The creative destruction that pushed GM into bankruptcy has created new opportunity for cleantech venture and startups that can adapt and innovate in, of all places, the automotive market, according to the Cleantech Q2 Investment Monitor. The two-year, 40% decline in American auto sales between 2006 and 2008 has led to drastic cuts in capacity and output.

Venture Capitalist Cleantech Investing Gains Momentum

In the face of the pullback, venture capital cleantech investors picked up the pace of their investments in the transport sector, committing record amounts to electric vehicles, powertrains and components, and advanced batteries. Total investment in the sector accounted for a third of all clean technology new funding during the second quarter.

Many of these startups will succeed in producing new components and vehicle innovations, however the most likely exit for investors will be eventual buyout by larger manufacturers, due to the obvious barriers to new vehicle market entry.

Biomass-to-Power Gains Investor Attention

Other subsectors that look to be gaining investor interest include biomass-to-power, particularly for the southeastern US which lack wind and solar resources, yet have substantial biomass feedstocks. Biomass, unlike wind and solar, is a relatively dependable energy platform and can be used for base demand, much like coal-fired generation. Biomass plants, however, require large-scale capitalization, and will likely find funding through large infrastructure players and utilities rather than the venture capital markets.

Efficiency

Industrial Energy Efficiency represents the low-hanging fruit in carbon savings, according to a recent study from McKinsey. Companies offering energy efficiency innovations now look to be attractive targets for venture dollars.

Smart Grid Technology - Electrifying Potential

Finally, grid-level energy storage continues to be the Holy Grail that can transform wind and solar from peak level load source to base load. High energy density and high power density make flow batteries a promising approach. A flow battery is a form of rechargeable battery in which electrolyte containing one or more dissolved electroactive species flows through an electrochemical cell that converts chemical energy directly to electricity. Vehicle-to-grid also shows longer term potential as electric vehicle market penetration evolves along with smart grid technology.

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