Cleantech investors should all familiarize themselves with the work done at the National Renewable Energy Lab (NREL) if they aren't already.

Case in point: Last week's announcement that NREL researchers have used the nanocrystalline structures of "quantum dots" (nano-scale structures) to boost the potential efficiencies of solar cells up to a theoretical maximum of 65% -- versus today's best-in-class at around 35%. If we could double the efficiency of solar PV at the same cost, we would halve the cost of solar energy and get the technology that much closer to cost competitiveness.

That's a big "if". From an investors' standpoint this is a really early, largely theoretical finding that doesn't discuss the economic feasibility of the technological approach. However, it's worth noting that back in March, solar startup Konarka and quantum dot specialist Evident Technologies announced a plan to work together to develop technologies that sound a lot like what NREL has been working on.

Of course, there are a lot of other factors to consider such as cost, modularization, durability, etc. But such developments and efforts are nevertheless of strong interest to cleantech investors.

Here's an interesting post in Business Week's Deal Flow describing a recent interview with Vinod Khosla of Kleiner Perkins. It's always interesting to see top VCs describe where they see the investment opportunities in cleantech, and it's good to see that Vinod is apparently looking into biofuels, fuel cells and solar. Note that the post didn't mention any specific such investments, although the rumor is that Vinod put some personal money into Ion America (the formerly-stealth solid oxide fuel cell company) alongside John Doerr.

Just a quick post to note the useful article by Matt Marshall (of SiliconBeat) in Monday's Merc on water technology investments.

Water technologies are an important area for cleantech venture investors to consider, when one juxtaposes the magnitudes of the emerging unmet need for water for drinking, agricultural and industrial purposes, and the revenues of the overall global water services industry, versus the amount of venture investments that are annually applied into the space.

Ocean power has been in the news a lot recently, and it may be of interest to cleantech venture investors to know what is going on:

Like some others (see SiliconBeat's posting today, for instance), I was struck by the Wired Magazine article on Common Heritage Corp. and their technology for ocean thermal energy conversion (OTEC). The article doesn't really describe the technology, but in a nutshell OTEC uses the heat of surface ocean water to boil a liquid like ammonia with a low boiling point. Then the ammonia vapor thus produced runs a turbine, just like a steam engine would. Finally, cold deep ocean water is used to re-condense the ammonia back into a liquid for re-use. At least that's this layman's take on it. Other benefits besides power generation include fresh water production via condensation off the cold water pipes, and the use of deep-sea nutrients brought up in the process. NREL has a good description of the technology, which has been around for quite a while and has enjoyed federal and state government funding for R&D at various stages.

According to Carl Hoffman, the author of the Wired story, a very private venture capital firm out of Memphis, TN named Alpha Pacific has funded CHC to the tune of $75M. If accurate (there doesn't appear to be any more information about Alpha Pacific or the round anywhere to be found), that would be a huge bet on this technology, amidst a lot of secrecy. The only thing missing is a catchy code name for the technology, something like "Ginger," perhaps.

Another backer of OTEC technology is the Abell Foundation, through their investment in Sea Solar Power (SSP). SSP was supposedly unsuccessful in its attempts in the late 1990s to raise a very large amoung of funding, but has been moving forward with a couple of demonstration projects with support from Abell.

Meantime, wave power -- the use of the motion of ocean waves to power generators -- has apparently been making some progress as well. The world's first commercial wave power farm is apparently going to be constructed in Portugal by Ocean Power Delivery, a Scottish company. The cost appears to be about $4.4M per MW (as point of comparison, a wind farm costs about $1.3M per MW, according to the AWEA), but it's a good start. Ocean Power Delivery is backed by cleantech VCs such as Norsk Hydro Technology Ventures, Sustainable Asset Management (SAM), and Carbon Trust, among others.

At the same time, another Scottish wave power startup, Wavegen, has run into a bit of trouble and required rescue via trade sale to Voith Siemens Hydro.

Another technological approach being considered by ocean power startups is the installation of water-driven turbines directly into rivers or ocean currents. Several such demonstration projects have been proposed or have already been successfully tested.

Clearly, it is very early days for ocean-based power, with a lot more ups and downs to come (no wave-power pun intended). However, the long-term potential is there, and it will be interesting to follow the development of these technologies going forward.

For those who are following the possibilities and investment opportunities in hydrogen fuel cell-powered automobiles, Fuel Cell Today released their annual survey on the industry today (link to pdf here).

One notable statistic: There appear to be 100 hydrogen refueling stations around the world now, growing at a rate of about 30 to 40 per year. As point of reference, there are about 171,000 gasoline refueling stations in the U.S.

But as the history of gasoline-fueled vehicles shows, a lack of refueling stations is probably not the limiting factor for adoption of the technology -- even though gasoline stations came about as early as 1907, until the 1920s most gasoline was sold through other channels, and that didn't terribly hinder the adoption of the automobile...

In any case, it is an interesting report on the current state of the automotive hydrogen industry.

A couple of surveys announced in recent days (Fenwick & West, and VentureOne) have indicated that valuations of venture-backed companies have risen 20%-plus over the past year. VentureOne, for instance, noted that the median pre-money valuation was $15M in the last quarter, versus $12.2M in Q1 of last year. The Fenwick & West survey only covered the bay area, but pointed to much the same results.

I have not seen any breakdown which speaks to any markets other than IT, healthcare, consumer products, and "other", so it's hard to say if cleantech has been similarly affected. From anecdotal evidence, some of the same upward trend has been seen in cleantech VC, although it would appear to be very much deal-by-deal, with a few popular deals getting pretty high valuations. In sector specifics, clean energy, energy efficiency and advanced materials have been garnering significant attention, and it wouldn't be surprising to see those sectors rising in valuation. Other sectors, however, such as clean water and clean manufacturing technologies, appear to be getting relatively less attention. It is unclear to what extent any or all of the cleantech sectors are insulated from the general trend in rising valuation. However, I can tell you that our cleantech-focused firm still sees plenty of dealflow out there at reasonable valuations...

In terms of drivers of the increase in valuations, the VentureOne survey pointed to not only cyclical factors within the VC community, but also to more companies bootstrapping themselves to a later stage before going out to raise their first institutional rounds. Certainly we are seeing this trend in the cleantech markets, as more companies we track are raising funds with a solid, experienced management team in place, proven products out in the marketplace, a strong initial set of customers, and more mature technology development. It would make sense that such a company's "Series A" would be at a higher valuation than an earlier-stage company's Series A. It is a very welcome sign in cleantech investing to see more and more companies at such a mature stage.

According to Michael Liebreich and Bozkurt Aydinoglu of New Energy Finance Limited, the number and value of early stage, new or renewable energy technology private equity deals more than doubled from 2003 to 2004. According to their study, more than $950M went into angel, seed, expansion-stage, buy-out, spin-out, or PIPE investments in energy technologies last year.

The study's numbers are a bit at odds with Nth Power's numbers (discussed back in March), which totalled 2004 U.S. clean energy VC investments at $520M, and it would be interesting to figure out exactly why that is. For one thing, the Nth Power numbers only cover the U.S., while New Energy Finance's study covered at least the U.S. and Europe, possibly more. Another critical factor is that Nth Power's study only looked at venture investing, while New Energy Finance's looked at a much broader range of private equity deals.

But still, if these were the only differences then you would expect to see New Energy Finance's numbers consistently higher than Nth Power's, and yet looking back at what both studies said for 2003, the opposite is true. I suspect there are some large definitional differences between the groups as to what constitutes "clean energy" for one and "new and renewable energy" for the other. It would be good to better understand these differences, if only to understand why growth was 100%+ in one study and relatively low in the other. Does that mean that non-VC private equity investments in energy technology took off last year? Or that what really took off was investments outside of the U.S.? Inquiring minds want to know...

Regardless, the New Energy Finance study, as described in the linked article, has some fascinating data in it. The breakdowns by sector are particularly interesting.


UPDATE: In another set of related numbers, Carbon Trust has released a study showing that half a billion pounds has been invested by VCs into UK clean energy companies since 2000, with growth at around 30% per year. Here's a link to the pdf of their study.