Some experts think that private equity's focus on fossil fuels is short-sighted, even if it's rational. Stefan Heck, a consulting professor at Stanford University and former adviser to energy PE funds at McKinsey, said the oil and gas bets make sense in the short term.
"Most private equity investment is still in traditional energy—there's a lot of money to be made there," Heck said, noting a typical PE investment time horizon of 3 to 7 years. "They're not yet making the shift proactively."
But Heck, who believes renewables could generate 50 percent of energy in 2039 and that most vehicles will be electric, said PE firms often think renewables are a riskier investment than they really are and should be doing more in the space.
"There's a misperception," he said. "If you had large investors get into the space in a larger way, it could expand much more quickly."
The focus on old fuel sources, particularly in emerging markets, isn't good news for climate change. BP projects that global carbon dioxide emissions will rise by 29 percent by 2035 as part of a 41 percent overall increase in global energy consumption—virtually all of it from developing economies.
"If left unchecked," the United Nations warned this month, "climate change will increase the likelihood of severe, pervasive and irreversible impacts for people and ecosystems."
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To be sure, private equity is doing plenty of renewables investing.
Blackstone, for example, invested $300 million in Indian solar company Moser Baer Projects in 2010. Warburg Pincus led a $75 million financing round in 2009 for Suniva, a U.S.-based manufacturer of solar cells. And Impax has big money invested in on-shore wind farm plays in Finland, Ireland, France and Germany—with plans for even more from its about $400 million New Energy Investors II fund.
Average returns for renewables are difficult to calculate given the low number of funds focused on the sector. Overall, PE and venture capital investments in clean energy have fallen from a peak in 2008 of $12.4 billion, according to Bloomberg New Energy Finance, to $4.1 billion from October 2013 to September 2014.
It's just not as much as clean tech advocates think makes sense.
Jigar Shah, the founder of large solar company SunEdison and a clean tech advocate, thinks between 90 percent and 95 percent of electricity will come from renewable sources in 2039.
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Shah said that less than half will come from solar and wind and the rest will be a mix of biomass, small hydroelectric, geothermal (derived from underground heat) and nuclear.
Shah said that private equity firms and other large investors didn't start to take renewables seriously until around 2010. While there have been some investments in wind and solar projects, the most mainstream renewable plays, he said investors aren't doing much to innovate in the sector.
"I wouldn't say there's a ton of leaders here yet," he said. "There are a bunch of people doing individual transactions. But almost no one has said that this is a thematic investment that we're going to raise money around resource efficiency."
Shah also said he believes that the narrative on better oil and gas extraction technologies, like fracking, is misguided and the costs are much higher than estimated. He said there's strong initial profit from a new drill site, but the economics deteriorate quickly, especially as oil prices fall.
"The cost of actually doing deep-sea drilling, the cost of doing fracking in North Dakota, the cost of tar sands, the cost of Arctic drilling is way, way, way higher than anyone admits," Shah said.