.com article as saying. "In 2007, anything that was green, or claimed to be green, got investment. Now everyone is looking for the next Facebook." He says solar and wind startups are "dead," and that venture capitalists see more money in social media.

hift to developing markets

China led renewable energy investments globally last year, with 17 a percent increase toward $52 billion in 2011. Even though its lead over second placer U.S. shrunk to just $1 billion, together with other developing countries China has aggressively increased investment in renewables.

A 2011 report from Pew Environment Group says Asia will be the "center of gravity" for clean energy investment due to its "growth" and "dynamism."

"The bottom line is the focus on fundamentals: don't rely on uncertain government subsidies, instead focus on those with the need and the means to pay," blog Commercial Climate said.

Companies from Europe and the U.S. have expressed their interests in Asia as well. A Forbes report said several European clean technology firms have made more projects outside their respective countries than locally, under the given circumstances.

Spanish firms Abengoa and Isofoton are examples, with the former having 90 percent of its expenditures abroad, and the latter receiving a $300 million investment from a Chinese company for a deal to develop solar power plants in Asia.

Future projects and investments

The Asian Development Bank announced its plans to fund $3.7 trillion in Asia over the next 10 years last year, which will drive economic growth to developing countries like Vietnam, the Philippines and Indonesia, and would meet the large energy needs of India and China.

"With energy demand projected to almost double in the Asia and Pacific region by 2030, there is an urgent need for innovative ways to generate power while at the same time reducing greenhouse gas emissions," he bank says on its Web site.

The bank calls attention to the widespread energy poverty across the continent, with almost 1 billion people not having access to electricity.

Projects are on the way. As Reuters reported, Malaysia plans to construct more than 3,140 megawatts of new renewable energy capacity by 2020, with the assistance of a feed-in tariff that pays energy producers premium rates.

Thailand currently has 51 solar power projects under construction by U.S. solar wafer and polysilicon company MEMC Electronic Materials Inc., while Japanese steel manufacturer Sumikin Bussan Corp. will be investing $100 million for a solar plant there.

Future wind power projects in Vietnam will be funded by a $1 billion loan from the U.S. Export-Import Bank, and will be providing special rates and tax perks for wind power.

Top geothermal power producer Indonesia gives a special rate for geothermal power, while a feed-in tariff is in the works in the Philippines. (Nico P. Arboleda)