In October, Third Way raised alarms that a decline in early stage venture capital investment in clean energy technologies threatened America’s ability to compete in the $2.3 trillion global clean energy market. Some in the clean energy community dismissed this warning, citing the massive growth of wind and solar capacity in the United States over the past 10 years. Others challenged the importance of early stage investments. They interpreted the decline in funding for new start-ups as a sign that investors were simply shifting their capital into cleantech companies that were nearing their initial public offerings.

As long-time advocates of moving the United States to clean energy, we would be thrilled if either thesis was correct. Unfortunately, new analyses on the state of renewables in 2011 and venture investment show how far the United States has left to go.

The National Renewable Energy Labs just released its look at renewable energy deployment from 2000-2010. There’s a lot of good news. Solar and wind generation have spread more quickly than the Honey Badger video. The cost — particularly of solar photovoltaic — is dropping so fast that it is beginning to close in on parity with coal and natural gas-generated electricity. But as Grist’s own David Roberts reported, the combination of few clean energy options in the South and conservative opposition in Washington means that existing renewables are not going to replace fossil fuels anytime soon.

The clean energy blog Secret Formula by venture capital investor Matthew Nordan also crunched the numbers on venture capital investment and found that there is a lot less money for start-ups seeking seed or early stage funding. As Third Way also explained in our report, if you’re a company that’s getting close to commercialization or an IPO, this shift in capital is okay. There are more venture and private equity firms looking to help you build factories, ramp up production and grow. But if you’re an entrepreneur with the possible answer to utility-scale energy storage or tidal power generation, there’s far less money out there than three years ago. As Secret Formula warns, “there may be insufficient Seed/Series A capital available to fund new cleantech enterprises.”

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What does all this mean?

Clean energy advocates need to acknowledge the challenges we face as well as our significant gains. As the United States’ current electricity generation mix shows, we have an enormous distance left to travel to transform our country’s energy system. We cannot do this by overpromising and underperforming with our existing technologies and financing structures. Instead, let’s all recognize that there is still work to get done and work together to start correcting these problems. 

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