Cleantech Investing Drops 33% in 2009, But Recovery Hope Grows

Worldwide cleantech investment fell in 2009 just like the rest of the economy, but a recovery appears to be under way, driven by energy efficiency and public offerings in Asia that underscore the global march of the sector, a new report released Wednesday shows.

Overall, "cleantech had a pretty good 2009," said Dallas Kachan, managing director of the Cleantech Group, a research and advisory firm, which issued the preliminary 2009 report with Deloitte.

"Several new records were set in the cleantech sector, and that's despite the lack of a binding agreement in Copenhagen."

The firms reported that investment in clean technology tumbled 33 percent to $5.6 billion in 2009 from $8.4 billion in 2008.

Despite the drop in total money invested, though, there were likely more cleantech venture capital deals in 2009 than in any other year.

According to the Cleantech Group, the number of VC deals across North America, Europe, Israel, China and India, now at 557, could increase 5 to 10 percent when the final numbers are calculated next month. That's compared with 567 in 2008.

The sector continued to outpace software, biotechnology and "virtually any other industrial sectors," Kachan said, with a quarter of all global VC going to cleantech in the past 12 months.

Continuing a multi-year trend, solar was the leading investment category "but just barely," Kachan said.

"Transportation and energy efficiency now stand to eclipse solar as leading subsectors for cleantech investment," he said. This was not the case a year ago, he added.

Solar took 21 percent of the year's cleantech investment, down 64 percent from 2008. A big part of that was a single deal: Solyndra, the high-efficiency solar panel maker, which landed $198 million in VC funding in the third quarter.

In the fourth quarter, solar snagged just $187 million, a three-year low for the sector.

Particularly hard hit for the year were concentrating solar power (CSP), down 91 percent from 2008, and thin film, down 71 percent.

Energy efficiency, however, "is up," said Kachan, having had a record year. In fact, by deals done, efficiency is already ahead of solar, he added.

"You can read the rise of energy efficiency and the fall of solar as a move by investors toward less capital intensive sectors," said Kachan. "Efficiency technologies are faster to bring to market are usually based on proven technologies, are less expensive, are net negative in carbon emissions and have virtually no land or water."

Transportation also had a record year, taking in 20 percent of the year's cleantech investment.

"It was a good year to be an electric car company," Kachan said.

The U.S. still leads VC investment, but North America's share of cleantech was down from 72 percent in 2008 to 62 percent in 2009, a four-year low. Europe and Israel, meanwhile, hit a five-year high, as their share jumped from 22 percent last year to 29 percent in 2009.

All in all, 2009 "underscored that cleantech is becoming increasingly a global phenomenon," Kachan said.

Several countries hit all-time record years, particularly Norway, France, Switzerland, the Netherlands, Belgium and Denmark.

Perhaps the best evidence of cleantech's "global march" was in the year's initial public stock offerings, IPOs.

There were 32 cleantech IPOs worldwide, raising $4.7 billion. While the most visible of them was Massachusetts-based car battery maker A123 Systems, which raised $380 million in September, nearly all of the IPOs took place in Asia. Half were in China, said Kachan.

"Asian countries absolutely dominated," he said, taking in nearly 75 percent of IPO dollars. In the previous 3 years, Asia was less than 10 percent.

The leading IPO of the year was China Longyuan Power Group, the country's largest wind power producer, raising $2 billion on the Hong Kong stock exchange.