Tuesday, March 07, 2006

Clean energy on the rise -- $40B in 2005

Clean Edge put out their annual report on clean energy markets, and even to those expecting to see strong growth, the results were surprisingly good. According to their study,

"Global wind and solar markets reached $11.8 billion and $11.2 billion in 2005 -- up 47% and 55%, respectively, from a year earlier. The market for biofuels hit $15.7 billion globally in 2005, up more than 15% from the previous year."

Fuel cell markets remained relatively small, at $1.2B (as they describe it, "primarily for research contracts and demonstration and test units"), and their 10-year expectations for the market have retrenched somewhat (this year's 2015 forecast is the same as last year's 2014 forecast).

Overall, Clean Edge expects the market to increase 4x from $40B in 2005 to $167B over the next ten years -- a 15+% annual growth rate. Last year's survey suggested a 10-year CAGR of around 20% in these markets, but over the last year they've grown 33%, so things are moving faster than even Clean Edge had perhaps expected. (Interestingly, it appears they expect the growth of the wind power market to slow down considerably in the out years, but perhaps I'm reading too much into the 2004 vs. 2005 numbers)

Also, released in conjunction with the market report, Nth Power and Clean Edge released their annual survey of clean energy investing by the venture community. Unsurprisingly, that was also up -- to $917M, which they report is up 28% (although last year's announcement said 2004 totals were $520M). They peg the clean energy portion of the overall venture capital market at 4.2%, up from 3.3% last year by their calculations. The number of deals they identified went down from 81 to 84, but it looks like they may have boosted their 2004 deal numbers retroactively with more deal inclusion, so perhaps that will happen again this time.

Interestingly, the mean deal size went up from $8.4M to $10.9M, while the median deal size only increased a little bit from $6M to $6.5M. Which suggests a few bigger deals really drove the increase in total investment this year. But it's tough to tell with the shifts in 2004 numbers (the differing calculations of clean energy investment figures by various groups is something we discussed last year as well). It's all a bit confusing, but the basic storyline is the same -- more VCs are investing in clean energy.

Of course, solar was the highlighted investment sector. We'll have to start making more of an effort to talk about the other cleantech sectors beyond energy and solar in particular, even if that's all anyone writes about right now...

Kudos to Clean Edge and Nth Power for good, helpful reports.


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