US venture capital (VC) investment in cleantech companies dropped 44% to $1.1 billion in Q2 2011 compared to Q2 2010, while deals fell 12% to 68, according to an Ernst & Young analysis.
The year-over-year decline sounds worse than the reality of the situation, because Q2 2010 was a record-setting quarter with $1.9 billion in investment - $978 million of which was wrapped up in only five deals.
On a consecutive quarter basis, things look much better, as the dollars invested in Q2 2011 were 8% higher than in Q1.
"Cleantech financing levels remain strong in the context of investment levels over the past several quarters. We're seeing continued commitments to solar, electric vehicles and energy efficiency technologies from the venture community, as well large corporate and private investors," says Jay Spencer, Ernst & Young's Americas Cleantech Director.
Solar Still Leads in Energy Generation
Investments in Energy Generation continue to dominate, with solar companies getting the most support.
$311.6 million was invested in energy generation in Q2 and $686.9 million for the first half of 2011 - just shy of the $700.6 million raised for the first half of 2010.
Solar companies got $234.2 million of that, representing 21% of all investments for Q2. BrightSource Energy, which designs, develops and sells solar thermal systems, secured the largest deal of the quarter with $168 million.
The Industry Products and Services segment raised the second largest amount in Q2: $305.7 million. That's a decrease of 53% from the record $655.3 million in Q2 2010, of which $350 million went to Project Better Place, an electric vehicle charging company.
Transportation is a sub-segment in this category - electric car maker Fisker Automotive accounted for 37.6% of the total with a $115 million deal.
Another sub-segment, Materials. got $113 million in Q2, up 340% from the $26 million in Q2 2010. One of the larger transactions was a $45 million deal for BioAmber, a green chemistry company.
Energy Efficiency and Storage
The Energy Efficiency segment received $183.7 million, a 3% decrease from the $189.8 million raised in Q2 2010. However, the segment had 20 deals, the largest number of deals for the quarter.
The largest deal was for Hara Software, which develops environmental impact measurement software. They raised $25 million.
Energy Storage companies attracted $150.3 million dollars, a 4% increase from Q2 2010. largely attributed to the $54.5 million investment in General Compression Inc.
The Alternative Fuels segment raised $126.1 million in Q2 2011, $121 million of which was in biofuels. While this was a 57% decrease from Q2 2010, Kior, which makes alternatives to hydrocarbon-based oil, raised $55 million, the third highest investment of the quarter. The company, based in Pasadena, TX, completed an IPO in June.
Later stage, Revenue Generating Companies Favored
It's not surprising that companies with revenue raised they most - $865.2 million, or 79% of total dollars invested for the quarter. This is an 8% increase from Q2 2010.
Later stage companies also dominated investments, since they tend to produce revenue. They accounted for 67% of the total.
For the first half of 2011, $1.44 billion went to revenue generating companies and $1.28 billion went to later stage companies.
Government, Private and Corporate Funding
In mid-June, the US Department of Energy (DOE) announced loans and guarantees or offered conditional loan guarantees totaling over $32 billion to support 32 clean energy projects, including over $10 billion in loan guarantees for solar projects.
First Solar secured $4.5 billion in loan guarantees, NextEra Energy Resources secured $681.6 million and Abengoa SA's solar unit received $1.2 billion - all for projects in California.
On the private investor side, a group of 11 wealthy US families formed The Cleantech Syndicate - an investment fund to support renewable energy and efficiency companies at all stages of development. The families intend to invest up to $1.4 billion over five years.
Corporate activity was notable in two areas: solar and electric vehicles. In the solar market, Google announced a partnership with SolarCity to create a $280 million fund to provide solar panel leases and power purchase agreements to households - making it the largest residential solar financing scheme to date.
Bank of America, Merrill Lynch, Prologis, and NRG Energy are jointly financing the installation of $2.6 billion of commercial and industrial rooftop solar arrays -- the largest distributed solar deal in history. Additionally, GE announced a $600 million investment to manufacture solar panels in a factory slated to be the largest in the US.
In terms of electric vehicles (EV), several initiatives focused on EV charging infrastructure. The US National Renewable Energy Lab (NREL) is working with Google, Coulomb Technologies, Pacific Gas and Electric, Tom Tom and Best Buy to provide up-to-date information on the locations of EV charging stations.
GE Energy Industrial Solutions and Lowes will partner to offer Level 2 GE WattStation Wall Mount EV Charging Stations.
Two cleantech companies completed IPOs in Q2 2011. Kior Inc, a Texas-based renewable fuels technology developer, raised $150 million and Solazyme Inc, a San Francisco-based company that develops renewable oil and bio-products, raised $ 198 million.
In addition, multiple cleantech companies filed for IPOs in Q2.
There were 9 cleantech mergers and acquisitions with a disclosed value of $2.1 billion in Q2.
The largest of these was Total SA's acquisition of a 60% stake in SunPower Corp (Nasdaq:SPWRA), the US-based solar manufacturer, for $2.0 billion.