Energy Venture Capital Sector Sees Renewed Interest

Abstract

As venture capitalists show renewed interest in start-ups, the energy sector is attracting particular notice. Concerns about U.S. reliance on oil imports and problems such as the recent blackout appear to have sparked new interest in energy ideas. In the fourth quarter of 2003, a half-dozen emerging technology companies in the energy sector received over $37 million in funding for projects in areas including hardware and software tools for managing and optimizing power consumption, solar power technologies, oil and natural gas exploration technologies, and wind power technologies. One cloud that currently hangs over the energy venture capital sector is the recent failure by Congress to pass sweeping energy legislation, which would have included tax credits to encourage the use of wind and solar power, government funded deployment and testing of photovoltaics, a requirement for states to establish “net metering” rules, and encouragement of universally available “time-of-use” metering for all customer classes. Despite the uncertainty of a comprehensive energy bill and a recent tendency of utilities to limit or close their own venture capital units, venture and growth capital investing in the energy technology sector continues to be one of the more attractive segments of private equity investing.