Cleantech Investment Drops 44%, but Big Deals Suggest Future Growth

The second quarter of 2010 was a record-breaking era for investment in clean technology companies, which makes this year's numbers seem all the worse.

According to just-published research from Ernst & Young, investment in clean technologies companies dropped by a whopping 44 percent in the second quarter of 2011, though there is still plenty of activity in the market.

A total of $1.1 billion were invested in cleantech firms between April and June of 2011, in companies in the following seven categories:

• Alternative Fuels: Biofuels, natural gas;
• Energy / Electricity Generation: Gasification, tidal/wave, hydrogen, geothermal, solar, wind, hydro;
• Energy Storage: Batteries, fuel cells, flywheels;
• Energy Efficiency: Energy efficiency products, power and efficiency management services, industrial products;
• Water: Treatment processes, conservation & monitoring;
• Environment: Air, recycling, waste;
• Industry Focused Products and Services: Agriculture, construction, transportation, materials, consumer products

California remained the nation's hotspot for cleantech investment, taking in $548.8 million, or 51 percent of the total investment. That sum was due in large part to five big deals for California-based companies last quarter; otherwise California took a bigger hit than the national average, with Northern California dropped 63 percent year-over-year.

Among the biggest deals that have happened in the last three months include:

  • Energy / Electricity Generation: BrightSource Energy, $168 million
  • Industry Products and Services: Fisker Automotive Inc., $115 million
  • Alternative Fuels: Kior, $55 million
  • Energy Storage: General Compression Inc., $54.5 million
  • Energy Efficiency: Hara Software, $25 million

The drop in cleantech VC activity is due in part to revived interest in cleantech IPOs; investors are putting their money into internet companies in the hopes of cashing in on the new dot-com boom.

There is still plenty of activity on the cleantech front, as the number of large deals noted above indicates. And Ernst & Young's research offers a few more examples of announcements that suggest the next few quarters will continue to see steady activity in cleantech.

• In mid-June, the US Department of Energy announced loans and guarantees or offered conditional loan guarantees totaling more than $32 billion to support 32 clean-energy projects, including more than $10 billion in loan guarantees for solar projects.

 

• On the private investor side, a group of 11 wealthy US families formed The Cleantech Syndicate, an investment fund to support renewable energy and power-efficiency companies at all stages of development. The families intend to invest up to $1.4 billion over five years, according Bloomberg New Energy Finance.

• In the solar market, Google announced a partnership with SolarCity to create a $280 million fund to provide solar panel leases and power purchase agreements to households – making it the largest residential solar financing scheme to date.

• Bank of America, Merrill Lynch, Prologis, and NRG Energy are jointly financing the installation of $2.6 billion of commercial and industrial rooftop solar arrays — the largest distributed solar deal in history.

• And GE announced a $600 million investment to manufacture solar panels in a factory slated to be the largest in the US.

More info about the research is available from Ernst & Young.

Photo CC-licensed by Jeremy Levine Design.