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Wind turbines at ‘Energiepark Druiberg’ in Dardesheim, eastern Germany: feed-in tariffs have made Germany one of the biggest producers of alternative energy.

Investment in alternative energy could hit a stumbling block, but the Middle East may have the power to see solar through the dark days.

When oil prices peaked last year, alternatives were looking like a safe bet. Consumers and corporates alike viewed them favourably, if for different reasons. Sun, wind, waves and fanciful bio-fuels all combined with a heady mix of subsidies, incentives and market regulation to attract investment. Now, things have changed.

In a recent interview with news agency Reuters, Nobuo Tanaka, the executive director of the International Energy Agency - the OECD energy lobby group - speculated that investment in alternative energies will be one of the first casualties of a recession.

He cited the decline in the oil prices as a catalyst for a slow down in the switch to renewables and the search for new sources of oil. Both require plenty of capital. A lack of investment, he said, could lead to ‘serious problems in the future'.

A host of other special interest groups, including the vocal World Wildlife Fund, have made similar calls for levels of investment to be maintained and even improved, despite the long shadow of economic crisis. They are nervous, rightly, that investors will retreat from anything but the most secure returns. However, speculation that investment in alternatives will drop in the face of the economic downturn comes at a time when leaders in the Middle East are turning even greater attention to the issue.

Since the beginning of 2009 alternative activity in the region, particularly solar, has reached a zenith. Abu Dhabi announced its commitment to a 7% renewable energy target in January and the UAE joined the International Renewable Agency (IRENA) as a founding member. At more or less the same time, the inaugural Zayed Future Energy Prize went to Dipal Chandra Barua, for taking solar power to the rural masses of Bangladesh. This was all feel-good news.

There are other reasons to be optimistic. Sami Khoreibi, president and CEO of Enviromena - a solar integration company - jokes that Abu Dhabi sees sunshine ‘370 days a year'. He also notes that PV panels deployed in Germany, the country with the most installed solar power capacity, produce twice as much power when deployed in this region, simply because of the available sunshine hours.

Enviromena's Masdar City solar power plant will connect to the Abu Dhabi grid and go live sometime this month. The plant's development has clearly benefited from being under the umbrella of the Masdar Initiative, which has encouraged experimentation and provided the necessary investment.

Calls have also been made - especially by investment bankers - for the Gulf's sovereign wealth funds to follow suit by putting money into alternative energy. Now may be the right time to make such investments.

As Boston Consulting Group pointed out at a recent gathering for the press, investments in infrastructure and R&D made now, will come on stream in three to five years time. A realignment of sovereign wealth fund strategies with local economies, instead of their traditional foreign hunting grounds, may help drive diversification and let regional governments balance crisis management with opportunity management.

Low equity prices make investments attractive, as does popular public support for alternative energy. But even those suggesting it, caution that due diligence is especially important and not just from a returns point of view.

Alternatives, such as solar, cannot currently compete head-to-head with conventional sources, without some kind of regulatory involvement. If that regulatory environment was seen as unduly influenced by investor interests, public support could swiftly become a backlash.

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