Could 2009 offer a bumper year for clean tech bargain hunters?

The bleak economic outlook for 2009 could present a major opportunity for clean tech venture capitalists and encourage private equity firms to make their first foray into the renewable energy sector.

That is the prediction of Richard Youngman, European managing director of the Cleantech Group, who this week argued that while overall levels of clean tech investment globally will fall back slightly during 2009 to $7bn (£4.7bn), the sector would continue to outperform other investment categories.

Speaking ahead of a roundtable discussion hosted by the venture capital arm of IT giant Intel, Youngman said that the record $2.6bn invested by venture capital firms during the third quarter was unlikely to be exceeded in the near future, but he insisted that the outlook remained relatively upbeat given the economic climate.

"While some think [clean tech investment] will fall off a cliff, we don't subscribe to that," he said. "There is still a lot of capital out there and a lot of investment opportunities."

He predicted that while venture capital investment in renewable energy was likely to fall in 2009 and a "shake out" in the thin film solar sector looked imminent, other less high-profile sectors such as energy efficiency and water technologies were on track to enjoy an investment boom.

Youngman also predicted that green IT would continue to attract high levels of investment as established firms accelerate their R&D efforts.

"The IT industry is already playing a big part in clean tech and we will see that even more clearly in 2009/10," he said. "If clean tech is about resource efficiency, then IT is a proven enabler of efficiency – it is possible that some of the big IT companies could look very different in a few years' time."

In addition, the Cleantech Group predicted that the economic downturn could attract more investors to the sector as the valuations of some clean tech firms fall.

"There are already a lot of undervalued assets out there and we are also beginning to see private equity firms take an interest," Youngman observed.

Solar and wind energy firms in particular have seen their valuations fall in recent months, despite the medium-term legislative and demand outlook for their products remaining near universally upbeat, and they could soon become prime targets for private equity raiders.

"The smart investors look at clean tech as a 20, 30 or 40 year trend and if they haven’t entered the sector yet, next year could be a good time," Youngman said, adding that IT giant Cisco was founded just two weeks after the 1987 stock market crash.

"One of the great success stories of this wave of innovation will be founded in the next two years," he predicted.

However, Youngman also issued a note of caution, warning that while there were still plenty of good investment opportunities around, failure rates were also likely to rise as the sector matures and economic factors begin to hit some companies.

"We'd expect some fund managers will prioritise those investments most likely to prove home runs, and leave some companies to, if not fail, then cope with less capital," he said.