About a year ago popular newspaper columnist Thomas Friedman called for “a 1000 Manhattan” like projects in the renewable / alternative energy industry. Looking back now at how much publicity and growth is happening in this industry in no small part due to the investments of private equity and other venture capitalist in the field it seems that the world is well on its way to delivering on Mr. Friedman’s call to action.  While other factors have certainly play a role such as the high oil price and increasing petrocraticism as well as instability in oil producing regions, the world energy industry estimated to be worth approximately $1 trillion USD could be on the way to being dramatically reformed. By 2016 it is estimated that the renewable energy industry could become a $167 billion USD industry according to some market researchers.

 

Venture capital pouring into the renewable energy industry has been steadily increasing over the last few years, figures are not exact, for example it was estimated that in 2001 2.3% of capital was flowing into the industry as opposed to 4.2% in 2005. In 2006 venture capital money and private equity invested by North American firms toped $3.5 billion USD according to New Energy Finance of London, a consulting firm Clean Edge has put that number at around $2.4 billion for the United States in 2006. Through three quarters of 2006 $474 million USD alone were invested in Silicon Valley.

 

Firms such EnerTech Capital, Nth Power, Altira Group, Chysalix Energy LP and Goldman Sachs have all invested in the industry. Nth Power is one of the early leaders of the pack with 30 investments from 2001 to 2005.  But not all firms take the same approach to investments.  Some such as Goldman Sachs have already invested in projects which are up and running and generating revenue. Others are looking at many upstart projects of small firms who are developing new ideas and putting seed money into these ideas hoping to back the next big winner. Buyout firms seem one of the few who may have fewer opportunities in this industry as they are traditionally more drawn to firms which have solid revenue streams but bad debt and need a dramatic overall and restructuring. As the industry is still at a relatively early stage, there are few companies in need of this.

 

While Europe has been the traditional hotbed for renewable energy with a great deal of the mature firms, investment and projects situated in Europe for the moment a rival has arisen. That rival is Silicon Valley and this should come as no surprise considering the background of Silicon Valley. The Valley has played host to a big surge in investment before in the 1990s, this left it with great deals of experience, knows how, and qualified technology workers to offer.  While European firms are busy already turning years of research and development into projects, Silicon Valley firms are busy looking for the next cure to the energy crisis.

 

Part 2 continues tomorrow….