Energy Ventures Draw Record Investments

Venture capital firms invested $536 million into biofuel and other energy ventures in the first three quarters of 2006.

Published on: Jan 4, 2007

Venture capital firms more than doubled their investments in biofuels and other energy ventures in 2006, and even more is expected in 2007.

According to DowJones Venture One, firms put $224 million towards energy ventures in 2005 - and $536 million in 2006's first three quarters alone. Another estimate, by venture-capital firm Nth Power, puts the amount invested in energy start-ups at a whopping $1.7 billion in 2006. Start-ups making biofuel from farm products took the biggest share, the firm says.

Previous moves toward energy investing resulted in more than $250 million put towards the sector in 2000 and 2004, but the new boom is a different animal.

Several factors have contributed to renewed investor interest in alternative energy. Environmental concerns connected with fossil fuels' contributions to global warming have drawn attention to ethanol and biodiesel as environmentally sound alternatives, while several reports have touted biofuels as a way to help the U.S. wean itself off foreign oil.

President Bush encouraged alternative fuel initiatives last year in his State of the Union address, saying that America is "addicted" to oil, and both Democrats and Republicans favor policies friendly to biofuels.

The political climate shifted in 2006 when Democrats took the majority in Congress, and the new leadership has since expressed an aim to remove some government support of oil companies to free up money for alternative energy research and development.