'Clean-tech' start-ups are pushing the green button

…Venture capitalists, big companies including Cisco Systems Inc. and General Electric Co. and private equity firms have been pumping money into a variety of green IT initiatives, said Ron Pernick, co-founder and principal of Clean Edge Inc., an environmental research and consulting firm. A major push includes an effort to make the nation’s power grid “smarter” by using sensors and networking technology so companies can track their electricity use.

These initiatives look at the demand side — figuring out how people are using energy — rather than the supply side, such as solar power, to replace the type of energy being generated.

…For the last few years, venture capitalists have poured money into so-called clean-tech companies, which use technology to solve environmental problems, at a much faster rate than traditional technology. The field appears particularly poised for growth as the Obama administration begins to pump stimulus dollars into green energy initiatives, and as governments around the world consider making companies pay for the amount of carbon they generate.

“Clean-tech investment almost doubled every year for the past several years,” said Jessica Canning, research director for Dow Jones VentureSource. Venture funding of clean-tech companies rose to $5 billion last year from $687 million in 2005.

That money has dropped in the last two quarters as the turmoil in the financial markets has made investors reluctant to sink large sums into projects that could take years to pay off. Pricewaterhousecoopers reports that funding of clean-tech companies dropped 84% in the first quarter of 2009 to $154 million, down from $971 million the fourth quarter of 2008. Investing in solar shrank 97% and alternative fuels 69%.

“The capital-intensive companies like solar and biofuels, which were the key drivers of the past few years, really fell in the first quarter,” said Tim Carey, head of PricewaterhouseCoopers’ U.S. clean-tech division. “That was partly due to overall uncertainties in the economy. Those companies require large amounts of capital.”

But software firms can be started for far less. “If you have less money, you have to be smart and invest in energy-efficiency technologies, and IT and management systems start becoming more effective,” said Jacqueline Crespo, who leads the venture capital and technology practice at New Energy Finance Ltd. in Palo Alto, a research provider for the clean-energy industry. “You’re going after the same market, but it’s not as capital-intensive.”

LA Times