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Venture capitalists go green

According to reports, the venture capital funding market for renewable energy is expected to triple globally by 2020 due to positive regulatory policies, environmental support for a lower carbon footprint, and innovation in renewable technologies.

Analysis from Frost & Sullivan reveals that Europe and North America would be hubs for main deal activity in renewable energy. “Bidders are also looking at south Asia and Asia Pacific as emerging regions of renewable energy development,” Frost & Sullivan said. The research covers venture capital investment opportunities in solar, wind, biofuels, and geothermal and marine/hydro energy segments.

“2011 was a stellar year for renewable deal making with the number of deals rising by two-thirds year-on-year, although total deal value went down by one-third. Europe, in particular, followed by the Asia-Pacific region, led this trend towards more but smaller deals. This was in contrast to North America, which had fewer deals of larger individual values,” Frost & Sullivan said.

Currently, more than half of venture capitalists have ventured into clean energy investments. Solar technology received the most venture capital investments between 2006 and 2008 for new technologies and manufacturing capacity expansion. “Newer technologies such as thin-film solar and advanced biofuels such as cellulosic biofuels and biofuels from algae are among the most pursued green energy technologies,” Frost & Sullivan said. “Other than green energy generation, investments in sustainable energy have also broadened to include energy storage, energy efficiency, and smart grid technologies.”

But challenges remain. These include high capital costs, continuous requirement of investments into technology and the fact that economies of scale have not yet been reached. “”Effective asset management will play an important role in value creation,” Frost & Sullivan added.

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