VC investment in Greentech is thriving. After a soft first quarter brought on by recession and low investor confidence, VC in Greentech has been creeping up steadily. 

Greentech VC in 2009

Q1 2009                        $836  million in 59 deals
Q2 2009                        $1.234 billion in 85 deals
Q3 2009 (to date)          $923 million in 83 deals (to date)

Q2 was 50 percent more than in the first quarter, and the third quarter should exceed the second quarter – a nice trend. That said, rising investment in greentech is not exactly an indicator of the health of the industry. We need more startup revenue, more M&A, and more IPOs – and that's starting.

Some of the biggest VC deals this year have been:

Suniva                       $75M for high efficiency solar
Powerspan                 $50M for CO2 capture technology for coal-fired electric power plants.
Imperative Energy      $43M for large scale renewable energy from biomass
eMeter                       $32M for smart grid management software

(I don't believe we can count Synthetic Genomic's $300 million big algae investment from Exxon as VC).

Greentech M&A in 2009

We've seen some M&A trends, highlighted by:

• Ongoing consolidation in the solar integrator and installer market
• Rising consolidation and land grabs in the carbon dashboard and utlity carbon monitoring field
• Vertical integration in solar – Bosch's acquisition binge created a vertically integrated entity from Ersol, Aleo and Johanna Solar

Greentech IPOs

Plenty of chatter but the only SEC IPO registration looking like it might launch in 2009 is A123 Systems, the developer and manufacturer of advanced, rechargeable lithium ion batteries.  A123’s product line ranges from 3.6 watts per hour batteries for portable power applications to larger 65 watts per hour batteries for electric vehicles. The company is also developing multi-megawatt battery systems for utilities that can provide electric grid services including standby reserve capacity and frequency regulation.

It is reasonable to expect the A123 IPO to come to market in the fourth quarter of this year – reasonable given A123’s revenue, the government and industry focus on smart grid, and the pent up demand for a greentech IPO.

A123's long-threatened IPO has the potential to draw the market’s attention to the energy storage sector. The IPO will also give us a glimpse on how investment banks and institutional investors like underwriters Morgan Stanley, Goldman Sachs and Lazard Capital Markets will value energy storage firms.

A successful public offering could open the floodgates to more greentech IPOs and usher in the dawn of a finance-rich greentech era. Other Greentech IPO candidates would include Silver Spring Networks, Tesla Motors, Nanosolar and Solyndra.

Every Greentech VC and M&A deal, every month – logged in the Greentech Innovations Report.

Listed EV firms

Clare Ondrey, one of Greentech Media's inside stalwarts, somehow got me volunteered to speak at something called The MoneyShow in San Francisco a few weekends ago. It was an unusual event for me – more a retail stock picker show than a renewable energy / technology event, filled with regular citizens looking for info on which stock to invest in. I restricted my comments to market trends and technology and let the speculators make their own stock bets. We don't recommend particular stocks at Greentech Media.

The topic of batteries and electric vehicles was clearly on the mind of these astute investors – and they wanted to invest in EVs. But the problem is that there are no EV firms that trade on the NASDAQ or the Amex (Maybe Tesla can change that soon). The only publicly traded EV firms are on the backwater bourses of the OTC BB and pink sheets. These companies are tightly held, thinly traded and have, let's say, less transparency and more relaxed reporting requirements compared to their SEC-overseen brethren.

Anyway, here's a list of publicly traded EV firms:

Zenn Motors is thinly traded on the TSX-V exchange in Canada. Zenn is small despite its' bluster with revenue of $379,916 in its most recent quarter and losses of about $2.5 million for the quarter.  (Amounts in Canadian dollars).  Zenn generates considerable controversy and bloggage with its 10.7 percent ownership of ultracapacitor lightning rod startup EEStor (hi, Ed).  Zenn builds 100 percent electric vehicles. The spec sheet on the 2009 Zenn claims a base price of about $17,000 and 280mpg.  Despite mpg being a questionable spec for an EV. 

ZAP, like all of these publicly traded EV companies, loses money. It lost $2.5 million on sales of $769,000 in their most recent quarter.  ZAP offers a wide number of models of electric trucks, vehicles, and scooters on its website. But it's difficult to ascertain which of these products are real and deliverable. According to a recent article in Wired, ZAP's management is prone to, um, overpromising and underdelivering.

UQM Technologies builds components for EVs and lost $648,000 on sales of $2.1 million. It builds motor and controller systems for EVs and has contracts with the military and with commercial customers.

EV Innovations loses money and claims to be "a concept and brand development corporation in the field of alternative-fuel automobiles, motorcycles, scooters, and bicycles, and alternative-fuel products."  Whatever a concept and brand development corporation is.  The artist renditions of their many cars are presumably powered by artist renditions of lithium-ion batteries.

Leo Motors is an OTC front for Leozone, a Korean EV company that allegedly uses "12th generation lithium polymer cell" battery technology.  The Korean connection might prove lucrative as the site shows Korean police and military EV designs.

EV Quotes, Drag Racing, Autotune

• “No one is going to pay a $15,000 premium for a car that competes with a Corolla. So there are not enough idiots who will buy it." said Johan de Nysschen, president of Audi of America. He called the the Chevy plug-in hybrid “a car for idiots.”

• Joe Biden (auto-tuned) on Made in USA EV batteries.  

• Tesla quarter mile in 12.64 seconds, an EV record.

While the U.S. Congress fiddles and de-claws any effective measures from current energy, carbon, and climate legislation – the U.S. State department has approved a Presidential Permit to Canadian company Enbridge for the $3.2 billion 1,000 mile Alberta Clipper pipeline, which will carry oil-sand derived crude oil from Alberta to Wisconsin.  A Presidential permit triggers an environmental review of the proposed project
 
Oil sands or tar sands, are considered "unconventional oil." These deposits are referred to as bitumen and occur naturally in the U.S., Venezuela, and to the greatest extent in Canada.  They are dense, difficult to mine and extract, and not friendly to existing pipelines. Alberta, Canada's Athabasca Oil Sands is the largest reservoir of crude bitumen the world, comparable in magnitude to the world's largest reserve of conventional petroleum.

Mining these deposits is economical only when the price of oil is high.

And like all mining operations, oil sands operations have a strong impact on the environment:

• The Canadian oil sands lie under boreal forests which are decimated by mining operations
• The extraction process uses a host of toxic chemicals.
• The residue or tailings form vast lakes of toxics near waterways.
• The numbers differ whether you believe oil companies or environmentalists – but the water intensity of developing these unconventional oils is very high.  Oil Sands Watch, a conservation-minded group, claims that approximately 12 barrels of water are required to produce each barrel of oil from bitumen.  Up to 70 percent  of this water is reused, but that still means two to four barrels of water are used to produce each barrel of oil from oil sands mining. Greenpeace gives the number as 349 million cubic metres per year, twice the amount of water used by the city of Calgary. 
• And in the end we burn the stuff to power our transportation.

Excerpts from the State Departments press release:

• The Department found that the addition of crude oil pipeline capacity between Canada and the United States will advance a number of strategic interests of the United States. These included increasing the diversity of available supplies among the United States’ worldwide crude oil sources in a time of considerable political tension in other major oil producing countries and regions; shortening the transportation pathway for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer. Canada is a stable and reliable ally and trading partner of the United States, with which we have free trade agreements which augment the security of this energy supply.

• Approval of the permit sends a positive economic signal, in a difficult economic period, about the future reliability and availability of a portion of United States’ energy imports, and in the immediate term, this shovel-ready project will provide construction jobs for workers in the United States.

• The administration believes the reduction of greenhouse gas emissions are best addressed through each country’s robust domestic policies and a strong international agreement.

We have to balance our national security determinations and the threat of peak oil with the long term green house gas impact of tar sands. Unfortunately our security and short term energy jones is always going to win out.  A strong tax on carbon would slow the momentum of tar sands. This pipeline isn't a slum dunk – there is already plenty of environmental group oppostion to the permit in the works.

The only good point I can point to about tar sands is they employ really cool trucks to transport the stuff.  If you know any other good points about tar sands – chime in.

Yikes. Another microinverter company.  It's getting crowded in here.

Direct Grid Technologies of Ronkonkoma, N.Y., a subsidiary of Island Technology has introduced a microinverter for the photovoltaic market. The mother company, Island Technology, has a heritage of working with utilities in the Northeast such as Con Edison in monitoring and control equipment.

I spoke with Louis Squeo, the Director of Sales of Marketing.

"We saw some shortcomings in the microinverter arena," said Squeo. "Some of the microinverters out there are low wattage – 170 to 190 watts. Our offerings are in excess in 200 watts, one 200 watts and one 300 watts version with room for more."

This high wattage target raises the question of what solar panels they're going after. And the answer according to Squeo is "thin film." The company is going after the large format amorphous silicon thin-film panels from Signet Solar, one of which is rated at 340 watts.  According to Squeo: "We have been engaged with Signet Solar for a few months and one of the officers of the company is in Dresden as we speak." (The Signet Solar factory is in Dresden.)

Microinverters, as we've covered many times, convey a number of advantages to solar installations. By individuating the panels – maximum power point tracking is optimized for each panel, losses to to shading, soiling, and panel mismatch are reduced and overall system voltages are lowered. Depending on who you ask – there are potential reliability advantages.

Direct Grid uses a closed loop planar MOSFET – allowing sophisticated digital control, and claims that the sine wave created by their inverter better matches the utility AC line. 

Squeo foresees a future of do-it-yourself solar – where the consumer can buy an AC solar panel and install and connect that unit by themselves.

According to an optimistic note in their press release, shipments are "expected in the fourth quarter 2009."

Direct Grid joins the growing list of microinverter companies. Only EnPhase is shipping in commercial volumes – it has shipped over 50,000 units since last August. And Petra Solar which recently publicized a large contract with New Jersey's largest utility, PSE&G, is alleged to start shipments any day now.
 
Here's an updated list of microinverter firms:

• Accurate Solar
• Azuray
• Direct Grid
• Enecsys
• EnPhase Energy
• GreenRay Solar
• Larankelo
• Petra Solar
• SolarBridge (formerly SmartSpark)

The question is: How many microinverter companies can the market bear?

More details in the GTI Report: The Coming Disruption in the PV Inverter Market.

We carefully monitor and parse every greentech VC investment and we've done that for the last five years. Greentech Media provides those totals to our readers and the market every quarter.  Subscibers to the Greentech Innovations Report receive the gory details of that information – every deal, every investor. We also strive to log every greentech VC or PE fundraise. 

Here's a partial list of the VC and PE firms that have closed or are in the process of closing a fund over the last six quarters. The total is in the neighborhood of $5 billion for venture capital alone.

There are a lot of voices of late sounding the death knell for venture capital. The New York Times dusts this meme off every few years. One just has to have a good memory and ignore the nattering nabobs of negativity. They’re usually wrong.

Here, Michael Kanellos writes about Why VC Funding is Right for Green.

Ira Ehrenpreis, General Partner at Technology Partners had this to say: "The diversity and breadth of cleantech funds which have raised capital in this environment highlights the sustained interest by the Limited Partners to invest in the sector ... even more notable, given the difficulty of the fundraising environment in general."

On the other hand, Fred Wilson of Union Square Ventures has crunched some numbers and claims that “VC doesn’t scale.”  He has determined that: “You cannot invest $25 billion per year and generate the kinds of returns investors seek from the asset class,” and that, “The number that the asset class can take on each year is around $15 billion to $17 billion. It's interesting to note that the industry raised $4.3 billion in the first quarter of 2009. That's a good thing. If we can keep it to that level, or less for a while, then we may be able to downsize and get returns back on track.”

Bill Gurley of Benchmark capital discusses the coming shrinkage of VC and gives some background on asset allocation.

There seems to be a consensus from VCs and the NVCA that $500 million IT funds are going to be feeling some pain, that the number of VC firms will dwindle, and that GP salaries might even take a hit.

But we're talking greentech here, not VC in general – and all signs point to a continued optimism in greentech VC investing. Greentech VC funds need to be bigger than an IT practice.  And while we might not see $8 billion per year invested as in 2008, a healthy percentage of the total VC asset class will continue to go green. Factor in an economy on the mend and a few successful VC-backed greentech IPOs (A123? Silver Spring Networks? Tesla? EEStor? just kidding about EEstor) and we are off to the races.