FT report: Alternative Energy Investing reaching record levels

Green technology investment soaring!!!

By Fiona Harvey, Environment Correspondent, and Kevin Allison in San Francisco

Financial times Report

This year will be another record-breaking year for venture capital investment in “clean” technologies, according to a new analysis of the market.

Nick Parker, chairman of the Cleantech Group of analysts, said: “There is no doubt this year will break records in terms of the amount invested. But this year will also be notable for the amount of commercial take-up of clean technologies.”

Last year, more than $4bn (£1.9bn) of venture capital was invested in environmental technologies such as renewable energy, water technologies and carbon reduction technologies. The sector is now the biggest recipient of venture capital funds in the US, and in the first three quarters alone about $3.8bn of venture capital was invested, Mr Parker said.

Such large flows of capital are now pouring into clean technology in response to record high energy prices and governments’ perceived willingness to regulate carbon. Total investment, not just venture capital, in “clean” or low-carbon technology reached $74bn last year, according to Michael Liebreich, founder of New Energy Finance, a consultancy.

But investment in clean technology is heavily dependent on politics. Vinod Khosla, founder of Khosla Ventures, a venture capital group focused on clean tech start-ups, says: “Policy is absolutely important in the clean-tech space. The traditional businesses have strong political forces in play. Somebody has to educate Washington.”

Mr Parker agrees: “Politically, the big shift is in recognising that the market will respond if they send the right signals. But there is a sense in the business world that there is no going back now [for politicians]. This is a one-way bet.”

Al Gore’s announcement on Monday that he had been made a partner at Kleiner Perkins Caufield and Byers, the Silicon Valley venture capital company that helped to fuel the internet boom in the 1990s, illustrated the link between politics and investment in this sector.
In most countries, renewable energy is not competitive with conventional sources such as coal-fired power without government support in the form of subsidies, fixed energy prices or regulations mandating a certain amount of electricity should come from renewable sources.
As conventional energy prices rise, however, clean technologies become more competitive, as companies and consumers are financially driven to look for alternatives.

Companies investing in clean technology have been keen supporters of carbon-restricting policies.

“We strongly advocate a price on carbon,” said John Doerr, partner at KPCB. “Policy matters enormously and it’s woven into every part of our worldwide energy economy and for good reasons.”

Clean technology investors are also awaiting the outcome of a meeting of the world’s leading climate scientists who have been discussing the key messages on the state of the world’s climate.

The Intergovernmental Panel on Climate Change, a body of the world’s climate experts convened by the United Nations, is meeting in the Spanish city of Valencia to distil its work over the past six years into 30 important findings to be presented to policymakers tomorrow.
This will be in time for them to digest the information before a crucial United Nations meeting on climate change in Bali in December.

Copyright The Financial Times Limited 2007