The nearly five million commercial and industrial facilities in the United States account for nearly half of all domestic energy consumption, at a cost of over $200 billion each year. But according to Chris Pacitti, general partner at venture capital firm Austin Ventures, only five percent of that market has adopted sophisticated energy management tools. Investors are taking notice.

Software-based cleantech like energy management software (EMS) is a fast-growing segment as interest in hardware-based cleantech wanes. Leading EMS vendors like C3 and Hara offer tools that allow organizations to measure their energy consumption and, often, identify operational inefficiencies. That can lead to savings in energy consumption as well as real dollars, a fact that’s attracting some business owners’ attention.

A Pike Research report estimates the EMS and services industry will grow to $5.5 billion by 2020, from just under $1 billion in 2011. That’s a compound annual growth rate of more than 20 percent.

An example of a recently-funded EMS vendor is Noesis, backed by Austin Ventures and Black Coral Capital. The company’s Web-based tools track energy consumption across more than 640 million square feet in nearly 7,500 buildings. Noesis’ facility portfolio has grown by 200 percent in the past four months.

Sarah Groen, co-founder and director of SURGE Accelerator, says that cleantech investments are shifting from hardware plays (think wind turbines) to software plays like EMS. So-called “digital cleantech” investments fit more squarely within VC’s comfort zone.

“After minimal success with hardware-focused cleantech investments, a software play gets [VCs] back to what they’re comfortable with–the VC model of the dot-com days,” explains Wal van Lierop, president and chief executive of Chrysalix Energy Venture Capital.

Additionally, Groen says that hardware-based cleantech has received something of a “black eye” as companies like Solyndra have come to light, giving investors more confidence in funding EMS-based cleantech.

“These applications empower and incentivize both utilities and end customers to get more from their energy,” says Steve Vassallo, general partner at Foundation Capital. “Initial investments in cleantech were focused on the infrastructure, but the time has now come for the next wave of digital energy solutions and applications, of which energy management and technology-enabled conservation will play a substantial role.”

Vassallo further notes that “investing in efficiency is five times less [expensive] than investing in new [energy] supply.”

Several other factors are driving investor interest in EMS, specifically. “[Investing in EMS] is capital-light and may offer faster investment returns,” says van Lierop. In addition, customer demand is being spurred by new legislative mandates for reducing organizations’ energy consumption–which suggests lucrative long-term revenue potential for EMS vendors.

William Jaffray, an energy engineer at Associated Renewable, points out that many businesses are taking a hard look at their energy use for the first time. This stems from the desire to reduce consumption, lower energy costs, and address White House calls-to-action like the Green Button Initiative. “Good management software provides useful analysis of energy consumption and costs,” Jaffray says.

Juan Lois, financial analyst at Associated Renewable, adds, “The key to the accelerated growth of the industry is the fact that businesses and large corporations now have access to much more detailed and precise energy consumption reports. This allows them to reduce the variability of consumption–especially during peak demand times–reducing energy costs, maximizing efficiency, lowering operating costs, and increasing the value of the property.”

Vassallo is bullish on the long-term revenue potential for Software-as-a-Service (SaaS) EMS vendors, particularly from utilities customers. “While utilities historically tilted toward capital-intensive enterprise software sales, the benefits of SaaS-based approaches are simply too good to ignore,” he says. “Utilities will absolutely gravitate toward Cloud-based, managed services.”

Tom Pincince, president and chief executive of Digital Lumens, believes the most promising long-term revenue models include solutions and services delivering continuous and ongoing operational efficiency. He says that “Simple reporting and monitoring will not deliver enough value; winners will be systems that drive changes in the way a building and its occupants use energy. Ultimately we’ll see new business models such as Light as a Service or HVAC as a Service.”

Economic and legislative forces are driving numerous changes within the energy management landscape. With the re-election of President Obama, there will likely be a continued emphasis on climate change, sustainability and energy independence. This gives investors a long-term opportunity for funding a market that will inevitably be expanding for quite some time.

Ashley M. Halligan is a 2007 graduate of Marietta College (Ohio) with a bachelors in journalism. She has a background in freelance feature writing–in particular, travel, musician and human interest features. She is a market analyst at Software Advice, where she regularly reports on sustainability news and trends along with trends in the nonprofit sector. Connect with her on Google+ or follow her Contemporary Pilgrim book project.

Top image: Energy history screen from Nest’s iPhone app.

Open-source CRM service SugarCRM

Salesforce competitor SugarCRM has raised a sweet $33 million in funding. The eight-year-old company provides customer relationship management (CRM) software-as-a-service for companies to manage their sales leads.

Navetas grabs $7 million for smart grid tech

British-based energy management company Navetas  raised £5 million ($7 million US dollars). The company makes energy-tracking products that help people see how much energy they use at home or in a commercial setting. U.S.-based smart meter company Sensus led the round.

Link A Media Devices filed a form D

From the, Securities and Exchange Commission, Link A Media filed a form D Wednesday. The company appears to have raised $13.2 million of a $30 million funding round. Link A Media makes system-on-chip circuits for hard-disk and solid-state drives.

GEO Semiconductor raises funding

GEO Semiconductor Inc. secured $1 million in new funding Wednesday from undisclosed investors. The company makes geometric processor IC technology for cell phones, video communication devices, and surveillance cameras.

AvaLAN raises money for wireless Internet technology

AvaLAN announced $700,000 in second-round funding today from Huntsville Angel Network. AvaLAN builds industrial long-range wireless Internet routers and bridges.

Bramasol files $1 million form D

A Securities and Exchange Commission form D was filed Wednesday for SAP cloud service provider Bramasol. It appears the company has raised $1 million in equity from Loewenthal Capital Management.

If you’ve got any funding news to send out way, email tips@venturebeat.com. 

The Palo Alto, Calif., company sells networking software that telecom and other companies can wrap into their larger home automation and energy management software. Broadband providers can then give homeowners the option to tie in web-enabled devices into iControl’s OpenHome software. The software, running on the security hardware made by companies like General Electric, Honeywell and ADT, manages data received from a network of sensors placed around the home.

One of the flagship parts of the software is home energy management. It’s part of a batch of smart-grid technologies — which use advanced algorithms and sensors to distribute electricity more efficiently. Homeowners can tie in electricity meters and thermostats to monitor and manage their energy usage through web-based interfaces like an iPhone or a web browser.

The company raised $15.5 million in another funding round closed in 2008. It raised $43.5 million in three years before its most recent round of funding. Its total funding now amounts to more than $100 million, though the company wouldn’t give an exact number. That’s a substantial figure for a service that has yet to be adopted by mainstream energy consumers, but having the financial backing of some big names in Silicon Valley may help iControl reach its ambitions.

Comverge software expands to cars, air conditioning — The company is a top player in demand response, a peak load-reducing program popular among utilities. But it’s expanding its software offerings today to be included in GM’s OnStar vehicle communications system and wireless thermostats that can help manage energy use of air conditioners made by Carrier, CNET reports. Comverge’s IntelliSource software can also now work with OnStar to monitor electric car charging, a hot area that companies like Cisco, Siemens, Silver Spring Networks and Schneider Electric are entering.

Intel and Capgemini debut new home energy offerings — Technology and consulting company Capgemini and Intel announced a new home energy management offering for utility customers that builds on a home energy management display made by Intel. The display and associated services will allow utilities to communicate with residential consumers and roll out demand response programs, in which customers can realize financial incentives by turning down electricity use during peak times.

Alphabet Energy gears for growth — The waste-heat recovery startup has appointed a new vice president of process and manufacturing, Sylvain Muckenhirn, who will lead the scale-up of the company’s prototype technology. Alphabet makes thermoelectric materials, which are essentially semiconductors that can generate electricity from heat. It’s an area with applications in metals refining, cement and glass production and the military.  The company has customer delivery targets in 2012 and 2013, has nabbed $1 million in investment from Claremont Creek Ventures and CalCEF Angel Fund and won small innovation research contracts from the U.S. Army, Air Force and Department of Energy.

Mitsubishi to produce 8 electric cars by 2015 — The company plans to produce eight electric car and plug-in hybrid models by mid-2015, according to Greentech Media. It has already released one electric car, the MiEV, in Japan, with plans for a larger version of the car to debut in the U.S. this year. Mitsubishi plans for electrics to comprise 20 percent of its total global shipments by 2020.

Vivent broadens offerings into home energy management – In the latest sign of companies surging into the home energy management space, top home security company Vivent — formerly APX Alarm — is now offering home lighting and appliance controls. The new series of automation and energy controls are designed to go along with its security offerings and allow homeowners to remotely control and monitor their homes via smartphone.

Vestas has cut 2,200 wind jobs — The top Danish wind turbine manufacturer has cut 2,200 jobs so far in a planned lay off of 3,000, Reuters reports. The layoffs will primarily impact its plants in Denmark and Sweden and are in response to overcapacity in Europe.

Most energy management systems cannot measure the consumption of an individual appliance without using a smart-plug (an intelligent outlet that can measure power usage) for each device. Building management systems often deploy a large number of sensors attached to circuits in the building to pinpoint consumption more accurately.

Veutility recently won the “Ireland’s Innovator” award at the Globe Forum‘s Pitch competition. Veutility CEO, Antonio Ruzzelli, is a researcher at University College Dublin’s Clarity centre, working on sensor technologies. The algorithms used to identify individual appliances and calculate “appliance DNA”, were developed there.

Veutility’s system works with any off-the-shelf smart meter, and only one meter is required per building or business. It also does not require any training (some energy management systems require appliances to be switched on and off to train the system). Another feature it offers is benchmarking, which allows facility managers to compare their consumption to that of similar businesses, e.g. compare the energy consumption of several hotels in a chain.

Veutility targets businesses with large electricity bills. It is currently running a series of pilots in Dublin with hotels, banks, restaurants and a pharmaceutical company. In hotels, the pilots are already showing results of 20-40 percent reductions in consumption. Ruzzelli gave an example from a pilot where a new chef in a hotel was not told to turn off an extra fan in a restaurant kitchen. That single appliance costs thousands of euros a month to run and was quickly identified by Veutility’s system as a major energy consumer.

As the system matures, Ruzzelli hopes to build up a database of appliance DNA profiles that can be used to provide recommendations to facility managers such as suggestions for more energy-efficient equipment. Veutility will also track how the signatures of appliances change over time, since they get less efficient as they age. Veutility’s business model is based on subscriptions, whose costs will vary depending on the size of the customer.

Competitors include startups like AlertMe, TED, Powersavvy and Ecofactor. None of these systems currently track energy consumption at the appliance level. However, AlertMe has had an appliance disaggregation system in development for some time and has filed some patents on certain aspects of the technology. It is being tested by a sample of customers and should be available to all AlertMe users sometime in 2011.

AlertMe’s system has a recognition algorithm for each type of device, whether that is a kettle or a washing machine. The system is trained at a global level, e.g. that a kettle is a binary type of device (draws no power or a fixed amount of power) and that it generally only draws power for a few minutes whereas a fridge runs continuously. When appliance disaggregation is in use in a particular household it also learns the characteristics of that particular household such as the fact that the kettle has an energy consumption rate of 2.3 Watts rather than 2.5 Watts. AlertMe can also detect settings related to the power consumption of an appliance such as the temperature at which a washing machine cycle was run.

Veutility is based in Dublin, Ireland and is currently raising funding.

Global oil will run out 90 years before replacement technologies are ready given the current pace of research and innovation, according to a new study from the University of California, Davis. The study was based on stock market expectations, or the theory that long-term investors are good predictors of whether new energy technologies will become commonplace.

Energy management company ENXSuite announced an upgrade to its platform and said the company is now managing $1.2 billion in energy at 12,000 sites for major corporations like Northrop Grumman, Morgan Stanley, and Sears. It also recently hired away a top sales executive from competitor Hara.

Volkswagen plans to sell 10,000 electric cars in China between 2014 and 2018 through local ventures with SAIC Motor Corp. and FAW Group Corp., Bloomberg reports.

Bio-oils company Solazyme has signed a nutritional joint venture with global food ingredient supplier Roquette. Together, the two companies will create  microalgae-based healthy food ingredients and oils.

There’s enough consensus among the American public about the benefits of cleantech and green jobs that the Republicans winning the House may not be the end of the world for cleantech, Greentech Media writes.

A social media platform for green entrepreneurs looking for investors, OnGreen, today announced a $1.4 million first round of financing by China Southern Hong Kong Investment, a cleantech investment fund based in Shanghai.

SolFocus is attempting to bring bankability to the relatively nascent concentrated solar power field by offering customers a 25-year power performance warranty via insurer Munich Re. Green Tech Media notes this move takes a crack at the difficulty concentrated solar projects have getting bank loans if the panels are not supplied by well-established manufacturers like SunPower and First Solar. Concentrated solar projects are often utility-scale and capital-intensive.

Tesla’s Roadster model will end production in 2012, and the company will focus on the Model S sedan (pictured), which it expects to make at a rate of 20,000 cars a year starting at the end of 2012. Tesla’s Model S sedan’s battery is incorporated into the underbelly of the car, making it easier to switch out — but the company said it probably won’t collaborate with battery-switching station startup Better Place. (Unlike Better Place, Tesla doesn’t agree that battery forms should be standardized; rather, it chooses different batteries for different cars.) Tesla plans to grow its workforce from 700 to 2,000.

First Solar announced yesterday it has signed seven customers for a 380-megawatt increase in orders for 2011. The company is working with existing customers on solar projects mostly in Europe, and says its customers see “robust growth” in that market, according to a statement. First Solar has plans to increase capacity in Germany and France to meet increasing local demand and the development of a utility-scale market.

Production of biomaterials will grow faster than biofuels and increasing biofuel capacity is highly reliant on technology from innovative startups, according to a new report from Lux research. The biofuels sector has been slow to replace petroleum-based products, but the market is expected to grow at least 17.7 percent a year.

LG Chem has landed its first American utility customer, Southern California Edison, which will use LG’s battery packs for a residential energy storage pilot project. SoCal Edison will collect data over about one year to learn how stored solar can help in its renewable energy efforts.

Automakers may be required to boost fleet fuel efficiency to 62 miles per gallon by 2025, according to one scenario offered by a government report today. Electric hybrids and electric cars would play a crucial role in meeting the top range targets.

The White House announced today it is going solar. Solar panels will be installed atop the living quarters of the residence for the first time by spring 2011 and will be used to heat water and supply electricity as part of a Department of Energy demonstration project. Former Presidents Jimmy Carter and George W. Bush incorporated solar into White House operations in the past.

Portland solar technology startup Azuray announced today it has teamed up with Chinese solar panel maker Suntech to research smart solar panels, drawing from Azuray’s solar technology. The technology promises to extract up to 25 percent more energy from underperforming solar panels. Azuray has also teamed with junction box maker Renhe to integrate the technology into a box that is part of the solar panel.

Energy management startup Hara released today its biggest software product to date, a supply-chain module that can evaluate energy efficiency among a client’s suppliers – vendors, transportation services, warehouses and the like. The Hara Value Chain module marks the company’s seventh release in 21 months. Hara has enjoyed some nice momentum as of late, recently signing the city of Philadelphia as its 40th customer, and counts Hasbro and Coca-Cola among its customers.

Are you a green executive or entrepreneur? If so, sign up now for GreenBeat 2010 — the year’s seminal conference on the smart grid — November 3-4 at Stanford University. World leaders in smart grid initiatives will debate how the new “Super Grid” is creating huge opportunities in cars, energy storage, and renewables. GreenBeat 2010 is hosted by VentureBeat and SSE Labs of Stanford University. Go here for full conference details and to apply for the 2010 Innovation Competition. Early-bird tickets are available until October 15th.

The addition of Hara Value Chain effectively widens the scope of Hara’s main product, a software called Environmental and Energy Management (EEM)  that identifies energy inefficiencies within companies. EEM – which counts among its customers the city of Las Vegas and Safeway — can make recommendations about potential energy savings and track carbon emissions.

Hara has had some nice momentum lately, most recently landing the city of Philadelphia as a customer. It has signed up some 40 clients — big names that include toymaker Hasbro and Coca-Cola — and tripled its workforce in the last year.  The company, has, however, lost executives to competitors – most notably Enxsuite.

The Hara Value Chain module marks the company’s seventh release in 21 months.

“We opted for a much faster deployment and innovation cycle. It’s still a relatively early market,” Waibel said. “A year ago no one really looked into the value chain capability.”

Indeed, the company is moving at a fast clip. But this new release begs the question: Why would a customer pay for a software that helps its suppliers analyze energy efficiency?

Risk mitigation, for one. As Hara Chief Technology Officer Udo Waibel explains it, the software requires the company and its suppliers to enter data into the system, which the company could then use to project how costs could change in the event, say, oil prices rise. It also allows companies to achiever greater energy efficiencies by casting a broad net that looks outside the company itself.

“At the end of the day it’s purely cost-oriented. If you help your suppliers figure out how much energy they consume and eventually provide them with tools and methods to help improve…the parts that you buy might become less expensive,” Waibel said, adding that Hara developed the new module in response to feedback from existing customers.

Hasbro and Intuit, for example, have already been piloting the new program. Pricing for the software is based in part on the number and type of facilities customers want to analyze.

With this announcement, Hara is also unveiling a number of upgrades – the system is now available in seven languages, a mark of its adoption globally. The EEM software is in use in 94 countries.

Are you a green executive or entrepreneur? If so, sign up now for GreenBeat 2010 — the year’s seminal conference on the smart grid — November 3-4 at Stanford University. World leaders in smart grid initiatives will debate how the new “Super Grid” is creating huge opportunities in cars, energy storage, and renewables. GreenBeat 2010 is hosted by VentureBeat and SSE Labs of Stanford University. Go here for full conference details and to apply for the 2010 Innovation Competition. Early-bird tickets are available until October 15th.

Battery company Ener1 is selling $20 million in stock

Energy management startup Hara seems to be on an upward swing and could become a prime acquisition target, Green Tech Media says. The company makes software that monitors energy use (water, gas and electricity) and yesterday landed the city of Philadelphia as a customer. The company’s strategy targets corporations as well, and it has signed up big names like Apple, Coca-Cola, Safeway and News Corp. Green Tech Media’s article notes the company now has 40 customers and tripled its workforce in the past 16 months.

Irish energy company Gaelectric has raised $18 million from European private equity, which will be used to reserve 960 megawatts of transmission capacity for wind energy developments in Montana. The company will work with transmission operators Bonneville Power Administration and NorthWestern Energy.

First Solar could be bolstered by a new California rule that will require state utilities to get one-third of their power from renewable sources by 2020, which is the most stringent requirement of any state in the U.S. An article by Bloomberg suggests other companies that could get a bump as a result: Trina Solar, SMA Solar Technology and Vestas Wind Systems.

The FCC ruling on white space spectrum could have implications for the smart grid, Earth2Tech reports. Now that a portion of airwaves are freed up, companies could build a white space smart grid network, using the network to reach hard-to-cover rural areas. Spectrum Bridge is one startup that is testing that.

Publicly-traded Evergreen Solar has replaced its CEO, a sign of the company’s troubled times of late, which Green Tech Media details. Company stock is trading at 59 cents a share, and the problem seems to be that its technology has become obsolete. Its modules are also too expensive to compete in a solar market that has seen technological advancements and price drops since Evergreen’s IPO ten years ago. Former COO Michael El-Hillow will replace Richard Feldt.