The overall amount of venture capital invested in clean tech firms may have fallen last year as a result of the recession, but investment in low carbon technologies is increasingly dominating the private equity sector according to a major new study.
Preliminary figures released yesterday by analyst firm the Cleantech Group and consultancy giant Deloitte, show that while total venture capital investment in clean tech globally fell 33 per cent during 2009 to $5.64bn (£3.54bn), the number of deals held steady, with 557 firms enjoying fresh venture capital funding.
The companies said that based on previous years, the overall total will rise between five and 10 per cent once investors fully announce their fourth quarter activity, meaning that 2009 is likely to prove a record year for the number of deals.
Moreover, while the total amount of money invested has slipped back to 2007 levels, venture capital investment across all sectors has fallen back to 2003 levels, according to the US Venture Capital Association.
Nicholas Parker, executive chairman of the Cleantech Group, said that the record level of venture capital activity provided evidence that the market for clean technologies would continue to grow, regardless of the disappointing outcome from last month's Copenhagen Summit.
"In parallel with trying to reach carbon agreements, governments spent the year earmarking hundreds of billions of dollars for clean technology in pursuit of economic growth," he said. "And in the private sector, about a quarter of all global venture investment capital was invested in clean tech in 2009 - more than software, biotech or any other category."
The figures also provided ample evidence that the clean tech market is maturing fast and becoming more global in its nature.
US dominance of the sector slipped, accounting for 62 per cent of all venture capital invested in clean tech firms in 2009, compared to 72 per cent the year previous. In contrast, Europe and Israel strengthened its position with its share of the market rising from 22 to 29 per cent. China and India similarly saw their share of global clean tech investment rise to six and three per cent respectively.
The rate of consolidation among clean tech firms also increased, with an estimated 505 mergers and acquisitions taking place during 2009, compared with 394 transactions in 2008.
Scott Smith, US clean tech leader for Deloitte, said that in addition to increased activity among venture capital firms, utilities are also playing a growing role in the development of clean tech projects.
"Utilities continue to bring their capital and access to credit to the clean tech sector," he observed. "In 2009 we saw a surge in utility Power Purchase Agreement (PPA) announcements, with Solar Thermal and Solar PV accounting for 80 per cent of the total PPAs, while wind saw increased capacity announcements in the second half of the year aided by the extension of the production tax credit. "
He added that project financing from blue chip firms also rose, with large firms increasing their direct investments in clean tech by 14 per cent during the second half of 2009 compared to the same period in 2008.
"Leading global utilities and non-utilities are likely to continue to see clean tech projects as an attractive investment from an economical and regulatory perspective," he concluded.
The latest figures from the Cleantech Group and Deloitte echo findings released earlier this week by analyst firm Greentech Media, which similarly concluded that 2009 saw a record number of clean tech venture capital deals.
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