Clean technology investment continues to rise
The energy sector led the way with investments of $594 million, a 69% increase over the $352 million invested in the previous quarter.
‘Cleantech’ is a term used to describe the application or development of technologies that provide a significant environmental benefit. The Cleantech Venture Network defines it as “knowledge-based products and services that optimize the use of natural resources, reduce ecological impacts and add economic value”.
Investments in clean technologies accounts for 13.4% of all venture capital invested in all categories for the quarter. So far this year clean technology investments have reached $1.4 billion, nearly doubling the $704 million invested in the first half of 2005, a clear indication of growing investment interest in this area.
“In addition to seeing a surge of venture investment in clean energy-related companies, we are seeing significant growth in other cleantech segments such as agriculture, environmental IT, transportation and water,” said Nicholas Parker, Chairman and Co-Founder of the Cleantech Venture Network. “Growth in venture flows is being matched by more cleantech mergers, acquisitions and public market activity, along with a lengthening list of major corporations placing cleantech at the heart of their competitive strategies.”
In the second quarter of 2006, clean technology investment surged ahead of the two previously dominant venture capital categories of Telecommunications and Medical. It now ranks third behind Biotech and Software, indicating its shift into the mainstream, observed Keith Raab, co-founder of the Cleantech Venture Network. Interest in environmental technologies has moved beyond investors towards broader acceptance by major corporations, global media, governments, academia and general consumers.
Global clean energy investment also rising
London-based analysts New Energy Finance (NEF) released its own figures on global clean energy investment this week, showing that worldwide private equity investment in clean energy has soared to more than $2 billion in the second quarter of 2006.
The group said this was three times the amount of venture capital and equity investment in the first quarter of 2006, and double the figure for the same period last year.
The number of deals also increased – to 88, against 66 in the first quarter and 78 in the second quarter of 2005 – as did the average deal size, suggesting that investors remain confident about the sector as it grows, NEF said.
The company said the surge in ‘private investment in public equity’ (PIPE) was particularly noteworthy. Traditionally, private investors have been a last resort for publicly-listed companies raising funds, but this year they have taken centre stage in the clean energy sector. PIPE investments reached $556 million in the second quarter, compared to just $21 million in the first quarter and $28 million in the same period of 2005.
This financing route is particularly popular among small-cap companies, who seek private investors to fund expansion rather than committing to full secondary offerings.
NEF also noted enthusiasm for California’s solar sector. “The last two years have seen an extraordinary ramp-up in the value of the solar photovoltaic sector. This was driven initially by extremely generous tariffs paid in Germany for electricity from solar power. Now it is California’s turn to drive the market,” the report said, following the states’ January announcement of $3.2 billion in subsidies for the sector.
New Energy Finance forecasts that total venture capital and private equity investments between 2006 and 2012 in the sector will be over $100 billion.