Clean technology (cleantech) investments are proving an increasingly attractive option to venture capital funds, according to new research.
Venture capital investment in the United States in cleantech companies increased to $1.1 billion in the third quarter of 2011. That it is a staggering 73 percent higher than cleantech investments in the third quarter of last year, according to professional services group Ernst & Young. The firm said the number of deals also increased on the equivalent quarter last year, up 36 percent to 76.
This spike in venture capital cleantech investments bucks the trend of most other sectors, with investment in general, save in internet and health care ventures, experiencing a slowdown. Jay Spencer, Ernst & Young LLP’s Americas Cleantech Director, said of the announcement:
“Confidence in cleantech investing continues despite the challenging investment market. We saw significant commitments in energy storage, which reflects a growing corporate focus on proactively managing their energy mix.”
On a quarter by quarter basis, the amount invested in the third quarter was up by 4 percent on Q2 2011.
Energy storage was the leading light in the cleantech sector, raising $421 million in the third quarter, representing an astounding 1,932 percent increase on the same period last year. Energy storage has raised over $865 million so far this year. Fuel cells represented the largest portion of the energy storage field, accounting for nearly 54 percent of investment in the sector in the third quarter, or $225.4 million. Ernst & Young said energy storage also had the three largest transactions of the quarter, the biggest of which was the $150 million Bloom Energy deal.
Energy and electricity generation was the second largest segment, raising $255.1 million in the third quarter, which was in fact 2 percent down on the equivalent period the previous year. Solar generation was the largest contributor in this segment, with $195.8 million, or 77 percent of investments.
The energy efficiency segment was third, $245.1 million of investments.
Golden state out in front
Geographically, California led the other states in cleantech venture capital investment, with over $1.7 billion raised so far this year. In the third quarter California represented 52 percent of all cleantech investment, or $583 million, 74 percent up on the equivalent period last year. Massachusetts was the second placed state, with $170.4 million of cleantech investments in the quarter. Pennsylvania ($85.4 million) and Oregon ($73.5 million) followed.
Last month it was reported that Massachusetts had ousted California as the United States’ most energy efficient state, according to research published by the American Council for an Energy-Efficient Economy.
Spencer went on to laud the level of both government activity and corporate funding in the cleantech sector:
“The renewable energy capacity additions and corporate commitments demonstrate that cleantech has reached its deployment phase. It’s a challenging investing environment overall right now and cleantech is holding its own, receiving about 10 percent to 15 percent of all venture capital investment in the quarter”. Spencer said in an interview.
Ernst & Young’s analysis was based on data from Dow Jones VentureSource.