Cleantech Group - Investment in electric vehicles, biofuels and advanced batteries are booming, while solar is in its lowest slump yet, according to new findings today from the Cleantech Group.

The global cleantech sector may have seen the worst, according to data released today by the Cleantech Group in conjunction with accounting firm Deloitte.

Second quarter results for cleantech venture investment total $1.2 billion across 94 companies, indicating a rebound from the previous two quarters, which were down corresponding with other investment sectors affected by the credit crisis, liquidity issues and a lack of exits. But it’s too early to tell whether the rebound can be sustained.

“It looks like we have bounced off the bottom,” said Brian Fan, the Cleantech Group’s senior director of research. “One quarter isn’t a trend, but it looks like the worst is behind us.”“The market has been reset back to 2006 conditions,” Fan said.

The second quarter total is up 12 percent from the previous quarter, but down 44 percent from the same period a year ago, according to the Cleantech Group. The second quarter’s average round size was $12.9 million, up from $12.3 million in the previous quarter.

The transportation sector was the clear forerunner, with vehicles, biofuels and advanced batteries bringing in a combined $607 million, which is the highest level of venture investment they have ever received in a single quarter, Fan said.

“Investors, policymakers and auto manufacturers are all looking beyond traditional internal combustion engines to the next big growth market,” Fan said. “There’s a consciousness that the next big market is around plug-in and full electric vehicles.”

He cited examples including companies such Tesla Motors receiving its $465 million loan guarantee from the U.S. Department of Energy and the Chinese positioning their major auto manufactures to be leaders. In June, China’s largest private automaker Chery Automobile rounded up $425 million from domestic investors for its clean energy program and a new sedan plant.

But solar took a dramatic nose dive to its lowest level of investment in more than three years, with only $114 million invested, down from an all-time high of $1.2 billion invested in the third quarter 2008.

“I don’t expect solar to basically go away or investors not to fund anything in solar, but it won’t reach $1.2 billion in investment anytime soon,” Fan said.

Fan suggested solar’s slump is occurring because the concentrated solar power (CSP) and copper indium gallium (di)selenide (CIGS) cell segments have been very capital intensive. Investors have been pulling back from these spaces to fund more capital efficient business models. He indicated investors are also not funding large rounds of $100 million to $150 million in thin-film photovoltaic and CSP.

“Some of these companies may go out of business,” Fan said. “But that’s a natural thing in the venture space. In fact, I think it’s kind of healthy that we have seen a correction. We have seen valuations become more rational. We have seen a lot of investors that had come into the sector pull back. But the core original investors are still in the space.”

He said the result is that some companies may have to change their business models. He cited examples of companies already doing so including Ausra and eSolar, which are moving toward being licensors of their technology to other developers, rather than being the developers and owners of solar thermal projects as originally planned.

The Cleantech Group’s findings include North America, Europe and Israel, India, and China. North America accounted for 66 percent of the investment total, while Europe and Israel made up 21 percent, India took 11 percent and China was at 1 percent. Fan indicated India has never had this percentage of the world’s share before, and that India might fall back next quarter. 

The six most active venture firms in cleantech in the second quarter were Kleiner Perkins Caufield & Byers, Kholsa Ventures, Braemar Energy Ventures, Robeco Alternative Investments, Draper Fisher Jurveston and VantagePoint Venture Partners.

Publication Date: 7/03/2009

By Lisa Sibley, Cleantech Group