Cleantech investment up close
Each quarter Deloitte and CleanTech share their research on clean technology investments occurring around the globe. In a webinar format, the two firms speak to the quarter’s investments as well as the cumulative trends. They use a large sampling of utility companies and global enterprise firms to establish a barometer of market trends.
Q3 results show some maturing of investments in the sustainable markets. Highlights of the webinar include:
• Global venture investments totaled $1.53 billion across 152 deals. Total venture investments through the first three quarters of 2010 is $5.7 billion, placing 2010 on track to be the second highest year of investments since 2008 at $8.5 billion. (CleanTech started compiling investment data in 2005.)
• In terms of dollars invested, transportation leads all other clean technology investments followed by biofuels and smart grid.
• In terms of number of deals signed, energy efficiency is at the forefront.
• Investments in Solar dropped to a four year low in Q3 after hitting its second highest quarter in Q2 2010.
Looking at the data set on a regional basis, North America accounted for 61 percent or $928 million of the total investment dollars, with almost half (49 percent) going into California companies.
Europe and Israel followed, raising $382 million in the quarter, accounting for 25 percent of the total global investments.
Chinese companies raised $153 million in Q3, representing 10 percent. India accounts for the remaining 4 percent and $67 million dollars raised in the quarter.
Clarity on Transportation, BioFuels, and SmartGrid Sectors
To better understand what is behind the label “Transportation” a look into the leading deals signed is helpful. A car sharing company based in China, a developer of an internal combustion engine with improved efficiencies based in Michigan, and a developer of technology to break down exhaust stream pollutants in diesel engines based in China are at the core of the Transportation investments in the quarter.
One firm in Texas and two in California clarify the BioFuels label. These three companies represent 92 percent of the total BioFuel investments in the quarter. The Texas firm developed a catalytic cracking technology for turning biomass into bio-crude. One of the California firms offers a solution for converting algae into fuel and bio-products; the other firm converts jatropha seeds into biodiesel.
Smart Grid solutions are consistently software centric at the core, frequently coupled with professional and consulting services. Of the $163 million raised in the third quarter, 65 percent ($106 m) went to a single firm, California-based Trilliant. Trilliant provides wireless equipment and management software for smart grid communication networks. Nexant and eMeter, also California-based firms, round out the leading smart grid investments in Q3. Nexant offers software and consulting services for smart grid; eMeter is a software developer targeting electric, gas, and water utility providers enabling them to achieve large-scale smart grid deployments.
Data Points in Context
A bunch of statistics is meaningless when taken out of context. Several salient points to note include:
1. Investment dollars in cleantech are increasing in 2010. Even though Q3 dollars are below Q2, the aggregate numbers make 2010 the second highest investment year only behind 2008.
2. The number of investment deals in a given sector is a better metric to use than dollars invested when looking at a sector’s viability.
3. Federal and State regulations will continue to drive utility companies to seek emission reductions. Therefore, companies able to provide solutions that increase energy efficiency and reduce demand should see a rising trend in venture investments.
4. It is less costly for a utility to sign PPAs (power purchase agreements) than to build out its own sustainable infrastructure. If this continues, the net result will be large alternative energy producers feeding the utility companies.
5. As capital remains tight around the globe, utility companies will seek to meet their sustainable energy targets with the least amount of direct capital investment, driving further power purchase agreement signings.
The sustainable and renewable energy market is maturing. Clearly the electric car is not going to replace the combustion engine any time soon. Utility companies are not going to make infrastructure investments if there is an alternative solution, with a more rapid return on investment, as they have with the PPAs today. Federal and State sticks and carrots (regulations and incentives) continue to be the driving factor behind the sustainable industry at this time.
For more information on the Q3 2010 research, visit CleanTech Group.