Venture capital for energy innovation

Overview

The current focus of most energy-sector venture capital (VC) is on technologies that are sustainable, particularly those that support carbon reduction. Analysts generally refer to these as ëclean energy' investments or ëcleantech' investments. The National Venture Capital Association categorizes the ëcleantech' sector as ventures involving alternative energy, energy efficiency, and environmental controls.

According to the United Nations Environment Programme and New Energy Finance, global new venture capital and private equity for renewable energy and energy efficiency was $13.5 billion in 2008, an increase from just $3 billion three years prior. North America investments accounted for 57 percent of this total. In addition to the $13.5
billion investments in 2008, an additional $5.8 billion was dedicated to on-going projects. In total, more than 500 funding rounds took place in 2008.

New Directions for Venture Capital
Venture capital investment peaked during the Internet boom of the 1990s and has been on the decline since the dot-com bust in the early 2000s. The industry is hoping that cleantech startups in need of capital for product development and market penetration will provide the next round of investment growth.

This hope is reflected in the increasing share of venture capital being invested in cleantech. While renewable energy and energy efficiency startups accounted for less than 1percent of investments in 2000, the percentage increased to almost 5 percent in 2005 and to over 11 percent in 2008.

Responding to the Global Corporate Venture Capital Survey 2008-2009, by Ernst & Young, 35 percent of venture capitalists reported their company planned to increase cleantech investments in 2009. More than 60 percent of those participating in the Ernst & Young survey foresee that their firm will be involved in cleantech investment within five years.

VC Investments in Renewable Power Generation

Renewable power generation technologies account for 55 percent of cleantech. The following are some of the innovative companies attracting these investments:

• AltaRock Energy (Sausalito, Calif.)
  AltaRock Energy develops Enhanced Geothermal Systems (EGS) for power generation, a technology that involves boring up to four miles, which could potentially be used across the U.S.
  Key investors: Advanced Technology Ventures, Google, Khosla Ventures, Kleiner Perkins Caufield & Byers, Vulcan
• 1366 Technologies (North Lexington, Mass.)
  The focus of 1366 Technologies is to make design and manufacturing advances in multi-crystalline silicon solar cell development, with a goal of making solar competitive with coal by 2012. One such development is a grooved ribbon that reflects more light onto the surface of the cell, improving efficiency by 2 percent.
  Key investors: North Bridge Venture Partners, Polaris Venture Partners.
• BrightSource Energy (Oakland, Calif.)
  BrightSource Energy constructs concentrating solar power plants that utilize large fields of mirrors to focus sunlight onto a tower-mounted boiler. In early 2009, BrightSource signed contracts with Southern California Edison and Pacific Gas & Electric Co. for a total of 2,200 MW of power from seven concentrating solar installations to be built by 2017.
  Key investors: BP, Black River Ventures, Chevron Technology Ventures, Draper Fisher Jurvetson, Google, MorganStanley, StatoilHydro, VantagePoint Venture Partners
• CoalTek (Tucker, Ga.)
  CoalTek is the developer of a continuous pre-treatment process that increases the energy density and reduces the sulfur, ash, and toxic-inorganic substances in coal.
  Key investors: Braemar Energy Ventures, Element Partners, Lightspeed Venture Partners, Technology Partners, Warburg Pincus
• MiaSolÈ (Santa Clara, Calif.)
  MiaSolÈ produces solar cells that offer the efficiency of multi-crystalline silicon at a fraction of the cost.
  Key investors: Atel Ventures, Atlas Ventures, DAG Ventures, Garage Technology Ventures, Kleiner Perkins Caufield & Byers, VantagePoint Venture Partners.
• Solyndra (Fremont, Calif.)
  Solyndra develops cylindrical solar panels. The panel design performs optimally when mounted horizontally and packed closely together, thereby producing more electricity per rooftop on an annual basis than a conventional flat-panel installation.
  Key investors: Argonaut, Artis, CMEA, Madrone Capital, Masdar, Redpoint Ventures, RockPort Capital Partners, U.S. Venture Partners, Virgin Green Fund.

VC Investments in Energy Storage
Energy storage is another growth area for venture capital investment. During the first quarter of 2009, startups developing storage technologies received the second highest amount of venture capital among all cleantech investments, trailing only solar.
Applications include both electric vehicles and utility energy storage. The following are three examples of startups attracting VC capital:

• A123 Systems (Watertown, Mass.)
  A123 Systems develops and manufactures lithium-ion batteries for electric vehicle and utility storage applications.
  Key investors: Alliance Capital, CMEA Ventures, GE, Motorola, North Bridge Venture Partners, Qualcomm, Sequoia Capital.
• Deeya Energy Inc. (Fremont, Calif.)
  Deeya Energy Inc. develops and manufactures electrochemical energy storage systems. Deeya's L-Cells are believed to have better charging and discharging performance than competing batteries and at a lower cost. The L-Cells contain environmentally benign materials and are infinitely recyclable, as opposed to the solid materials in batteries that deteriorate with use.
  Key investors: Atel Ventures, Element Partners, New Enterprise Associates
• Ice Energy (Windsor, Colo.)
  Ice Energy offers an energy storage system for commercial applications which freezes water in tanks when power demand is low then uses the ice to reduce the load on air conditioners when demand is high.
  Key investors: Energy Capital, SAIL Venture Partners, Second Avenue.

Source : Power Engineering International, 10/10/09