In June, the United States Energy Information Administration (EIA) projected that world marketed energy consumption will grow by at least 50 percent between 2005 and 2030, and that total world energy use will rise from 462 quadrillion British thermal units (Btu) in 2005 to 563 quadrillion Btu in 2015 and then to 695 quadrillion Btu in 2030. Despite the sustained high world oil prices that are projected to persist over the long term, global energy demand continues grows.

It's little surprise, then, that clean technology — or cleantech — is making huge gains.

Despite a sluggish economy and a decline in federal research and development (R&D) spending on energy, venture capitalist funding in clean-energy companies surged in 2007, according to a recent study from PricewaterhouseCoopers LLP, titled Cleantech Comes of Age. The MoneyTree report, released in May 2008, determined that venture capitalists poured $2.2 billion into U.S. cleantech companies last year — a 45 percent jump from 2006.

Cleantech, also referred to as clean technology "has grown to define a business sector that includes significant and high growth industries such as solar, wind, water purification and biofuels," according to Neal Dikeman, founding contributor of CleantechBlog.com and Cleantech.org. "Clean is more than green."

"Clean technology, or 'cleantech,' should not be confused with the terms environmental technology or 'green tech' popularized in the 1970s and 80s," Dikeman recently wrote. "Cleantech is new technology and related business models offering competitive returns for investors and customers while providing solutions to global challenges."

In revising the definition and history of "cleantech," Dikeman this month explained:

The sector and the term came into its own in the 2005 and 2006 time frame, when mainstream institutional investors [...] began allocating investment into venture funds in the environmental, alternative and renewable energy sectors, and adopted cleantech as a term of choice for the description of that asset class, lending credibility to the sector.

Today, investors and companies alike are setting long-term cleantech investment strategies.

Venture capital investments in U.S. cleantech companies grew by 41 percent to $961.7 million in the second quarter of this year, according to a new Ernst & Young report based on data from Dow Jones VentureSource. This figure, up from $683.5 million in Q1 2008, is "the highest total cleantech investment on record and comes amidst a quarter in which overall venture capital investment was down by nearly 8 percent."

"Year-on-year cleantech investment follows this upward trend, increasing 83 percent from Q2 2007," an Ernst & Young statement claims.

According to the professional-services firm's report, released earlier this month, energy-/electricity-generating companies attracted the most investment of any sector this quarter with $494.9 million — 52 percent of the total. The top three deals of the quarter were solar-related companies, which each raised $131 million, $130 million and $115 million, respectively. (The report notes that corporate investors were involved in all of these deals.) This echoes PricewaterhouseCoopers' earlier findings, which determined that solar energy attracted the largest share of investment.

Meanwhile, energy-efficiency companies made up 20 percent of total investment dollars and continue to be a top cleantech investment segment despite a slight 4 percent decline to $188.3 million in Q2. The third-largest segment this quarter was alternative fuels, which comprised 13 percent of the nation's overall cleantech market. The segment made up entirely of biofuels transactions, attracted $129 million of investment, down 44 percent from the previous quarter.

"Despite signs of a weakening economy, the credit squeeze and volatile public markets, investment in the sector is expected to persist, priming significant exit activity by 2009 and throughout 2010, then accelerating as more companies graduate through a well-fed pipeline," according to the PricewaterhouseCoopers report in May. "Investment in 2008 will likely continue to flow into wind and solar and channel out to an increasingly diverse range of sub-sectors, including next-generation biofuels and energy storage technologies."

So, while clean technology may face huge hurdles ahead, it also continues to make huge gains. And this trend shows few signs of a slowdown.

Resources

US Cleantech Investment Climbs 41% in 2nd Quarter of 2008 to Nearly US$1 billion, the Highest Quarter on Record
Ernst & Young, Aug. 4, 2008

Cleantech Comes of Age
PricewaterhouseCoopers, May 2008

What is Cleantech?
by Neal Dikeman
Cleantech Blog, Aug. 10, 2008

International Energy Outlook 2008
U.S. Energy Information Administration, June 2008