US venture cash floods into clean tech

The amount of US venture capital cash sloshing around the clean tech sector this year broke the previous annual record three months before the end of the year, according to new research.

Released yesterday, the report from the National Venture Capital Association (NVCA) and research firm Thomson Financial found that for the first three quarters of the year US VCs invested $2.6bn across 168 clean tech deals, a 46 per cent increase on the full year performance for 2006, which saw $1.8bn invested across 180 deals.

Solar energy was the biggest beneficiary of the VC's deep pockets with 35 solar-related deals accounting for $664.6m, 33 alternative energy deals covering, excluding wind, solar, geothermal, and co-generation, attracted $317.5m. California and Texas were also big winners

Silicon Valley was at the hub of the boom, with the three biggest clean tech investors - Khosla Ventures, Draper Fisher Jurvetson, Kleiner Perkins Caufield & Byers - all headquartered in the Bay Area.

The record-breaking VC gold rush also spelt good news for non-US clean tech firms, with $900m of the $2.6bn invested in the first nine months of the year going to non-US firms. The three largest clean tech deals of the year also went to non-US firms, with Dutch outfit Delta Hydrocarbon BV attracting $500m, the Brazilian Renewable Energy Company securing $200m, and $118m going to Chinese solar specialist Yingli Green Energy Holding Company.

However, NVCA president Mark Heesen counselled caution over the booming market. "There are major opportunities for venture capitalists to totally reshape the energy market throughout the world as governments, consumers and companies are demanding innovation in this space," he said. "However, as has been demonstrated in the IT and life science arenas, investing in new technologies can be fraught with pitfalls and is not for the inexperienced or the faint of heart."

He advised that "prudent, long-term, knowledge-based investment" was required to turn clean tech investments into a success, adding that "short-term 'tourists' should steer clear".

The report came on the same day as Dow Jones reports revealed that Hudson Capital Management L.P. is set to join the green investment gold rush, with plans for a $1bn renewable energy investment fund.

Meanwhile, investment banking giant Morgan Stanley also stepped up its presence in the solar energy space yesterday, announcing it is ploughing $190m into California-based SunPower to help accelerate the expansion of a business model that will allow customers to buy energy direct from third-party-operated solar installations.

Under the terms of the deal, Morgan Stanley and SunPower will set up a jointly owned holding company that will finance project companies established for individual solar panel installations. The project companies will purchase solar systems from SunPower and then resell the electricity to customers.