Galaxy Z Flip 4 Preorder Quest 2: Still the Best Student Internet Discounts Best 55-Inch TV Galaxy Z Fold 4 Preorder Nintendo Switch OLED Review Foldable iPhone? 41% Off 43-Inch Amazon Fire TV
Want CNET to notify you of price drops and the latest stories?
No, thank you

Government funds, VCs boost green-tech start-ups

Venture capital investing in the third quarter shows fast growth and federal stimulus money starting to flow to smart-grid, auto, and other green-technology areas.

Data on third-quarter venture capital shows that green-technology companies are attracting dollars from both investors and government programs.

Ernst & Young on Thursday said that venture investing in green tech rose 46 percent compared to the prior quarter to total $965 million in 50 deals. Solar, auto, green buildings, and biofuels continue to be fast-growing segments within the overall category, according to the Ernst & Young analysis of data from Dow Jones VentureSource.

The numbers show that companies shipping products are garnering more money and that a mix of investors, including private equity firms and corporations, are increasingly part of the picture. Because energy-related businesses are expensive to scale up, venture capital companies need to invest with large corporations, such as GE and Siemens, or late-stage equity companies.

Money from the federal government stimulus program is starting to be disbursed which is also aiding new green-tech companies. On Tuesday, the Department of Energy announced $3.4 billion worth of grants for smart-grid programs. The money is aimed primarily at utilities, but they then contract with smart-grid companies such as meter manufacturers or software providers which do in-home energy management systems.

Another large program is $2.4 billion in grants to promote plug-in electric-vehicle battery manufacturing. New Energy Finance estimates that $9.5 billion in stimulus money has been already spent and that government money will continue to enter the market for two more years.

These programs, including state-level efficiency mandates and ARPA-E research grants, add to the confidence in the overall market, according to Ernst and Young.

Investors and entrepreneurs are also keeping an eye on an energy and climate bill which is now being debated in Congress. One of the key pieces of the bill is a cap and trade systemfor regulating greenhouse gases. Under this system, large polluters, such as utilities, have a certain number of permits to emit carbon dioxide. To stay under a government-set cap, they can buy and trade these permits.

A survey by law firm Cooley Godward Kronish of green-tech executives found that 80 percent believe that cap and trade would help the U.S. economy. But investors and entrepreneurs are not expecting passage to affect business plans in the short term, according to the survey which was released on Tuesday.