U.S. clean-tech investing hit $4 billion in 2010

Venture capital investment rises 8 percent and a larger percentage of funding goes to later-stage deals, according to an Ernst & Young report.

Investment in clean-technology companies rose in the U.S. last year, garnering $3.98 billion in venture capital, according to a report released yesterday by the accounting firm Ernst & Young.

The change represents an 8 percent increase in investment overall, but there was also a major shift in when companies received funding.

"The share of investment dollars going to second rounds increased from 18% in 2009 to 26% in 2010. Later stage deals received $2.37 billion or 62% of the money invested in this period," according to the report.

Of that $4 billion, $1.32 billion went to energy and electricity generation; $1.58 billion went to solar; and $1.24 billion went to "industry products and services," which Ernst & Young says includes agriculture, construction, consumer products, materials, and transportation.

The $1.58 billion in solar investment for 2010 represented a 77 percent increase compared with the previous year.

The report notes that the change in investment in U.S. clean-tech projects overall is related to three major factors.

"In comparison to the early days of clean tech, the 2010 US VC investment results reflect a turning point in the industry due to improving credit and capital markets, the deployment of stimulus spending and increasing corporate clean tech adoption," Jay Spencer, Americas Cleantech Director at Ernst & Young, said in a statement.

The report also broke down its investment analysis by area of the country. California got the most clean-tech funding out of any state. California together with the Pacific Northwest, and the Mountain region collectively scored about $2.8 billion in clean-tech venture capital funding in 2010. The Northeast, Mid-Atlantic, and South meanwhile eked out a collective total of about $626 million.

As for the future of clean-tech investing, the Ernst & Young report noted two possible boons that might affect the coming year. California's landmark law requiring utilities to generate 33 percent of their energy from renewable sources by 2020 remains in effect, and the federal government's $858 billion tax cut bill extended renewable-energy projects grants for another year.