Money flows into green transport despite recession

Colin Barras, New Scientist 2 Jul 09;

A new generation of mean, green electric machines is shifting attitudes to the electric car. Most large automobile companies are pouring money into electric vehicle programmes, and a new report shows venture capitalists are hot on their heels.

Despite the financial recession, venture capital investment in green technology rose, for the first time in six months, during the second quarter of 2009 – and the biggest winner was transport-related technology, according to the report, issued this week by the Cleantech Group and Deloitte.

The problems faced by the traditional automobile industry, particularly companies in the US, are well documented. But for many investors, now is an "historic opportunity" to take a chunk of the market themselves by supporting new clean transportation options, says Brian Fan, senior director of research at Cleantech.
Chock full

Those investors were perhaps buoyed by government initiatives to support green technology, including President Obama's high-profile multi-trillion-dollar budget request for 2010, which was chock full of funding for US science and technology ventures.

Over the past three months, venture capital invested $600 million in green transportation – biofuels, and new vehicle and battery technology. The big winners include V-Vehicles, a San Diego based startup that raised $100 million to build fuel-efficient cars in Louisiana.

Reyer Gerlagh, an economist with a specialism in environmental policy at the University of Manchester in the UK, thinks the new trend is good news. "Venture capitalists not only shape their own future by their self-fulfilling beliefs – they're probably also very influential in shaping other's beliefs," he says.

That's important, because venture capitalists are far too small to make a difference alone. "The amount of funds required to turn our energy system around are beyond the scale of venture capitalists," says Gerlagh.
Solar slump

Andrew Simms, policy director at New Economics Foundation (nef) agrees. "The big technological changes almost never happen without substantial injections of public money," he says. Despite government rhetoric, he thinks the amount spent on green technology is lower than it could be.

The boost in transportation spending is likely a hangover of last year's oil crisis as much as a result of government cash injections, he says. "That sent out a profound message about the need for the next generation technology."

Although green technology was up 12 per cent on the first quarter of 2009, rising to $1.2 billion, that's still 44 per cent down on a year ago – and venture capitalist investment in some areas continues to fall.

Solar power has been particularly badly hit. Investment dropped from £1.2 billion in the third quarter of 2008 to $114 million by the second quarter of 2009.

But Mark Jensen, managing partner of the Venture Capital Services Group at Deloitte, and a co-author of the new study, remains positive. He says solar power investment is down because companies are investing in smaller and less expensive projects – including improvements to solar chips to boost efficiency – rather than focusing on thin-film solar or concentrated solar-thermal technologies.