Unprecedented venture capital investment in renewable energy

The first quarter of 2010 registered 1.7 billion Euro investment and 189 operations

2010 began with a two-digit growth in renewable energy. In the first quarter of the year, venture capital funds operating worldwide performed 189 operations, registering an unprecedented investment, amounting to 1,7 billion Euro. The latter is equivalent to a 29% growth rate compared to the last quarter of the previous year and an 89%increase over the same period in 2009.

For renewables this was the best Q1 ever recorded by venture capital surveys. The surge of venture capital financing in renewable energy is significant for two reasons. At a macro-level, it means that investment in innovation is starting to grow and that the recession that naturally caused a decrease in investment is coming to an end. At a micro-level, it shows that international investors pay increasing attention to clean energy.
This data is useful to perform assessments and forecasts on possible trends of Initial Public Offerings (IPO) in the coming year.

Worldwide, in Q1 2010, 13 international IPOs were issued by renewable energy companies, for a total amount of 1.22 billion Euros.
One of the most significant offerings that were recently publicly exchanged was issued from Dutch Sensata Technologies, also operating in solar panels, which raised 467 billion Euros from the market with a total capitalization of about 2.7 billion Euros.
Despite the recession, in 2009 global investment in renewable energy from international venture capital firms amounted to 5.6 billion dollars (4.09 billion Euros), equivalent to as many as 557 operations.
This flow of new investments benefited mostly start-ups and forefront developers of innovative clean and efficient energy technologies.
Undoubtedly, in 2009 raising capital from the market was challenging. The banking system crisis, combined with the economic downturn, depleted available financial resources. Nevertheless, the renewable energy sector did not suffer as much as others, as witnessed by the Cleantech Media and Deloitte reports.
In North America, Europe, China and India, about 25% of investment from venture capital funds made in 2009 involved companies operating in clean energy more than in other sectors which were traditionally popular among these funds, such as software or biotechnologies.

In the second semester of 2009, net capital raise had grown compared to 2008 – which suffered less from the market crisis - with a 14 % increase in direct investment from large-scale clean energy firms. Solar energy was the most popular technology, with 21% of overall investment, following the trend of the previous years and the increased photovoltaic technology innovation potential.

It must be noted that these results have been affected by the investment strategies of US funds, considering that most operations in Europe support energy efficiency technologies,, which have more than doubled their share since 2008, with deals for $304 million (221 million Euros). Solar energy investment follows with 35 signed operations for a total of $292 million (213 million Euros).

Nevertheless, the scenario in Europe is scarcely homogeneous. While Norway, an oil producing country, increased its renewable energy investment by 333% compared to the previous year, Germany registered a 47% fall over 2008 levels, a drop which reached 21% in the UK, another oil producing country.
Another positive result of the year that has recently ended is investment growth in China and India, the two world manufacturers with growing environmental issues. China signed 28 deals for $331 million (241 million Euros) - showing growing interest toward the water management and material recycling sectors - while India invested $190 million (138 million Euros).
If forecasts for 2010 regarding economic growth will be confirmed, one can realistically foresee unparalleled investment in renewable energy from venture capital funds. The latter is significant for all market operators, since it shows that investors now have a different outlook: renewable energy developers, which were – superficially - considered to need large amounts of public funding in order to be profitable, have started to receive serious attention from funds that are top innovation investors.