Cleantech venture capital investment continues recovery
Media 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.