Solar Powers $1.1 Billion US VC Investment in Cleantech in Q2 2011

44% decline from record invested in Q2 2010; private and corporate investments continue to propel US cleantech market

Aug 03, 2011, 08:00 ET from Ernst & Young LLP

BOSTON, Aug. 3, 2011 /PRNewswire/ -- US venture capital (VC) investment in cleantech companies decreased by 44% to $1.1 billion in Q2 2011 compared to Q2 2010, while deals fell 12% to 68, according to an Ernst & Young LLP analysis based on data from Dow Jones VentureSource.  The decline in cleantech investment in Q2 2011 comes in comparison to the $1.9 billion invested in Q2 2010 — the highest level of quarterly VC investment on record, in which the top five deals amounted to $978.6 million.  However, on a consecutive quarter basis, dollars invested in Q2 2011 were 8% greater than the amount in Q1 2011.

"Cleantech financing levels remain strong in the context of investment levels over the past several quarters.  We're seeing continued commitments to solar, electric vehicles and energy efficiency technologies from the venture community, as well large corporate and private investors," said Jay Spencer, Ernst & Young LLP's Americas Cleantech Director.  

Energy/Electricity Generation segment leads with solar

The Energy / Electricity Generation segment continues to dominate cleantech investment. The segment raised $311.6 million during Q2 2011 and raised a total of $686.9 million through the first half of 2011 – just shy of the $700.6 million raised through the first half of 2010. Solar companies continue to draw the greatest support in this segment with $234.2 million, representing 21% of the overall investment in Q2 2011. BrightSource Energy, which designs, develops and sells solar thermal power systems, secured the largest deal of the quarter with $168 million.

Cleantech companies in the Industry Products and Services segment raised the second largest amount in Q2 2011: $305.7 million with a decrease of 53% from the record amount of $655.3 million that was raised by this segment in Q2 2010, of which $350 million was financing for Better Place.  The Transportation sub-segment investments were led by Fisker Automotive Inc., which accounted for 37.6% of dollars raised in this segment with a $115 million deal. Additionally, the Materials sub-segment raised $113 million in Q2 2011, up 340% from the $26 million raised in Q2 2010. One of the larger transactions in that segment was a $45 million deal completed by BioAmber, a renewable chemistry company based in Minneapolis, MN.

In Q2 2011, the Energy Efficiency segment ranked third with respect to total amount raised, with $183.7 million, a 3% decrease from the $189.8 million raised in Q2 2010. However, the segment had 20 deals, the largest number of deals for the quarter. The largest deal in this segment was completed by Hara Software, a Northern California a provider of environmental impact measurement software that raised $25 million.

Companies in the Energy Storage market attracted $150.3 million dollars, a 4% increase from Q2 2010. This is largely attributed to the $54.5 million investment in General Compression Inc. Additionally, the Alternative Fuels segment raised $126.1 million in Q2 2011, $121 million of which was attributed to biofuel deals. While this was a 57% decrease from the total raised in Q2 2010, the segment garnered the third largest VC deal of the quarter – a $55 million deal by Kior, a provider of hydrocarbon-based oil, based in Pasadena, TX, which completed an IPO in June 2011.

Later stage, revenue generating companies maintain the lead

Cleantech companies in the revenue generation stage of development drew the greatest amount of VC investment in Q2 2011 with $865.2 million, 79% of total dollars invested during the quarter. This is an 8% increase from investments in Q2 2010. Later stage companies also dominated the Q2 2011 VC investments, accounting for 67% of the quarterly total. Through the first half of 2011, $1.44 billion has been raised by revenue generating companies and $1.28 billion has gone to later stage companies.

Regional highlights

In Q2 2011, California garnered 51% of dollars raised with $548.8 million. However, the state faced a decline compared to the amount it raised one year ago, primarily due to five large deals that involved California-based companies in Q2 2010. Northern California alone dropped 63% in terms of dollars raised from Q2 2010. However, the Mountain region experienced a strong quarter with $114.7 million, a 167% increase in dollars raised from Q2 2010. The North East followed with $109.8 million in investments.

Government, private and corporate funding

New initiatives and funding continue to take shape from government, private and other corporate sources. In mid-June, the US Department of Energy announced loans and guarantees or offered conditional loan guarantees totaling more than $32 billion to support 32 clean-energy projects, including more than $10 billion in loan guarantees for solar projects. First Solar secured $4.5 billion in loan guarantees, NextEra Energy Resources LLC secured $681.6 million and Abengoa SA's solar energy unit received $1.2 billion – all for projects in California.

On the private investor side, a group of 11 wealthy US families formed, The Cleantech Syndicate, an investment fund to support renewable energy and power-efficiency companies at all stages of development. The families intend to invest up to $1.4 billion over five years, according Bloomberg New Energy Finance.

Corporate activity was notable in two areas: solar and electric vehicles. In the solar market, Google announced a partnership with SolarCity to create a $280 million fund to provide solar panel leases and power purchase agreements to households – making it the largest residential solar financing scheme to date. Bank of America, Merrill Lynch, Prologis, and NRG Energy are jointly financing the installation of $2.6 billion of commercial and industrial rooftop solar arrays — the largest distributed solar deal in history.  Additionally, GE announced a $600 million investment to manufacture solar panels in a factory slated to be the largest in the US.

In terms of electric vehicles (EV), several initiatives focused on EV charging infrastructure.  The US' National Renewable Energy Laboratory (NREL) is working with Google, Coulomb Technologies, Pacific Gas and Electric, Tom Tom and Best Buy to provide up-to-date information on the locations of EV charging stations. GE Energy Industrial Solutions and Lowes will partner to offer Level 2 GE WattStation Wall Mount EV Charging Stations.

Capital market activity

Two cleantech companies completed IPOs in Q2 2011.  Kior Inc, a Texas-based renewable fuels technology developer, raised $150 million and Solazyme Inc, a San Francisco-based company that develops renewable oil and bio-products, raised $ 198 million.  In addition, multiple cleantech companies have filed for an IPO in the second quarter of 2011.

In terms of other capital market activity, there were 9 cleantech mergers and acquisitions with a disclosed value of $2.1 billion in Q2 2011, according to IHS Herold. The largest of these was the acquisition by Total SA of a 60% stake in SunPower Corp, US-based manufacturer of monocrystalline silicon cells, modules, system trackers, and equipment to monitor solar systems, for $2.0 billion.

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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