Government announces additional £20m in green VC funding

Energy and climate change secretary Ed Miliband announced yesterday that an additional £20m in government-backed venture capital (VC) investment is to be ploughed into helping emerging clean-energy firms expand.

The investment, which forms part of the £405m of clean-tech funding announced earlier this year as part of the Budget, will be targeted at early-stage wave, tidal, fuel cells, solar and energy efficiency firms that have found it hard to attract VC backing due to the recession.

"It is essential we meet our long-term climate change goals. That's why we are intervening with support for tomorrow's green-energy technologies," Miliband said. "Where market capital isn’t coming forward, we’re stepping in to plug the gap as speedily as possible."

The funding was welcomed by Simon Walker, chief executive of the British Venture Capital Association, who said that it would come as a boost to those firms reliant on a VC market hit hard by the economic downturn.

"Low-carbon energy technologies backed by venture capitalists will play an important role in creating a sustainable energy future for the UK," he said. " In 2009 we have seen a dramatic fall in the amount invested into clean-energy companies in the UK. We welcome any initiative which boosts the supply of capital into this crucial sector."

However, the funding comes as evidence continues to emerge that global VC investment in clean technologies is bouncing back strongly after a poor start to the year.

Recent figures show that it rose 12 per cent during the second quarter. There have also been a series of high-profile VC deals in the past few months, culminating in the announcement last week from Silicon Valley venture fund CMEA Capital that it is to invest $100m (£63m) in alternative energy firms over the next three years.

That pledge follows news earlier this month that VC firm Westly Group exceeded expectations by raising $120m for clean-tech investments, while Khosla Ventures announced that it had raised a whopping $1.1bn for low-carbon deals.