Clean Energy, Cleantech venture capital, Renewable Energy

Demand Outstrips Supply for Clean Energy Deals

August 31, 2007 (RedHerring.com) – Despite keen interest and deep pockets, demand for clean energy-related investments is so high that cleantech investors around the world are having a hard time spending all the cash they have at their fingertips, according to a report by research group New Energy Finance.

The annual report, released Thursday, takes stock of venture capital and private equity investment in clean energy in 2006 and the first half of this year. It documents continued off-the-charts growth for the ever-popular sector, with overall venture and private equity investment in the sector leaping 67 percent to $18.1 billion in 2006.

But clean energy venture capitalists invested only 73 percent of the total money available to them in 2006, leaving some $2 billion in their pockets, according to the London-based group.

“Our sense is that the supply/demand imbalance has gotten a little stronger this year than in the past, said Ethan Zindler, an analyst with New Energy Finance. “If you roll back the clock 18 months, you did not as often hear the complaint from VCs that they were having trouble finding opportunities.”

That’s not to say opportunities are lacking. Quite to the contrary, as the report shows.

The group found that the ranks of venture capital and private equity investors in clean energy technologies, firms, and projects have swelled nearly 30 percent since last year to more than 1,800. Meanwhile, more than 190 funds invested exclusively in cleantech, clean energy, or renewable power, according to the research firm.

Private equity drove much of that investment, particularly in biofuels in the U.S., Mr. Zindler said. And the U.S. saw stepped up investment, sucking up much of the $7.1 billion private equity and venture capital invested in North and South America in 2006, 83 percent more than in 2005.

This year, as Brazilian ethanol companies soak up more funds, “the focus might shift a little farther south,” Mr. Zindler said. Overall investment also grew 62 percent to $9.2 billion in Europe, the Middle East, and Africa, and 26 percent in Asia and Oceania to $1.8 billion, the report found.

The 57-page report encompasses everything from traditional VC-style investment in early stage technologies to private equity investments in pre-IPO, more mature firms and stakes in publicly listed companies.

Of the $18.1 billion invested in 2006, $8.6 billion funded companies while $9.5 billion financed projects, New Energy Finance said. Only $1.6 billion of that went toward traditional VC deals, nearly 80 percent of it to U.S.-based firms. Thin-film and non-polysilicon technologies absorbed the lion’s share, $428 million, followed by second generation biofuels technology, at $235 million.

Five of the top 10 investment firms, in terms of the number of disclosed deals, were located in California, led by Draper Fisher Jurvetson, Khosla Ventures, and Goldman Sachs, according to the report.

But, in dollars invested, 3i, Irish firm NTR, and the U.K.-based Ecofin topped the list, having poured $263 million, $178 million, and $158 million, respectively, into clean energy technologies and firms, New Energy Finance found.

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