Cleantech venture capital investment continued recovering in third quarter spurred by stimulus funding — and is “now eclipsing biotech and IT

csp-salon.jpgMedia reports of the death of the clean tech industry have been exaggerated (see “Global recession? Must be time for the media’s alternative-energy backlash“).  The Cleantech group reported Thursday, third quarter “results for clean technology venture investments in North America, Europe, China and India totaling $1.59 billion across 134 companies.”

That means total cleantech VC funding this year is already about $3.8 billion — which puts total funding on a pace to exceed every year except 2008!  And what has brought about this miraculous recovery:

The billions in government funding being allocated globally in clean technology have begun emboldening private capital, which has in turn helped propel clean technology to the leading venture investment sector, now eclipsing biotech and IT,” said Dallas Kachan, Managing Director, Cleantech Group. “The two largest venture deals (Solyndra and Tesla Motors) and the largest IPO (A123Systems) this quarter were all recipients of U.S. government funding. Hundreds of millions of dollars in new venture funds this quarter are also evidence of investor confidence and momentum, including $1.1 billion in two new funds by Khosla Ventures alone.”

The extension of tax credits for renewable-based power generation along with government stimulus and regulatory requirements to meet renewable portfolio standards are helping to drive continued investment on the part of VCs and utilities into the cleantech sector,” said Scott Smith, U.S. leader of Deloitte’s Clean Tech practice. “Utilities are increasingly bringing their access to capital to the sector through direct investment and power purchase agreements, driving new projects and increased capacity. We continue to see utilities investing in wind and solar and expect this trend to continue as cleantech projects become more economically viable and desirable for utilities.”

Thank you President Obama and progressives in Congress (see “Sure Obama stopped the Bush depression, cut taxes for 98% of working families, and jumpstarted the shift to a clean energy economy with a $100 billion in stimulus funds “” but what has the green FDR done lately?“)

Where is the money going?  Solar, transportation, green buildings:

The leading clean technology investment sector was solar, which rose from the previous quarter’s 13 percent to 28 percent of venture investment, but still only received $451 million, down from a high of $1.2 billion invested in 3Q08. The second highest area of investment was transportation””subsectors of which include vehicles, biofuels and advanced batteries- which received $383 million. Green buildings””including energy efficient buildings, glass and lighting subsectors””had a strong quarter, with investment of $110 million.

Here’s a fascinating factoid from the Q2 report:

Solar thermal was the leading energy source procured through power purchase agreements in the first half of 2009,” said Scott Smith, U.S. leader of Deloitte’s Cleantech practice. “New investment tax credits are playing a major role in making new solar thermal, solar PV, and wind projects more economically viable for utilities, which are bringing their access to capital to the sector.”

That will no doubt come as a surprise to the Energy Information Administration, which in April, projected solar thermal power in 2014 will be 790 MW, and in 2030 a paltry 860 MW (see “EIA projects wind at 5% of U.S. electricity in 2012, all renewables at 14%, thanks to Obama stimulus!“)  EIA does not much like renewables “” even those with power purchase agreements (see “World’s largest solar plant with thermal storage to be built in Arizona “” total of 8500 MW of this core climate solution planned for 2014 in U.S. alone“).

We’re also seeing the initial public offering market return, which is another major source of funds for cleantech:

In the leading cleantech IPO of the quarter, and one of the most significant cleantech exits to date, A123Systems made its long awaited debut on the NASDAQ Global Market, in which the company raised $380 million at a company valuation of $1.3 billion (which rose to $1.9 billion by the close of day one trading). Other clean technology IPOs recorded in 3Q09 were wind farm developer Indian Energy, which began trading on London’s AIM, raising $16.2 million, and India-based Euro Multivision, which raised $13.5 million on the Bombay Stock Exchange for the company’s photovoltaic solar cell manufacturing unit.

This country remains by far the leading source and destination for VC funding:

  • NORTH AMERICA: North America accounted for 67 percent of the total, raising USD $1.1 billion in 73 disclosed rounds, up 8 percent from 2Q09 and down 42 percent from 3Q08. As the most significant region for VC investment, the sector trends broadly match those described globally. The region accounted for the four largest venture deals (Solyndra, Tesla Motors, SolFocus and Serious Materials) as well as the largest IPO (A123 Systems). California led the way, with $655 million (61 percent total share) in investment, followed by Colorado ($47 million, 4 percent).
  • EUROPE AND ISRAEL: Europe and Israel received 29 percent of the total, raising USD $457 million in 53 disclosed rounds….
  • CHINA: China received 3 percent of the total VC investment, raising USD $41.8 million in three clean technology VC deals: Nobao Renewable Energy attracted USD $25 million from Tsing Capital to develop geothermal heating and cooling technology….
  • INDIA: Indian cleantech companies raised USD $21.5 million in five investment rounds….

How do we maintain US leadership in clean tech investment and key technology areas?  Pass the clean energy bill.

5 Responses to Cleantech venture capital investment continued recovering in third quarter spurred by stimulus funding — and is “now eclipsing biotech and IT

  1. Greg Robie says:

    I wonder if PG&E’s 200 megawatt commitment to space-based solar back in April is included in the referenced figures.

    Regardless, the 101 I had in venture capital dynamics is that, and leveraging the taxpayer subsidies available through the SBA guaranteed loans (and now stimulus funds and guarantees), VC pools of capital work within these parameters: They look for new businesses that can garner—if I remember correctly—30% of more of the business of a market within the next 10 years. Of an averaged 10 businesses invested in, the expectation is that 5 will go bust, three will allow their founders to drive BMWs, and all the return-on-investment is expected to come from two of the ten. And to do so within five years. After a corporation that is invested in is taken public, the VC investors cash out and move on to repeat the process.

    As such, this is more of the ponzi scheme that is collapsing. Taxpayer guarantees are key to pools of private capital, in effect, cannibalizing the economy in the name of greater “efficiency.” However, systemically, the dynamic is more about churn of capital, which is the life blood of Wall Street, but chaos on Main Street.

    IMHO, with the possible exception of the “Angel” sector of the venture capital scheme, an increase in this sector is as likely to herald a taxpayer subsidized fleecing of themselves, as it is any meaningful metric for predicting an onset of sustainable “green” economics. Long term principled investment (and excluding the “principle” of greed) is the only iteration of capitalism that can rationally be snuck in under the label of sustainable economics—and today’s market dynamics and Wall Street’s “ethics” (and from the consumer side, mutual funds—socially “responsible” or not) preclude this.

    Passing a climate bill—as opposed to a “clean energy”/“Green” jobs bill—is what is scientifically and morally required . . . _IF_ we (left and right, can get over our love affair with greed as a moral value.

    [JR: This is tiresome crap. VCs ain’t part of the Ponzi scheme. They have no interest in businesses that can’t deliver real products in a scalable manner. Since when is creating wildly successful businesses in clean energy that then take off on their own in the public capital markets a bad thing? I’m putting you back on moderation. Apparently everyone who can see the future and wants to invest in it is somehow a fraud, except you.]

  2. pete best says:

    A single 2 MW (power rating) wind turbine can generate 5 billion (Giga)watt hours (GWh) a year of electricity (30% efficiency overall) and thats a usefull amount! 100 of them give us 500 GWh and thats lot for 1000 gives us 5 TWh of usefull energy and thats both offshore and onshore in the USA. I am sure that 5 and 10 GW turbines will also come online. The USA can generate 1000 x 25 GWh = 25 TWh of usefull energy a year.

    The USA consumes 3000 TWh of electricity so its quite plausable to me that 10,000 turbines can generate 250 TWh and 100,000 (quite feasable in the USA) generate 2,500 TWh of electricity. So ok its actually 500,000 2 MW ones or 100,000 10 MW ones but couple all of this to CSP and then you are onto a real job creator and it can all be paired for by provate money only incentivized by the present admnistration.

    Here in the UK we have some electric transit VANs which consume only 17th the equivilent diesel on daily runs of less than 150 miles, urban routes presently. The vans pay for themselves within 3 years and then its all making money after that. Battery technology improves than you can cover 300-500 miles routes before recharging in future.

    Efficiency gains can make up another large part of the difference and some nuclear is also viable in the mix of a electricity future. Clean Coal if ever mastered could potenitally be of some worth to but its only needed on transition grounds.

    Generate millions of jobs to.

  3. Garvin Jabusch says:

    Hi Joe, thanks for another great post. I’m co-founder of a firm called Green Alpha Advisors, where we work exclusively on the public equity side of cleantech, managing a basket of next economy companies. Our Green Alpha Next Economy Index (GANEX) is a reflection of what we hope the entire economy will look like in the future: truly renewable energy, water conservation and management, green materials, basic research, etc. We’re based on the simple concept that the next economy – underway already – will grow much faster than the legacy economy. Because it must. We focus on companies that exist to confront the issues facing civilization. So far, not too many of these are public (so we were similarly excited to see A123’s IPO last week); the GANEX is comprised of 82 firms thus far. If you’re looking for additional signals that the next economy is growing rapidly, you’ll be interested to know that the year to date performance of the GANEX is far outpacing that of the DJ composite, and also that of its own benchmark, the Russell 3000. Of course, this is only a snapshot signal of the last nine months, and time will tell if our macroeconomic thesis holds up. Nevertheless, we believe it’s critical for more financial services firms, VC, private equity and public equity, to act as conduits of capital into the next econ. Because you’re right, without these pipelines of capital, we would very soon be left in the dust by nations with a slightly longer view.

  4. Doug Meyer says:

    Oh come on Joe, massive deficit-financed government subsidies are absolutely required components of these business deals. New energy moguls are being created right now while China and Japan collect interest on the long-term debt that makes it possible. Is this not Ponzi Scheme Exhibit A? You might say the deep deficit was all Bush’s fault, but we’re still borrowing from the future to increase this year’s GDP. You’ll say it’s investment, I say it’s spending. Companies building steam-evaporating CSP in the desert prove it’s the same old short-term motivated capitalism at work here.

  5. An increase in Cleantech investments also translates to an increase in Green Collar leadership positions and an increase in jobs!