For those who can make it, the Marines' Memorial Association (in association with the Renewable Energy Business Network) will be holding what should be a fascinating forum on Wed. evening. As the campaigning season ramps up into full swing, try as you might to avoid it, you can't help getting wrapped up in presidential politics if you care about clean technologies and energy policy.  Energy policy is now front-and-center in the political debate at the national and at most state levels.  Many people are expecting pretty big shifts come 1/20/09, but there are a lot of unanswered questions about what these shifts might look like. On Wednesday evening, the Marines' Memorial Association will be hosting a debate between high-level advisors from each of the campaigns, moderated by Jim Sweeney of Stanford.  You need to register to be able to get into the event, so do so immediately if you want to attend. And hurry, space is limited and it sounds like it will be pretty full.  Click Here to register.

Had the pleasure of attending Ernst & Young's Cleantech Ignition Session earlier this week in NYC. An invite-only group of about 30-40 transportation industry participants, including representatives from government and inside the beltway, from transportation OEMs and suppliers, and from the investment community. The topic: "Leveraging cleantech to build a sustainable advantage in transportation." E&Y will be writing up a report on the session for later release, and until then, what was said in the room stays in the room. But there were a number of very good thoughts in the wide-ranging, open discussion, and some compelling ideas. I'll highlight one in particular, just because it was said by me, so no disclosure problems here (sorry, but you'll have to wait to read about all the more insightful comments made by other participants): It seems to me that the auto industry has a very intriguing opportunity right now to use all of the recent entrepreneurial and investment activity in clean transportation tech to their benefit. This opportunity could help them address the evident "gap" between highly innovative demonstration vehicle programs, and the historically slow pace of adoption of core innovations into mass-production models. It's no surprise that such a gap would exist. It's relatively inexpensive for such large organizations to spend money on onesy-twosey demonstration vehicle programs where the engineers can play around with new technologies to see what might work. But scale-driven economics means that, in order to get costs down, standardization and large production runs have to be the operational model. And it's a huge gamble to integrate a very core, and very different, technology into a large production run vehicle. So it's relatively easy to do something very unique at the demo level, it's almost impossible to get someone to take a potentially Career-Limiting Move of integrating new tech into a full-scale production vehicle, and there's no in-between. But now there's an in-between. Outside the OEMs themselves. But instead, in the entrepreneurial efforts out there. And during a time when auto R&D budgets are being slashed, the transportation industry is possibly being turned on its head, and public (and regulatory) pressure are mounting for greener options to be seriously pursued, it's time for the auto industry to more actively engage. Auto OEMs could be meeting with, challenging, investing in, and co-investing with the cleantech VC community. What the chemicals, forest products, and many other industries have found is that the venture community can be an important conduit for identifying and working on new innovations, large to small. And for getting a ring-side seat while those innovations are being tested in other early markets, proving themselves out. Likewise, the Auto OEMs could be collaborating or even partnering with some of the upstart OEMs being launched by entrepreneurs -- these small production volume plays will be a great early testing ground for innovations that then the incumbent OEMs could more confidently integrate into their own future products, but only if they get first-hand knowledge of what's working and what isn't. So it would have to be engineer-to-engineer collaborations, not just high-level PR events. There have been some early signs of the above shifts possibly starting to happen. But only starting to. It would be smart for Detroit to take on an even more deliberate commitment to engaging the venture and entrepreneurial communities around serious innovation efforts. Deals from the past few days:

• Rubber recycler Lehigh Technologies raised an undisclosed (but "significant") amount of financing from Kleiner Perkins and Index Ventures, with the proceeds going to fund the building of a second plant next year (at a cost of $15mm) -- this, according to VentureWire. The company had previously raised more than $18mm from NGP Energy Technology Partners and others.

• Ensartech, which is developing a smelter-based waste conversion technology (perhaps akin to Ze-Gen's?), announced an undisclosed amount of investment from Netherlands-based Icos Capital.

• One deal where the amount WAS disclosed was Spectrawatt's $50mm round, led by Intel Capital, with participation by Goldman Sachs subsidiary Cogentrix Energy, PCG Clean Energy and Technology Fund, and German solar company Solon. The silicon-based PV manufacturer is a spin-out from Intel. Not to be outdone, IBM this week also announced plans to get into CIGS manufacturing via a JV with a Japanese partner. Interesting build vs. buy decisions evident in the solar industry right now...

Other news and notes: More on politics, since 'tis the season -- here's a recap on some recent developments out of the campaigns, related to cleantech... Cleantech cluster-building around the globe continues -- see The Nordic Green Network, and this interesting column tying climate change regulation in California to the growth in regional cleantech VC activity... Even Beaumont, TX is getting in on the action... "The anti-cluster-building" effort (in a good way) of the Virtual Energy Forum has finished for now, but you can still log on and view some of the happenings... Not sure I agree with all his sentiments (although I appreciated the kind blogger-to-blogger 'shout-out'), but Mark Modzelewski is certainly throwing down the gauntlet... Meanwhile the Cleantech Avenger wonders why we can't all just get along... EcoSearch donates your Google search generated ad revenue to green causes... Neal is looking for bloggers to join in with the HuffPo of cleantech... Finally, VentureBeat has word of a $3B cleantech private equity fund being raised.

A couple of months back we discussed the potential impacts on cleantech venture capital from a possible recession. Since then that "possible" recession now seems to be hitting in full force, with a lot of pessimism out there at the highest (well, not the VERY highest) levels. So does that mean the picture's gotten clearer for those in cleantech venture capital? Nope. If anything, opinions are even more widely cast at this point, showing that no one really knows anything. In the past few days, we've seen arguments all over the map. Here's a column which argues that green technology could be recession-proof. Then there's consultant Rob Enderle, whom I heard this morning on NPR, arguing that green technology could be the hardest hit of all tech sectors because green techs are "feel-good" only, with poor economics. Finally, Eric Janszen hopes that cleantech could be the "good bubble" that floats the rest of the economy through the coming rough times... We still don't know how it will turn out. For yours truly, it's still looking "third scenario" out there in the industry, at least so far. In 2008, it looks likely that exits will be harder to come by, and that'll have a negative impact on some existing portfolios (esp. those with big cash burn), as well as a dampening impact on all the generalists still on the fence about whether to jump in or not. And while debt markets sort themselves out, project financing could be harder to come by. But the dealflow remains healthy, cleantech VCs so far remain active, large corporations are still very eager to get into the market, and for clean technologies that DO have strong economic value propositions (Mr. Enderle's learned opinion notwithstanding), customers seem very eager to capture cost savings. So, we'll stick by the "third scenario" (2008: down but not disaster) forecast... at least for now. Speaking of cleantech venture activity not slowing down, here are deals from the last few days:

• Swedish SiC wafer manufacturer Norstel AB has raised approximately $24mm from a consortium of investors including Northzone Ventures, Eqvitec, and Creandum.

• Environmental Operating Solutions, which has technology for the removal of nitrogen from wastewater, has raised a $2.5mm Series A, led by Stuart Mill Venture Partners. The company had previously been backed by angels.

• Advanced Power Projects, which is developing efficient natural gas turbines, raised an undisclosed (but "more than $10mm") Series A, led by Bay Partners and Sequoia Capital.

• CleanFish, a distributor of sustainably-harvested seafood, raised a Series A (VWire reports it at $4.2mm) led by TBL Capital, and including Mindful Capital and individual investors.

• Cleantech investors in the news: A cleantech hedge fund gets launched... Speaking of TBL Capital, Clean Technology Investor reports that they now have six portfolio companies in their $50mm fund... And VentureWire reports that Masdar will no longer make any LP investments in cleantech venture capital firms, instead they're going to focus on direct investments.

The AIChE's Boston chapter is going to be holding a Clean Energy Dinner Meeting in Boxboro, MA on April 3rd, check it out. Here's a suggested ice-breaker topic: Mr. Ozzy Freedom's fantabulous homemade automotive electrolyzer and hydrogen injection "water burning hybrid" system (thank you, Google AdSense, for bringing this one to my attention). Over dinner, you may enjoy discussing the following topics: a) "Do you think Rachel understands basic thermodynamics?"; b) How can I enroll at the "Water4Gas University", and are there scholarships available?; c) Mr. Freedom, thank you for the vote of confidence: "Anybody with NO MACHINES, with two broken pliers and half a brain, can build a jar with some wires inside. And get results."; and last but not least, d) does the recycled Bell jar come with the kit, or do I have to supply my own? This cleantech stuff is pretty easy, I guess. Other news and notes:  Advent Solar announces re-tooling program, with workforce reduction and plans to re-launch production next year [note: Advent is a portfolio company of @Ventures]...  Finally, still waiting on my loaner...

Outsiders are winning presidential primaries, cleantech IPOs are getting pulled, and the big cleantech venture deals keep rollin' in.  It's going to be a fun year... So let's get things kicked off with a few disconnected items:

•  We talked last week about how 2008 will be a make or break year for the first wave of post-2005 cleantech venture investments, and already the first big relevant news item has come out -- that Imperium has pulled their planned IPO.  We'll let the journalists do their job on these kinds of stories, digging into the details.  But expect a lot more stories like this in 2008:  "Big changes afoot at Company X -- does this spell trouble for the company??"  It's just important to recognize that whenever these stories come out, changes aren't necessarily a true indicator of problems at the company in question.  It's natural for startups to go through senior management changes as they near an exit event or simply progress in their development.  It's even normal for workforces to expand and contract as different technology, product and market development stages are hit.  That's not to say whether things are going well or poorly at Imperium or any of the other companies that have had similar types of stories lately, we'll let the companies share that and let the journalists dig into that.  But readers of such stories should always remind themselves that no reporter's job is to write a "hey, a change happened, but everything's fine" story -- they're paid to discuss controversy and to be professional skeptics.  Since there will be a lot of these kinds of stories in 2008, it's just important to keep that in mind.  And with all that said, sometimes it really will be a company in trouble.  Stay tuned...

• Revisiting past predictions, here's what I wrote back in 2007:

A small prediction: The total amount of cleantech venture dollars invested will likely go down in 2007. Why? Because the significant growth in “venture dollars??? invested in energy generation technologies from 2005-2006 was in many ways driven by non-traditional investments, such as fundings of solar companies intended to help build out their production lines. While some VCs may have participated in these financings, they do somewhat skew the total dollar figures, since the rounds are necessarily much larger than your traditional venture financing — we saw back in Q3 that a mere 5 deals out of 47 made up 60% of the “venture dollars??? tracked in cleantech in that quarter. Such mega-financings have mostly gone into solar and biofuels. And it’s only an educated guess, but while there will be more such large fundings in solar and biofuels in 2007, it will probably be a smaller number. Note that this only refers to total dollar amounts. The number of deals done in cleantech may continue to go up, as LP interest is still strong and more and more investors are getting into the space in one way or another. Oops.  Way off on that one.  The basic assumption, that deal sizes would come down and that mega-deals would stop dominating the dollars going into the sector, was dead wrong.  But I'm sure my predictions this year will all be much more accurate...

• The Renewable Energy Business Network continues to expand, with the launching of REBN-Houston, thanks to the local efforts of Cheng Chang.  They're going to be kicking off their networking efforts with an inaugural event on January 30th, readers in the area should check it out.  And a reminder to Boston-area readers, that the next REBN-East event will be January 22nd at the Muddy at MIT, co-sponsored by the New England Clean Energy Council.

• Lithium ion battery developer Boston Power has raised a $45mm Series C, led by Oak Investment Partners, and including participation by Venrock, Granite Global Ventures, and Gabriel Venture Partners.  Xconomy had a good writeup, with a pretty insightful observation that in energy storage we're still waiting for that game-changing technology...

Other news and notes:  New Energy Finance reported that, across all geographies and investment categories, cleantech pulled in $117B in investments in 2007...  Here's a nice write-up on the recent upsurge in cleantech venture investing in the Seattle area...  2008 to be a year of a big push for more green policy shifts...  Tyler's predictions for 2008...  A highly entertaining post by Joel...  And last but certainly not least, here's a nice column by Neal on how cleantech bloggers are changing the world.

Every day it seems like yet more hype gets piled in on solar.  And it's a bit hard to tell, perhaps, whether the hype is following the dollars or the other way around -- E&Y tracked 46 solar startup venture financing rounds in the U.S. and Europe in the first half of the year, an amazing pace.  Is there room for all of these companies and all of this capital? Certainly the market is now open and receptive and rapidly maturing, if reports from the recent Solar Power 2007 conference in Long Beach are any guide.  John Addision gives a bit of an overview, and mentions that registrations had to be closed a week ahead of the event because of too much interest, as well as the fact that 12,500 people ended up attending (or about the same number of people as live in San Anselmo, CA).  Ed Guenther also provided a lot of good coverage of the event, for those that couldn't shoe-horn their way in (see posts here, here, here and here). Other major news over the past fortnight alone includes FPL's $1.5B announcement with Ausra, Konarka's $45mm follow-on round (co-led by Good Energies and Mackenzie Financial Corp, with new investor Pegasus Capital and participation by existing investor), Soliant's move to abandon low-concentration PV and move to high-CPV, and an almost-daily march of exuberant news coverage in financial news sites and mass media news alike. But readers with contrarian investment outlooks will view all of this activity with some skepticism.  So perhaps it's time to revisit the post from just a few months ago where we discussed the possibility of a "bubble" in cleantech.  At the time, we dug down a bit into the other white-hot sector (biofuels), but admittedly we punted on the solar question. Is there a bubble in solar venture capital?  There are indeed some sobering indications:

• As mentioned above, there were 46 solar-related venture financing rounds in the first six months of 2007 in the U.S. and Europe, according to E&Y/ Dow Jones.  And they weren't small rounds, either -- the survey tallied the aggregate amount of the investments at nearly $1B.
• In the public markets (which as we've discussed don't necessarily point to a bubble in the private equity markets, but do contribute to "irrational exuberance" across investment categories at times) companies like SunPower have seen their market caps increase as much as 450% over the past 24 months alone.  Solar IPOs continue to queue up.
• The market remains heavily impacted by regulatory drivers -- as evidence, note John A.'s point that Germany's favorable policies are behind the fact that that single (smallish) country accounted for 40% of solar installations over the past 12 months.
• Polysilicon supplies have been and continue to be tight, constraining the capacity for production of Si-based PV systems.  Meanwhile, 2nd and 3rd generation solar tech developers are only now starting to finally make it out to the market, in many cases after some unanticipated delays.
• Anecdotally, valuations have risen and round sizes have gotten bigger in the solar sector in particular.

On the other hand, there are some reasons for continued optimism:

• Poly-Si supplies are expected by some to triple by 2010 (although there isn't quite consensus on the specifics).  And while it may have taken a while in some cases, 2nd and 3rd generation low-cost producers are starting to commercialize their initial products, suggesting the potential for big price declines -- and corresponding demand increases -- in the near future.
• Favorable government policies show little signs of fading, and in fact if anything the commitment at federal and state levels appears to be growing stronger.
• While the pace of venture financings into the sector has been on a blitz lately, it still pales in comparison to other VC investment sectors like IT and telecom, which E&Y/ Dow Jones tracked at $7.3B in the first six months of the year in the U.S. alone.
• Not all of these financings went into competing technologies -- in many cases the rounds went into upstream or downstream opportunities, as the solar value chain continues to mature on the whole.
• Many of the biggest "venture" rounds weren't really for tech development, but were instead focused on building out manufacturing capacity, for companies on the cusp of commercialization and exits.
• Most importantly, the worldwide PV market was $20B last year, up a whopping 40% from the previous year, and showing no signs of slowing down.

Remember, there are some fundamental reasons for solar to be an especially attractive sector for venture capital investments.

1. Fast-growing, big markets.
2. Lots of room for multiple winners -- different types of rooftops, ground-mounted versus roof-mounted versus BIPV,  hardware versus services, utility-scale versus distributed scale, etc.  There are so many different market niches in solar, as the ecosystem evolves it will never become a "winner-take-all" market, even as consolidation ramps up.
3. On the tech side, it scales much like semiconductors, a fairly familiar market to investors, who can apply their relevant networks and expertise to help companies grow effectively.
4. Good opportunities for exits, and earlier successful exits could become tomorrow's acquirers of today's investments.
5. Increasingly available pool of experienced entrepreneurs in the sector.
6. Very credible development paths for achieving (eventually) cost-effective PV or other solar power approaches, even in the absence of regulatory incentives.
7. Tons of world-class research being deployed, and vital governmental support at the regional and national level.

However, although these factors suggest reasons for being optimistic about the long-term outlook for the sector, it doesn't mean that things can't be moving too quickly at this particular moment in time.  Clearly there are some reasons to be cautious in the face of recent activity and hype. As for the verdict, solar VC bubble or not, it's too tough to say.   That's a different answer than I would have given just a few months ago, when a "no" would have been the simple answer, but the crowded marketplace and rising valuations and deal sizes is worrisome.  Also worrisome is seeing VCs get out of their tech-focused comfort zones to invest in unfamiliar business models.  And when you hear stories about unworried investors and entrepreneurs who haven't done their homework, that's got to raise some eyebrows. Are there a lot of reasons to be very optimistic about solar markets and the prospects for solar investments long-term these days?  Absolutely.  But could we be due for a bit of a break in the hyper-activity?  Quite possibly, but maybe not quite yet.  In the meantime, VCs with existing investments in well-positioned solar tech developers will be enjoying the ride...