Monday, September 25, 2006

The current state of play in energy tech and cleantech investing

Coming out of last week's Cleantech Venture Forum, it's pretty clear that cleantech (and relatedly energy tech, which is not a 100% overlap, as regular readers of this site will understand) is fast becoming a mainstream investment area for VCs, in part driven by LPs' interest.

In terms of energy technology investing, Rodrigo Prudencio of Nth Power was kind enough recently to share some of the data that his firm is tracking. As part of a recent presentation he gave at Rice University, Rodrigo showed how US energy technology VC investments are at $1.7B so far in 2006 -- compare this with $0.9B for all of 2005, or with the $500mm expected this year in VC investments in Web2.0.

That the energy technology sector (and cleantech in general) is a booming investment area is well understood, but what was really fascinating was Rodrigo's breakdown of the numbers by subsector, which showed that some subsectors are getting a lot more investor interest than others.

Within Distributed Energy Technology, for example (btw, this subsector was 28% of the total), investments in fuel cells and solar dominated the subsector, while other technology areas such as new engine technologies and hydrogen generation were small or nonexistent in the data. This means that solar tech has received more than 10% of all energy technology VC investments so far this year. Interestingly, while investments in fuel cell technology have been generally flat or dropping over the past year, battery-related investments have been growing very quickly. For those who argue that batteries and fuel cells are competing technologies, this is interesting data.

Even more interestingly, in the Fuels subsector, ethanol-related VC investments have received more than $400mm, or just about one quarter of all energy tech investments. Some (including yours truly) would argue that much of this hasn't really been venture capital investment, but has instead been project finance and/or mezz financing that happened to include VCs in the mix. But the more important comparison is with other fuels-related investment areas -- biodiesel, fuels-related biotech, and new drive train technologies have collectively received less than $100mm so far this year. Such investments clearly are not receiving the same level of attention in the rush to invest in ethanol-related opportunities.

Encouraging to those who have been proponents of technology-enabled energy efficiency technology is the fact that 21% of energy tech investments this year were directed to Energy Intelligence, and of that, the vast majority has been directed to IT & software, end-use management, and sensors. This is good validation that such scalable technologies are primed for rapid market adoption -- or at least that investors think so. Such investments have more than doubled over the past two years.

Thanks to Rodrigo for sharing this very interesting look. As Rodrigo points out, there's a lot of deals concentration in certain technologies, and "the opportunity is to find neglected but valuable subsectors." Amen, and especially true for those investors with a broader cleantech mandate as well.

And it's all strong validation of the increasing interest in these industries, and in the cleantech investment thesis in general. Further such indications can be found in this article in PE Week, which points out that a lot of former IT/etc. venture investors are now looking to expand their efforts in the sector. Oftentimes because LPs are asking for it to happen.

Other news items: (Self-promotion alert) I'm extremely pleased to note today's VentureWire People mention that Alex Sloan has joined Expansion Capital Partners as a Principal... [If only VentureWire would provide online links to their stories, it would be great to be able to point to their work more often...]

Also, for those in the Bay Area on October 4th, the next Renewable Energy Business Network (REBN) happy hour is going to be held at Gordon Biersch in Palo Alto starting at 6:30pm -- and in a terrific opportunity, if you're interested in an overview of PARC's cleantech efforts and an in-person review of SolFocus' business model and technology, PARC is generously hosting a tour for REBNers immediately preceeding the happy hour (so: 5 to 6:30pm). Those interested in attending the PARC event should RSVP to Nick Allen as space is limited (no RSVP necessary for the happy hour at Gordon Biersch afterward).


Anonymous Anonymous said...

It is interesting that you say Biodiesel and realted arn't receiving the VC attention of ethanol...

I think cellulosic-ethanol is pretty much driving this area at the moment.

But on the other hand there are enormous opportunities for CHEMICAL generation from / in parallel to FUEL production (via BIOMASS and biorefinery).

We call such chemicals "PLATFORM MOLECULES" ... I know academia is very much focusing on these and the industry generally is now taking notice (due to the high oil prices - and relevant to my work ethylene/propylene prices). Renewable/Economical alternative supplies are urgently wanted.

I suggest your blog readers look up the ideas/concepts of "Green Chemistry" ... via the American Chemical Society (ACS) and the Royal Chemical Society (RSC, UK).

You'll see that Green Chemistry is very logical in its approach at making value added products, in intelligent ways - from unwanted products even!.

It's well worth keeping tabs on...

10:28 AM  

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