US venture capital investment in cleantech companies in Q1 2010 hit USD733.3m in 72 financing rounds, a 68 per cent increase in capital and a 118 per cent increase in deals compared to Q1 2009, according to an Ernst & Young analysis based on data from Dow Jones VentureSource.
Compared to Q4 2009, these results represent a six per cent decline in funding and one per cent decline in financing activity.
Cleantech investment is recovering faster than overall venture capital investment, which increased 11 per cent from Q1 2009 to USD4.7bn. The total share of venture capital invested in cleantech reached 16 per cent this quarter.
Early stage venture financing was particularly robust in Q1 2010. The 34 seed and first rounds represented 49 per cent of financing activity, the highest percentage since Q4 2008.
The energy rfficiency category received the largest proportion of seed or first round investments, 41 per cent, underscoring the sector’s appeal for new financing and company creation.
"With rising oil prices and growing signs of economic recovery, particularly in Asian markets, the drivers for cleantech remain strong," says Gil Forer, Ernst & Young’s global cleantech leader. "Given that the majority of government stimulus funds have yet to be deployed, the intensifying focus on cleantech solutions as a driver of operational efficiency, and the robust cleantech innovation pipeline, we expect increased activity in coming quarters.”
Companies in the energy efficiency cleantech category garnered the greatest number of deals, 20, in Q1 2010, continuing a trend that emerged in 2009. Activity in this cleantech segment represented 28 per cent of quarterly financings and a 100 per cent increase over the same period last year.
With 11 deals, the energy efficiency products sub-segment, which includes technologies such as smart meters and lighting management systems, was the largest segment in this category. Adura Technologies, a San Francisco-based provider of building lighting control systems, received the largest financing in this segment with a USD12m later stage round.
The venture investment focus on energy efficiency is reflective of broader trends. Electric utility energy efficiency budgets grew by 60 per cent over the past two years, reaching USD4bn in 2009 – up from USD2.5bn in 2007, according to a report from the Consortium for Energy Efficiency.
In March, the US Senate introduced a bill that would establish a "Building Star" programme, which would yield a prospective USD6bn in funding. The programme includes rebates and financing incentives for building owners to upgrade their property’s energy efficiency, including interior and exterior lighting, energy management, HVAC, motors, and drives.
The industrial products & services category had the largest amount of capital invested, receiving USD261.7m in Q1 2010, and 36 per cent of total quarterly financing. This cleantech segment represented a year-on-year increase of 490 per cent, attributable to large financings of two California-based electric vehicle manufacturers: the USD100m later stage round closed by Coda Automotive and the USD93m later stage financing secured by Fisker Automotive.
Corporations are also pushing the electric vehicle agenda. General Motors will invest USD246m to become the first major US automaker to manufacture electric motors for hybrids and electric vehicles. Toyota, Nissan and Mitsubishi, Fuji Heavy Industries and Tokyo Electric Power jointly created the CHAdeMO Association to increase the number of quick-charge stations for electric vehicles worldwide and standardize how to charge vehicles. UPS deployed 200 hybrid delivery trucks in eight additional US cities. Meanwhile, FedEx plans to be the first US delivery service to use an all-electric truck when it adds four Navistar vehicles to its fleet in June.
The energy/electricity generation category was the third-largest segment of the quarter and increased 30 per cent in terms of dollars raised from USD138m in Q4 09 to USD179.6m. Solar investment, in particular, rebounded in Q1 2010. It increased 233 per cent from the same period last year to USD159.9m, propelled by the USD60m round received by SolarCity, a solar power solution provider for home owners and businesses, based in Foster City, California.
Government and utilities are playing an important role in moving solar developments forward. The US Department of Energy will provide USD1.37bn in loan guarantees for solar energy firm BrightSource Energy and its solar power complex in the Mojave Desert, which would be world’s largest with combined capacity of more than 400 MW. PG&E and SCE have entered into long-term agreements to purchase the power generated by the plants.
Quarterly data compiled by Bloomberg New Energy Finance indicate that US clean energy asset finance rose to USD3.5bn in Q1 2010, from USD2.4bn in Q4 2009, and recorded its strongest quarter since Q2 2009.