Bioenergy, Energy Efficiency, Grid Scale, Solar, Storage, Wind Power

Cleantech Investments Plummeted 44% in Q2

Solar, electric transportation and energy efficiency attracted the most venture capital in the second quarter in the United States, according to a report released by Ernst & Young on Wednesday. Overall U.S. venture capital investments plummeted about 44 percent to $1.1 billion from the second quarter in 2010, however.

Solar companies brought in $234.2 million, or 21 percent of the total second-quarter cleantech investments. BrightSource Energy, a California developer of solar thermal power plants, was the big winner by raising $168 million. Overall, clean power companies took in $311.6 million during the quarter, making it the most attractive segment to venture capitalists.

The transportation world also received some big bets from investors. Fisker Automotive, which makes plug-in electric cars, raised $115 million, for example. The alternative fuel segment saw a 57 percent dive to $126.1 million in the second quarter from the year-ago period, however. The decline reflects the cautious attitude by venture capital community toward a business that often requires far more money to complete R&D and build that first commercial refinery.

On the other hand, biofuel companies seem to be able to entice investors in the public markets. Two cleantech companies made their stock market debut during the second quarter, and both are biofuel developers. Kior in Texas raised $150 million from its initial public offering while Solazyme in San Francisco raked in $198 million.

In the past two years, venture capitalists have often talked about tightening their criteria when it comes to making investments in capital-intensive sectors such as solar and biofuel. At the same time, they have shown a great interest in energy efficiency technologies, which can be everything from efficient lighting technology such as LED to energy management software. Energy efficiency technologies tend to require less capital to reach market deployment. Energy efficiency companies generated 20 venture capital deals, the largest number for the second quarter. But the dollar amount fell slightly from $189.8 million to $183.7 million. The largest deal went to California-based Hara Software, which raised $25 million.

Energy storage also has been a much talked about business by investors mainly because the growth in solar and wind generation will require utilities to use energy storage to manage and balance power supply and demand to the grid. Thanks to the government support for electric vehicles, billions of public and private money have been poured into developing and making lithium-ion batteries.

Although the energy storage market promises to be large, when it will get there is unclear and is likely to take longer than expected. Utilities are known to be conservative when it comes to investing in new technologies. Electric cars also aren’t selling as quickly as some tech companies have expected. Some venture capitalists put energy storage as an especially risky segment.

Energy storage companies drew $150.3 million in venture capital in the second quarter, down 4 percent from the same quarter in 2010. The biggest deal came from the $54.5 million received by General Compression, which uses compressed air for storing electricity.