Canadian Venture Capitalists invest in alternative energy technology

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Investment in clean power technology soars

$87 million in renewable energy, conservation and environment; Share of spending triples to 18 per cent

Aug. 16, 2006. 07:06 AM
TYLER HAMILTON, Toronto Star Energy Reporter

Canadian venture capitalists dramatically increased their investment in alternative-energy and environmental technologies during the second quarter of 2006, amid the backdrop of rising oil prices and heightened concerns over global warming and local smog.

While overall venture capital activity during the quarter plunged 25 per cent year-over-year to $496 million, companies focused on alternative-energy, environmental and other "emerging" technologies captured 18 per cent of the total. That was up from just 6 per cent in all of 2005, according to data released yesterday by the Venture Capital and Private Equity Association.

In dollar terms, $87 million was invested in the second quarter alone, compared with $109 million for all of last year.

Rick Nathan, president of the association and managing director of Kensington Capital Partners in Toronto, said it's too early to say whether the growing interest in such companies — often wrapped under the banner "clean technology" — is a quarterly blip or the sign of a long-term trend.

"It could be a one-off thing, but it's enough of a jump that it made us take notice," said Nathan.

"If we see this level of activity for another couple of quarters, then I think it would show the sector has really emerged as a core part of our industry."

It may be a case of Canada, comparatively conservative in venture capital circles, just catching up to the rest of the world.

"It's definitely not a blip," said Nicholas Parker, chairman and co-founder of the Cleantech Venture Network, which tracks venture capital investing in North American clean-technology companies. "It's entirely consistent with what we're seeing in Europe and the United States."

North American venture capital investment in "cleantech" companies rose to $843 million (U.S.) in the second quarter, up 129 per cent from the same quarter a year earlier, according to figures released last Thursday by the Cleantech Venture Network.

Parker said it was the eighth consecutive quarter of growth for the sector, which is largely focused on new energy technologies such as solar and ethanol. The sector also includes waste reduction, water purification, pollution control and energy efficiency.

Cleantech captured 13.4 per cent of total North American venture capital investments in the quarter.

The sector surpassed telecommunications and medical investments but remained behind biotech and software.

"This is happening almost in spite of public policy, and that's what's so fascinating and exciting," Parker said.

Canadian cleantech companies that raised funds in the second quarter included Ottawa-based cellulosic ethanol developer Iogen Corp.; solar-cell maker Arise Technologies Corp. of Kitchener; and Advanced Glazings Ltd., based in Sydney, N.S., a maker of a high-efficiency insulating glaze for windows.

Globally, clean-energy investments exceeded $2 billion (U.S.) in the second quarter, more than double the amount a year earlier, according to New Energy Finance, a London-based alternative-energy research company.

And momentum is building.

Earlier this month, Chrysalix Energy LP, a Vancouver-based venture capital firm that focuses on clean-energy technologies, announced the closing of a new fund totalling $70 million (Canadian).

The company said the fund will target investments in a number of clean-technology areas.

They will include solar, biofuels, fuel cells, clean coal, energy efficiency, energy storage and energy from waste.


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