By Eric Auchard
SAN FRANCISCO (Reuters) - Venture capital funding for environmental technologies nearly doubled to $1.28 billion in 2006, amid surging interest in tackling the threat of climate change, according to a report to be issued on Tuesday.
The survey by market researcher Dow Jones VentureOne and consulting firm Ernst & Young found that venture capitalists in the United States, China, Europe and Israel boosted investments by 93.5 percent over the $664.1 million spent in 2005.
More than two-thirds, or $883.6 million, of all "clean technology" investments in 2006 were made by U.S. investors, VentureOne data showed.
China bumped out Europe as the second largest market, with 12 deals attracting $221.8 million, up from $85.5 million in 2005. Europe attracted only $157 million in 2006, but three times as many deals, reflecting smaller average deal sizes.
"Global climate change, high oil prices, accelerated growth in emerging markets, energy security and the finite nature of resources are some of the key drivers," Gil Forer, director of Ernst & Young's venture capital practice, said in a statement.
The largest clean tech investments in 2006 were $75 million in solar panel maker NanoSolar of Palo Alto, California and $50 million in ethanol and biodiesel producer Altra Inc. of Los Angeles, VentureOne analyst Josh Grove said in an interview.
The third largest venture financing was $40 million invested in solar cell maker Trina Solar Ltd. ahead of its initial public offering late in 2006.
The category, called "clean technology" by its supporters, includes renewable energy and also water, agriculture, transportation, and manufacturing where the technology creates less waste or toxicity.
VentureOne said it uses a strict definition of companies that directly enable the efficient use of natural resources and reduce the ecological impact of production.
An industry trade group called the Cleantech Venture Network LLC estimated "clean tech" investments grew to $3.6 billion in 2006, up 45 percent from 2005. Energy investments represented 72 percent, or $2.6 billion, it said.
The difference between the two surveys is that VentureOne focuses solely on venture investments, while the Cleantech industry group also includes corporate investments and some debt financing, VentureOne analyst Josh Grove said.
VentureOne tracks China but not Canada, while Cleantech Venture Network includes Canada but not China, he added.
While new investments in clean technology are growing far faster than classic venture capital categories such as computers, health care or retail start-ups, it remains a tiny fraction -- only 3.7 percent -- of the overall market.
Venture capital investment across all categories totaled $34 billion in the United States, Europe, China and Israel -- the key markets where VentureOne collects investment data.
Israel had three clean technology deals worth $22.5 million, but no such investments during 2005, VentureOne said.
Cumulative investment in clean tech companies in recent years grew to $3.0 billion in the United States from 2001, when VentureOne began collecting data, through the end of 2006.
Solar energy firms have cumulatively raised $460 million while biofuel companies -- ethanol and other vehicle fuels designed to reduce dependence on oil -- have the second largest amount, at $423 million, VentureOne said.
The most active clean technology investors globally during 2006 were Draper Fisher Jurvetson, DFJ Element, Khosla Ventures, Nth Power and Rockport Capital Partners, each with 7 deals. VantagePoint Venture Partners had 5 deals last year.
Over the past three years, however, Nth Power has made 15 investments, while Draper Fisher, RockPort and EnerTech Capital have done 12 deals, according to the VentureOne survey.
