Cleantech Investing Stagnates, But California Clings to Lead

8/3/11Follow @wroush

So far this year, venture investments in cleantech and alternative energy aren’t keeping up with the optimistic pace set in 2010. While total U.S. cleantech investments in the second quarter were up slightly from the quarter before—$1.093 billion, versus $1.014 billion—they’re lagging 44 percent behind the quarterly record set one year ago, in the second quarter of 2010 ($1.949 billion). At least, so says a report released today by the Ernst & Young accounting firm, based on data from Dow Jones VentureSource.

E&Y defines cleantech as products and services that optimize the use of natural resources, reduce their negative environmental impact, or improve efficiency. Its report tallies up private-sector investments in areas like solar energy, gasification, batteries, grid management, water treatment, and waste recycling. There were 68 such investments in the second quarter, a slight increase from the 62 deals in the first quarter but still behind the record 77 deals in 2Q10.

To some extent, comparisons to 2010 may be unfair: the second-quarter total in 2010 was skewed by five large deals that happened to clump together. And drastic quarter-to-quarter fluctuations are common in a sector marked by a relatively low number of deals, so it’s impossible to say that the seemingly lackluster second quarter won’t be balanced out by stronger third or fourth quarters. But so far, it doesn’t seem that venture, private-equity, and strategic investors are on track to match their 2010 energy and cleantech investments of $4.7 billion.

Ernst & Young put a glass-half-full interpretation on the numbers. “Cleantech financing levels remain strong in the context of investment levels over the past several quarters,” Jay Spencer, director of the firm’s Americas Cleantech division, said in a statement accompanying the report. He’s arguably right—the context includes two dismal quarters, the first and third of 2010, when investments were below $700 million. “We’re seeing continued commitments to solar, electric vehicles and energy efficiency technologies from the venture community, as well large corporate and private investors,” Spencer said.

The biggest chunk of the 2Q11 funds, $312 million, went to companies development energy generation technologies—mostly solar. (Oakland, CA-based BrightSource Energy accounted for more than half of that total with a $168 million investment from Google in April—the largest energy deal of the quarter.) Industry-focused products and services—including energy technologies for agriculture, construction, transportation, materials, consumer products—won $306 million. Energy efficiency came next with $184 million, and energy storage followed with $150 million. Nearly 80 percent of all investments in the quarter went to later stage, revenue-generating companies.

California held on to its claim to the majority of cleantech funding across the country, but just barely. Some 51 percent of the dollars raised in the quarter, or $548.8 million, went to California companies. The Mountain West ($114.7 million) and the Northeast ($109.8 million) both gained ground on California.

Here’s a chart showing the top 15 energy deals of the second quarter in California, according to E&Y. Figures are in millions of dollars.

BrightSource Energy Oakland 168.00 Solar energy for utility and industrial companies
Fisker Holdings Anaheim 115.00 Plug-in hybrid electric vehicles
Hara Software San Mateo 25.00 Environmental impact measurement software
Transphorm Goleta 25.00 AC-to-DC power conversion
Cobalt Technologies Mountain View 22.00 Biobutanol as a renewable chemical and fuel
SolarCity San Mateo 20.00 Solar array installation and financing
SeaMicro Sunnyvale 20.00 Power technology for data centers
GreenRoad Technologies Redwood Shores 13.00 Driving optimization technologies
Primus Power Hayward 11.00 Utility energy storage
Bloo Solar West Sacramento 8.00 Solar photovoltaic modules
Redwood Systems Fremont 3.50 LED lighting systems
WaterSmart Software Tiburon 0.90 Residential water conservation
HydroPoint Data Systems Petaluma 0.72 Water management techhnology
Project FROG San Francisco Undisclosed Sustainable modular buildings
Deeya Energy Fremont Undisclosed Electrical energy storage systems

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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