'Green' Projects Get Serious; So Does the Money

Only a few years ago, the backers of renewable energy projects were known for their idealism rather than their business savvy. No more. Serious venture capital money — in the billions of dollars — has poured into alternative energy projects since oil prices started climbing.

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Among those upping their bets on clean energy technologies are venture capitalists. They have doubled their investments over the last year to as much as $4 billion, according to some experts. Clean energy backers hope all this will be good for the planet and for their wallets.

NPR's Laura Sydell reports.

LAURA SYDELL: Amyris Biotechnologies develops microbes that have all kinds of possibilities. Among them is their uses in (unintelligible) to turn sugar into biofuel. The company's co-founder Jack Newman says his product works better than corn-based ethanol as a replacement for oil or gasoline.

Mr. JACK NEWMAN (Amyris Biotechnologies): Anything that you can make out of a barrel of oil or crack out of a barrel of oil - to use some of the industry's lingo - we can crack out of a bushel of sugar.

SYDELL: The only thing that still needs refining, says Newman, is the cost. It's still more expensive to make fuel from sugar than from oil. To work out that problem, Newman says his company needed capital for research. So they went out with open palms to visit a few venture capitalists, and surprise -

Mr. NEWMANN: We'll we knocked on doors. The unusual part was that they opened up.

SYDELL: This fall, Amyris received $20 million in venture capital funding. The reason that doors opened up so quickly wasn't just that Amyris' technology has potential, the timing was right, says Greg Blonder, a general partner in the venture capital firm, Morganthaler Ventures.

Mr. GREG BLONDER (Morganthaler Ventures): With oil peaking and instabilities around the world, there's always a chance that a stable source of energy becomes unstable. And that's an opportunity for a startup to take a technology and insert it.

SYDELL: Blonder says his firm has increased investments to clean energy startups and that's true of the entire venture capital world. According to Blonder, last year about 15 percent of all venture capital money in the U.S. went into green technology, up from 7 percent the year before.

Stephan Dolezalek, a managing director at VantagePoint Venture Partners, says it isn't just the higher price of oil that venture capitalists are watching. He says consumer awareness of the growing threat of climate change is creating a ripe market.

Mr. STEPHAN DOLEZALEK (VantagePoint Venture Partners): We're seeing more people deciding that they're going to live their lives differently, that they going to replace their incandescent light bulbs with compact fluorescents, that they're going to look at putting solar on the roof. And so the whole consumer movement part of this is something that we're paying a lot of attention to.

SYDELL: Dolezalek says venture capitalists are spreading the money around to startup some solar, biofuel, wind, and cleaner coal energy, but the scattershot investment strategy in green technologies has its skeptics. Like Douglas Lloyd, co-founder of Venture Business Research, a firm that provides data to venture capitalists.

Mr. DOUGLAS LLOYD (Venture Business Research): We've seen investors saying well, look we'll just invest in 50 clean tech companies because, at least, 10 will work. That's where, I suppose, we get a little bit concerned.

SYDELL: There's also concern among investors about mercurial politicians. Venture capitalist, Dolezalek says the success of many clean tech businesses is predicated on consistent environmental laws and tax credits from state, local and federal governments.

Mr. DOLEZALEK: As compared to a situation that says well, it's here now, but it may change dramatically if the next administration moves in.

SYDELL: Still, even the Bush administration, which has close ties to the oil industry is responding to the winds of change, with policies such as those that encourage bringing ethanol to gas stations. Dolezalek and other venture capitalists are betting that those winds are only going to pick up in the coming decade.

Laura Sydell, NPR News.

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