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February - 2011 - issue > Cover Feature

2011: What is in Store for Cleantech?

Hari Anil
Wednesday, February 2, 2011
Hari Anil
CleanTech is not a new phenomenon; it has been with and around us for some time now and is now a quite substantial industry. Its growth was a natural and evolutionary one, and has now attained heights no one would have thought it would a few years ago. The global warming, scarcity of resources, and the desire to be energy independent has made more and more companies wanting to go eco-friendly and unlike its cousin ‘GreenTech’, CleanTech proved to be a practical option for them as it helps them to reduce their environmental foot print without disrupting their business models. Governments, Investors, and Venture Capitalists around the globe have also seen and understood the relevance of the industry and supported it in its different stages of growth. The Treasury Grant Program, Section 1603 and the Advanced Energy Manufacturing Credit, Section 48C are examples for the U.S. Government’s participation in the sector, whereas, with the Renewable Energy Certification and Energy Saving Certification, the Government of India played its part. The $7.8 Billion investments by the VC in the U.S. CleanTech sector in 2010 has marked the second highest since the $8.8 Billion is 2008, shows the value VCs have assigned to the segment. Likewise in India in 2010 Private Equity firms invested $7.974 billion over 325 deals in the CleanTech space. While all these stands, let us not forget 2010 has passed and we are now in a new year, a whole new decade. What is there in store for the CleanTech industry in this year? What does its future look like? These seem to be the right questions to ask.

U.S. CleanTech Space
It is not an easy task to foresee the future of the industry. The CleanTech industry in itself is a combination of several industries, like semiconductor, energy, waste management, and so on. This means any disturbance in those industries, let it be economic, regulatory, or technology, will have their ripples in the CleanTech industry. A prediction by National Venture Capitalist Association (NVCA) and Dow Jones Venture Source also showed that only 28 percent of VCs are now interested in making an investment in this space, whereas another report by Dallas Kachan of Kachan & Co. refutes this and predicts 2011 to be a great year for the CleanTech industry and expecting a sustained worldwide VC investment, there seems to be a lot of confusion in the industry regarding its prospects in 2011. There are even people who compare the boom in the industry to that of the DotCom boom in the 90’s and are expecting a similar burst. Could this be true? “No,” says Sagar Gubbi, Co-founder and Managing Partner, Ecoforge Advisors. “There are three main things in CleanTech that makes sure this will never happen. Firstly the CleanTech companies are not over evaluated like the DotCom companies were, secondly the industry primarily deals with energy, water, and waste management all these are utmost necessity for the society, and finally the government and international policies are supporting the development in this industry,” he adds.

The global CleanTech product and service market is above $250 Billion in size and this is expected to grow exponentially in the coming years becoming four to five times bigger market by 2017. The market is large, the growth rate is high, and still the last two quarters of 2010 saw a dip in the VC funding in the sector, especially Q4 where there was a 17 percent drop from that of Q3. But there is nothing to worry about says Arati Prabhakar, Partner, USVP. “CleanTech has carved out a world for itself with in the venture capital space. And 15 percent of the whole VC investment last year, was in this industry and this is a huge number when compared to the one percent and two percent a few years back,” adds Arati.

According to VCs 2011 will provide the CleanTech industry with a more financially stable environment and they are expecting to see more positive outcomes. “Something I am looking forward to this year is the Power Fee Alignment. There is huge potential in these companies, but the national and global impact is not going to happen with Power Fee Alignment,” says Arati. She considers that the support from the government so far have been substantial, both funding and policy wise, and this need to continue for the sustained and smooth growth of the industry.

Indian CleanTech Space

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