Thomas White Global Investing
Green Reports

April 28, 2010

The Green Report

Clean Technology Investment Soars in 2010
Clean Technology Investment Soars in 2010

When the recession struck, global warming concerns took a backseat. But now, as recessionary clouds are clearing, clean energy technology has returned with twice the vigor in the first three months of 2010. Investors across the globe have poured nearly $1.9 billion into green technology startups, which is 29% more than the fourth quarter of 2009 and a huge 83% increase year-on-year.

A global investment survey conducted by Deloitte, together with The Cleantech Group, a San Francisco based market research firm, found that 2010 is the strongest beginning for green technology startups to be recorded so far.

Electric cars were the first choice of investors, snagging $704 million from the total green tech cache. Nearly half of that figure was bagged by Better Place, a Silicon Valley firm that is involved in building charging stations and other green infrastructure worldwide. But electric cars are still considered an expensive as well as inconvenient option. A Lux Research report estimates that even in 2020 when oil is expected to cost $200 a barrel, only 4% of the vehicles sold globally will be electric vehicles. Electric car batteries are costly, which spikes up the price of the car inordinately. Moreover, an electric car currently travels just about 40 miles on a single charge, which makes owners hesitant to drive long distances. Better Place is looking to tackle this challenge, with more charging stations.

It appears that the more ubiquitous solar and wind energy technologies have lost their appeal as they require heavy doses of capital. Investors are seeking cutting edge technology that can be managed with relatively less capital investment, such as smart grid and energy efficiency solutions. Steve Vassallo, a partner at Foundation Capital, explained to the Financial Times that investors “…are looking for more capital-efficient projects. They are less interested in large-scale generation projects.”

Bloomberg New Energy Finance: Green companies across the world
expect to raise $9.6 billion this year for renewable energy projects.

Nurtured by investors, as well as the need to save energy, novel green technologies have been sprouting up. Nuclear reactors, carbon capture and storage and algal biofuels are some of the latest entrants into the green field.

The emergence of these innovative technologies has created the need for new technical expertise, which has called for green jobs. The Pew Research report shows that from 1998 to 2007, jobs in the renewable energy sector expanded at double the speed compared to other sectors, creating 770,000 clean technology jobs worldwide. More recently, the U.S. enacted the American Recovery and Reinvestment Act that has charted a special program allocating around $85 billion in tax incentives for energy equipment construction and transport related programs. Matt Rogers, senior adviser to U.S. Secretary of Energy Steven Chu calls it, “among the most successful clean energy job creation and innovation programs under the Recovery Act.”

Yet, it is China that is pushing full steam ahead, overtaking the U.S. Last year China poured $34.6 billion into the clean energy research compared to $18.6 billion in the U.S., $11.2 billion in the U.K., and $10.8 billion in the rest of the European Union. Nevertheless, the distinction for the greenest country goes to Iceland, as the 2010 Global Environment Performance index shows. Apparently, Iceland derives 81% of its total energy and amazingly 100% of its electricity from renewable energy like geothermal and hydropower sources.

But green investing has not been a boom for all. Failed businesses are part and parcel of the green technology world, often confronted with the challenges of resistance to new findings, volatile oil prices, hesitant government policies and heavy capital investment for research and achievement of economies of scale. And, as investors concentrate on new and more promising startups, many firms which obtained funding about three to four years ago now find themselves struggling, the victims of the newest energy solution to turn investors’ heads. For instance, BioFuelBox, a firm focused on converting waste oil and fat into fuel, is shutting down after receiving nearly $10 million in funding a few years ago.

Despite these hurdles, the fight goes on. Investment in clean technology is predicted to increase 35% this year alone. And as investing spurs new technologies, which give rise to new jobs, we might just be solving two problems at one time. In fact, Justin Lin, Chief Economist of the World Bank, commented that “…with the right handling, we could simultaneously solve the current financial crisis and prevent the emerging climate change crisis.” Imagine that.




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