Cleantech investments hit a record high



Cash continues to flow into cleantech, with venture investments hitting $2 billion for the second quarter of this year, an all-time record quarter according to a report released last month by the Cleantech Group.

The report covers North America, Europe, China and India and spans 96 companies, with solar thermal and second-generation biofuels in the lead. There’s a growing awareness of the severity and scope of the problems that cleantech is trying to address,' said Brian Fan, senior director of research for the Cleantech Group.

'Investors are seeing opportunity in funding technologies and companies that are trying to solve some of these problems versus putting capital into other segments of the market.'

The second quarter total is a 58 percent increase over the same period a year ago, and 48 percent over the first quarter of this year. The previous record quarter was the third quarter of 2007, which saw $1.8 billion of cleantech venture investments.

'I don’t think we’re in a bubble,' said Fan. 'When you look at all of the estimates on how much capital needs to be deployed to create a clean economy, the numbers are mindboggling. They’re in the tens of trillions of dollars.'

He said that the $2 billion total for the quarter is just a fraction of the amount that needs to be invested in things like new agricultural technologies and new water technologies to feed and ensure fresh potable water for the 6 billion people on the planet.

Second-generation biofuels, which do not rely on food crops as a feedstock, made a significant mark in the second quarter numbers. Ten companies, including Range Fuels, Sapphire Energy and Mascoma, raised a combined $280 million, with $136 million going into cellulosic ethanol startups and $84 million into algae. Sapphire Energy pulled in $50 million in financing - the single largest round ever raised by an algae company.

Fan said he expects other algae companies to aggressively raise new rounds to keep up with Sapphire. 'What we’ve seen in other sectors is that scale matters,' he said. 'It’s very early in the game for algae, but now we’re seeing companies move from small scale R&D pilots to larger volume production.'

'The actual technology itself may not be the sole important determination in who wins this game. Whoever gets to scale first has a much better chance of becoming a dominant player in the space.'

In solar thermal, five companies including eSolar, BrightSource Energy and SkyFuel raised a total of $278 million in the quarter.

Combined with the $100 million acquisition of Stirling Energy Systems by NTR (see Stirling engines meet solar power in the desert) and the $165 million raised by Solel, Infinia and eSolar in the first quarter, solar thermal companies have raised, year-to-date, $543 million.

'The most surprising takeaway for me was that solar thermal has been around for decades now,' said Fan. 'Now half a billion dollars of capital have gone into what’s essentially been decades-old technology, producing commercial power since the early 80s.' But he said old doesn’t mean bad. Fan said the advantages of solar thermal include its ability to scale, store power and dispatch power during peak demand times.

U.S. companies received $1.49 billion in the quarter, accounting for approximately 74 percent of the total. The European tally, which includes Israeli companies, was $257 million, accounting for approximately 13 percent. In China, companies raised $235 million for a 12 percent piece of the investment pie, and Indian companies pulled in $11.1 million, marking 0.6 percent of the total.

The top five investors for the quarter were Kleiner Perkins Caulfield & Byers, Foundation Capital, Quercus Trust, Khosla Ventures and Draper Fisher Jurvetson.

In related news, GE Energy Financial Services has passed the $4 billion mark in renewable energy investment - just five months after hitting the $3 billion mark - by investing in New York State’s three newest wind farms. GE will invest a total of $100 million in the three wind farms, whose construction began last month. GE Energy Financial Services closed more than $2 billion of renewable energy transactions last year, and by 2010 expects they will comprise 20-25 percent of its overall energy and water portfolio, up from about 10 percent in 2006.

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