Milestone for Euro cleantech

European cleantech investments have surpassed €1b, and analysts are predicting that the sector is now ready to mature, moving from component solutions to commercial packages. Dave Keating reports.

A new study by UK-based research firm Library House has revealed that venture capital investment in European cleantech companies has for the first time surpassed €1 billion ($1.3 billion). 2006 saw €400 million invested in 95 European cleantech deals, bringing the total number of venture backed cleantech companies in Europe to 217.

What is striking about the list of investments last year is the degree of geographic and sector diversity. The deals took place across Europe and in all sections of the energy supply chain. These included generation technologies like wind turbines, technology innovation like fuel cells or batteries, upstream technologies such as alternative fuels and end user technologies such as energy efficient appliances or sensors.

The next step will be to see solution providers and packaged offerings that are easy for consumers to buy and understand.

Doug Richard, Library House

Four of the top twelve investments took place in the United Kingdom, while the rest took place throughout Europe, including a £12 million investment in mono-crystaline wafer producer Norsun of Norway, a £14 million investment in power plant technology group Guascor of Spain, and a £10 million investment in SFC Smart Fuel Cell of Germany.

Darren Harper, head of the data and information team at Library House, says that this diversity shows that cleantech is ready to move to the next phase.

“If you look at the top deal of 2006, it’s the over £20 million investment in Electrawinds by 3i in December,” he says. “That company is involved in the production, sale and partitioning of renewable energy, specializing in wind-powered production. That’s a project-based angle, not so much having to do with parts.”

Library House chairman Doug Richard agrees, arguing that today’s cleantech market resembles the IT industry 20 years ago.

“The landscape if full of component solutions and no commercial packages,” he says. “The next step will be to see solution providers and packaged offerings that are easy for consumers to buy and understand. In addition, we need to see innovation companies scale up and commercialise their own innovation offerings.”

Harper also points out that less traditional cleantech areas are beginning to receive more investment as well. He points to the example of Deep Stream, a UK-based company that received £10 million from Doughty Hanson in February and then received an additional £13 million from an expanded consortium of investors in May.

“Deep stream is something that’s slightly different, they’re developing an intelligent sensor application,” he says. “These types of companies may not be as obvious as [traditional] clean technology but there’s a lot of interest in sensor technologies in terms of intelligent appliance solutions. That falls under consumption energy efficiency side of things.”

Worldwide, cleantech investment has been steadily increasing over the past few years. 2006 saw a record $3.6 billion invested in the sector in Europe and North America, according to Cleantech Venture Network. That’s a 46 percent increase over 2005 and a doubling of 2004’s $1.7 billion.