VC funding heats up in renewable energy market

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The venture capital funding market for renewable energy will triple by 2020, according to Frost & Sullivan.

Driven by positive regulatory policies, environmental support for lower carbon emissions, and innovation in renewable energy technology, investors will look to South Asia and Asia Pacific as emerging areas in renewable energy development while Europe and North American remain hubs of deal activity.

Renewables deals increased by two-thirds year over year for 2011, although total deal value was down by one-third.

"Europe, in particular, followed by the Asia-Pacific region, led this trend towards more but smaller deals. This was in contrast to North America, which had fewer deals of larger individual values," noted Frost & Sullivan financial analyst Vinod Cartic.

According to the research, newer technologies such as thin-film solar and advanced biofuels such as cellulosic biofuels and biofuels from algae are among the most pursued green energy technologies.

The market does face challenges, including high capital costs, continuous requirement of investments into technology, and the fact that economies of scale have not yet been reached.

"Companies will need to look at different ways to enhance the value chain," said Cartic. "Effective asset management will play an important role in value creation. On their part, governments will need to look at safeguarding their interests through transparent tariffs and the use of technology as a differentiator."

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