Large Energy Storage Deals Push US VC Investment in Cleantech to $1.1 billion in Q3 2011

BOSTON, Nov. 2, 2011 /PRNewswire/ -- US venture capital (VC) investment in cleantech companies increased by 73% to $1.1 billion in Q3 2011 compared to Q3 2010, while deals also increased by 36% to 76, according to an Ernst & Young LLP analysis based on data from Dow Jones VentureSource.  On a consecutive quarter basis, dollars invested in Q3 2011 is 4% above the amount in Q2 2011.      

"Confidence in cleantech investing continues despite the challenging investment market. We saw significant commitments in energy storage, which reflects a growing corporate focus on proactively managing their energy mix," said Jay Spencer, Ernst & Young LLP's Americas Cleantech Director.

Energy/Electricity Generation segment leads with energy efficiency

The Energy Storage segment led cleantech investment during the third quarter of 2011. This segment raised $421.0 million during Q3 2011, representing a 1,932% increase during the same period last year and has raised a total of $865.2 million throughout 2011. Fuel cells led this segment with $225.5 million, representing nearly 54% of the overall investment in the Energy Storage segment in Q3 2011. The Energy Storage segment had the top three transactions of the quarter, the largest of which was the $150.0 million raised by Bloom Energy.

Cleantech companies in the Energy/Electricity Generation segment raised the second largest amount in Q3 2011 with $255.1 million, a 2% decrease from Q3 2010. The Solar sub-segment led investments with $195.8 million, accounting for 77% of the sector's total investment.

In Q3 2011, the Energy Efficiency segment ranked third with respect to total amount invested, with $245.1 million, a 23% increase from Q3 2010. The segment, however, led the quarter in rounds of financing with 21 deals, a 31% increase from 16 deals in Q3 2010. The largest transaction in this segment was completed by Bridgelux, a provider of light-emitting diode (LED) solutions, which raised $60.0 million.

Companies in the Industry Products and Services segment attracted $132.0 million, a 22% decrease from Q3 2010. The segment ranked third in the number of deals with 15 rounds of financing this quarter compared to 13 in Q3 2010. Additionally, biofuel deals continue to lead the Alternative Fuels segment.  With $23.5 million raised, HCL CleanTech Ltd., a North Carolina-based company that converts cellulosic biomass into fermentable sugars, secured the top biofuel deal for Q3 2011.  

Revenue generating companies continue to lead with investments received

Cleantech companies in the revenue generation stage of development led both deals and investments in Q3 2011 with 49 deals and VC investment of $921.0 million, a 203% increase from Q3 2010.  The share of revenue generation stage, companies accounted for 78% of the dollars invested versus Q3 2010 when it accounted for 44% of the total dollars invested.  

Regional highlights

California continues to lead national cleantech investment in 2011 with $1,738.2 million raised to date. In Q3 2011 alone, California garnered 52% of all dollars with $583.0 million, a 74% increase from Q3 2010. Massachusetts raised the second highest level of investments with $170.4 million, a 65% increase from the same period last year. Both Pennsylvania and Oregon had investments more than triple since Q3 2010, bringing their Q3 2011 investment levels to $85.4 million and $73.5 million respectively.

Government activity and corporate funding

"The renewable energy capacity additions and corporate commitments demonstrate that cleantech has reached its deployment phase," said Spencer.

The US recorded 44 new–build clean energy asset financings with a disclosed value of $6.8 billion, according to Bloomberg New Energy Finance.  The US solar energy sector attracted the majority of all new-build asset financing raising $5.0 billion, through twenty deals.  Within the solar energy sector, NRG Energy secured the largest transaction with a $1.2 billion loan guarantee from the US Department of Energy and $350.0 million in equity for the development of the 250MW High Plains Ranch II and III PV plants, forming the California Valley Solar Ranch. The US Departments of Energy and Agriculture and the US Navy will invest as much as $510.0 million over the next three years to push the development of biofuels for commercial and military vehicles.  

Corporate activity included several new long-term commitments. NextEra Energy Inc., the largest US wind-energy producer, plans to spend as much as $5.8 billion in the next three years to build wind and solar projects. Northern California utility company PG&E has committed $1.3 billion to deploy smart grid technology to its coverage areas over the next two decades. UPS has deployed 103 hybrid electric vehicles for its fleet this year.

Cleantech partnerships

Key players in the electric vehicles (EV) space are collaborating to expand the accessibility and capabilities of EVs. Coulomb Technologies is allowing Dutch navigation systems firm TomTom to access their ChargePoint Network API to enable drivers to find the nearest available charging station and reserve it in advance. CODA Automotive is teaming up with Great Wall Motor Company to develop EVs, a collaboration that will involve integrating the Californian firm's EV propulsion system with the vehicle platforms of Great Wall. In addition, Ford Motor and Toyota Motor are working jointly to develop a new hybrid drive-train system for light trucks and SUVs.  

Companies in the biofuels sector are also forming a series of important alliances to help advance the field.  Dow Chemical and Mitsui & Company are creating a joint venture to produce ethanol and biopolymers in Brazil. ZeaChem and US carmaker Chrysler are combining efforts to accelerate the development and adoption of cellulosic ethanol. General Electric (GE) is teaming up with Virgin Australia, Renewable Oils Corporation, Future Farm Industries CRC and Canadian biofuels firm Dynamotive Energy Systems to develop commercial biofuel for the aviation industry.

Capital market activity

While there were no cleantech IPOs conducted this quarter, companies are continuing to enter the IPO pipeline, with companies such as Intermolecular Inc. of San Jose, CA, Silver Spring Networks of Redwood City, CA, Renewable Energy Group of Ames, IA, Genomatica of San Diego, CA, and Mascoma Corp. of Lebanon, NH filing their S-1 during the quarter.

In terms of other capital market activity, there were 11 cleantech mergers and acquisitions with a disclosed value of $222.0 million in Q3 2011, according to IHS Herold. The largest of these was the $131.0 million acquisition by MEMC and its subsidiary SunEdison of FRV, the US subsidiary of privately-held Spanish solar photovoltaic power developer Fotowatio Renewable Ventures.

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Note to editors:

Ernst & Young uses the following definitions to classify the cleantech industry and its sub-sectors:

Clean technology encompasses a diverse range of innovative products and services that optimize the use of natural resources or reduce the negative environmental impact of their use while creating value by lowering costs, improving efficiency, or providing superior performance.

• Alternative Fuels – Biofuels, natural gas
• Energy / Electricity Generation - Gasification, tidal/wave, hydrogen, geothermal, solar, wind, hydro
• Energy Storage - Batteries, fuel cells, flywheels
• Energy Efficiency - Energy efficiency products, power and efficiency management services, industrial products
• Water - Treatment processes, conservation & monitoring
• Environment - Air, recycling, waste
• Industry Focused Products and Services - Agriculture, construction, transportation, materials, consumer products

SOURCE Ernst & Young LLP