LONDON - Venture capital and private equity investments in clean energy companies increased by 167 percent in 2006, according to investment analysts at New Energy Finance Limited. These clean energy investments increased from $2.7 billion in 2005 to $7.1 billion in 2006, driven mainly by a surge of investments in biofuels in the United States. Investments in biofuels more than quadrupled, increasing from $647 million in 2005 to $2.8 billion in 2006. In addition, investments in solar energy more than tripled, while wind power investments more than doubled. Investments in other clean energy technologies - including energy efficiency, fuel cells, hydrogen, smart power distribution, and carbon markets - grew by 74 percent.

New Energy Finance notes a number of trends suggesting that the clean energy field is maturing. For one thing, more than half of the venture capital funding was third-round funding, also called "Series C" funding, up from less than a third the year before. According to New Energy Finance, such funding generally goes to proven technologies at an advanced stage of commercialization. In addition, private equity investments in new assets and capacity expansions for clean energy companies more than tripled, to $3.5 billion. These investments generally go toward proven technologies with a solid business plan.

Clean energy companies also raised $1.9 billion through over-the-counter transactions and by selling their stock at a discount, a technique known as a "private investment in public equity," or PIPE. These mechanisms are typically used for fast cash infusions to fund expansions in small- to medium-sized public companies.

Publication date: 02/05/2007