Investing in Renewable and Alternative Energy

In 2009 a number of states have increased their legislative activity on renewable energy, and are poised to take maximum advantage of the clean-energy provisions of the federal stimulus package.

“Alternative” energy isn’t alternative anymore. The U.S. committed several years ago to replace 75% of our oil imports from the Middle East by 2025. Investment in alternative energy is doubling every several years.

And Ray Lane, venture capital backer of Google, Amazon.com, and other internet groundbreakers says the alternative energy investment boom “is bigger than the internet by an order of magnitude. Maybe two.”

Investing visionaries like Warren Buffett, Bill Gates, T. Boone Pickens and others are betting big in alternative energy companies. Not all of the companies they’re investing in are large- or medium-cap either.


American VC firms injected $836.1 million in 59 deals in the first quarter of 2009. A principal at one clean tech investment firm says, “The $800 million of investment this quarter is more capital than has been invested annually for most of the years that we’ve been investing in the cleantech sector.”

So far solar has attracted the most venture capital in 2009 with $356.6 million in 14 deals, followed by energy storage with $121.5 million, and biofuels with $94.15 million. Now, as billions of dollars of stimulus funding for the smart grid and energy efficiency projects enters the market, investors could see growth in this arena.

At least 14 of the 59 deals in the first quarter of 2009 were early stage.

John Doerr, partner at VC firm Kleiner Perkin says, “Greentech could be the largest economic opportunity of the 21st century. This level of green VC investment is not enough.”
Erik Straser, a partner at Mohr Davidow Ventures says, “Cleantech enjoys favorable tailwinds even in this challenging time. In the first quarter, quality companies continue to raise capital albeit with longer fundraising processes and through the Stimulus Plan we see a potent program of incentives and loan guarantees to accelerate adoption of these critical 21st century technologies.”

And green technologies sector analyst Eric Wesoff says, “2009 will be a year of consolidation and development while 2010 and 2011 will be the year greentech breaks. Expect to see IPOs and acquisitions of VC-funded firms in solar, smart grid and biofuels. All in all, a good start to the year.”

Renewable energy distribution market is growing

Electricity is expected to remain the fastest growing form of end-use energy worldwide through 2030, as it has been over the past several decades.

According to the Energy Information Administration, “over the next 25 years, the world will become increasingly dependent on electricity to meet its energy needs.”

Right now nearly 70% of America’s electricity is generated by natural gas and coal. Still, companies that have solar and wind power generators tied into the grid are part of a major growth area.

Renewable Distributed Energy Generation (RDEG) revenue from sub-utility scale operations grew 76 percent globally between 2007 and 2008. Pike Research puts total revenues at $29.9 billion at the end of 2008, and it predicts the market to more than double in value to $60.6 billion by 2013. Globally, photovoltaic solar installations were up 110 percent in 2008.