Private equity firms want to invest in the cleantech sector but are holding back because a lack of regulatory control and government financial incentives makes it too risky, according to research released Friday.

Investments in renewable energy projects and assets, such as those in energy efficiency, energy storage and smart grid, have the potential for massive returns but without greater policy certainty and financial incentives investors are not going to provide the resources to enable the sector to grow, said international law firm Norton Rose in its industry report.