EnergyBiz - September/October 2007 - (Page 18) » Financial Front venture capital flood new enerGy ventures taP into fundinG By riChard sChlesinGer hard to come by, but there’s no doubt that renewables and clean tech — the terms are often used interchangeably — are growing exponentially as a percentage of venture capitalists’ portfolios. Mark Heesen, president of the National Venture Capital Association (NVCA), puts the figure north of 4 percent, up from less than 0.5 percent seven or eight years ago. That’s an 800 percent increase. And the pace is accelerating. Raj Atluru, a managing director of Draper Fisher Jurvetson, one of the largest venture firms, estimates that clean tech is the fourth largest venture category among all categories, up from seventh largest just three years ago. In 2006, he says, it accounted for 10 percent of all venture capital investments. Ira Ehrenpreis, general partner in the venture firm Technology Partners, puts the number even higher, at about 14 percent of all venture dollars in the fourth quarter of 2006. Much of that interest is in alternative fuels, but a significant percent of the dollars and interest are going into solar, energy efficiency, storage, and smart-grid technology. As might be expected, no single reason can account for the surge; rather, it’s driven by a confluence of factors — economic, political and social — some specific to the power industry, and some of broad, even global concern. There are the obvious: the carbon-emission crisis, the realization that grid constraints require demand-side changes, the absoluTe dollar figures can be enormous inflation in the price of new plant construction, and public pressure to address the issue of global warming. And there’s the nature of the beast itself. Venture capitalists are by definition in search of the next big thing, the nexus between economic demand and technological innovation. The renewable energy sector offers what Erik Straser, partner in Mohr Davidow Ventures, calls “technology disruption, the place where you can bring a new technology to market and change the economics.” Or, as Mark Heesen of NVCA puts it, “Venture capitalists created the biotechnology space, by and large, and the IT space and the communications space dramatically changed because of venture dollars. I think that same type of dramatic change can happen in the energy sector. It’s a huge market. There is an absolute need and want for change.” Right now, the most intense venture interest is in solar technologies. From a venture perspective, wind is already a mature industry, dominated by a few large manufacturers, capital intensive and already beginning to feel manufacturing constraints. “We focused on solar,” says Straser of Mohr Davidow, “because it was the technology we could see that was close enough to really changing the market dynamics.” It’s also been a singular success financially. In 2005, a number of venture-funded solar firms, including Suntech Power and SunPower Corp. had successful IPOs, and success breeds success. Suntech opened at just under $21 a share when it went public in December NewsFlash Constellation enerGy, edF ForGe PaCt Constellation Energy and EDF of France have formed a joint venture, UniStar Nuclear Energy, to develop, own and run new nuclear power plants. one year ago, the companies disclosed they agreed to work together on nuclear projects. EDF will contribute $625 million to the venture, and Constellation will contribute subsidiaries and the right to develop nuclear projects in Maryland and New York state. 18 E n E rgyB i z September/October 2007 http://www.energycentral.com
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