Cleantech Investment to Inoculate American Economy


The cleantech is industry is still forging ahead even as broad economic indicators skid to 11-year lows.

Despite dismal stock valuations in the sector, cleantech deals are still being done at the private equity and venture levels, and Congressional support for the industry is stronger than ever. Certainly this fledgling industry still has many milestones to reach, as all indicators point to robust growth in all segments of renewable energy and energy efficiency.

But with so many grim financial headlines breaking everyday, our instincts generally direct us to dismiss good news like this; surely one industry can’t be succeeding as so many others fail.

To satiate our curiosity, I think it’s perfectly alright to look this gift horse in the mouth.

Cleantech Investment is Growing, For Real

Here’s how the Wall Street Journal described the 2008 cleantech venture climate:

. . . investments in clean-technology companies totaled $8.4 billion, up nearly 40% from 2007, according to Cleantech Group. In the third quarter alone, venture capitalists poured $2.6 billion into clean technology, a quarterly record. In the fourth quarter, they invested $1.7 billion.

It begs the question: What recession?

When you throw in the private equity numbers the picture gets even more impressive.

Combined private equity and venture capital funding in the cleantech sector has broken its own record every year since 2005. The number of deals at those levels of funding has grown from nine in 2000 to 243 in 2008.

Take a peek*:

cleantech venture deal volume

And the amount of funding has gone from $1.02 billion to $16.5 billion in the same time. Here’s that chart*:

cleantech venture investment total

That’s just for early round financing. Activity in the debt and equity markets has also been robust, with $104.66 billion changing hands last year during 424 reported deals.

Regarding asset transactions, 2008 saw 133 deals–an all-time record–worth $9.45 billion.

So the funding numbers still look strong, albeit with recent slight contraction. How are the installed capacity numbers faring?

Clean Energy Capacity is Growing, Too

By all measures 2008 was a banner year for clean energy installation.

Over 26,000 MW of new wind power generation capacity was installed worldwide, bringing the total to over 118,000 MW. Wind capacity has grown every year since 2000 with a compound annual growth rate (CAGR) of 27%.

Last year was also a record year for solar energy installations. Not including thermal installations, global installed solar capacity reached about 13,300 MW in 2008–a full 66% growth over the previous year. Solar installations have also grown every year since 2000, but have done so more quickly, with a CAGR of 41.5%.

Geothermal, while not as sexy as wind or solar, has grown at a steady 3.2% clip since 2000, with over 9,200 installed megawatts.

Not to be outdone, ethanol production has more than tripled since 2000, and output last year was over 14.1 billion gallons. Biodiesel has done even better; production is up 1,205% since 2000 to over 2.49 billion gallons.

It’s a lot of data, I know. But it’s necessary to visualize the growth of various cleantech sectors.

As you can see, the industry is doing well even in the face of global economic uncertainty. And with billions slated for cleantech in the recently-passed stimulus, growth in the sector is also going to accelerate.

The $50-or so billion Federal dollars will have a ripple effect as new tax and bond incentives lure even more private capital into the space.

The way I see it, cleantech is America’s new Breadbasket. Billions of Federal dollars aren’t being spent to aid a failing industry, they’re being spent to expand a growing one that will be instrumental in our economic recovery.

Coming cap-and-trade legislation and a proposed national renewable portfolio standard will only further that process.

New jobs, clean energy, increased efficiency. . . what more could you want?

The only thing I can think of are more new jobs, clean energy, and increased efficiency.

They’re coming.



*Charts from GlobalData

Nick Hodge is a regular contributor to Green Chip Review and Energy & Capital. One of the bright young minds in today's cleantech industry, Nick is putting his knowledge of nascent green markets to use in several ways. . . He's the Managing Editor of Alternative Energy Speculator, an investment advisory service focused on taking advantage of every aspect of cleaner energy, from the stop-gap companies that are making a fortune lowering carbon emissions to makers of more fuel efficient engines and other technologies that will help the U.S. successfully build a bridge from current fuel to the energy of the future. Nick also runs Green Chip International, which is dedicated to giving you the sharpest insight, not just into clean technology trends but also the geopolitical context that makes markets move. A featured guest on Canada's Business News Network and Yahoo!'s Tech Ticker, Nick is also very interested in uncovering the massive profit opportunities associated with a growing lack of freshwater and the maturation of the global carbon markets. Nick is also the co-author of the bestselling book, Investing in Renewable Energy: Making Money on Green Chip Stocks.