US Venture capital investments into clean technology companies plunged by 63 percent in the first quarter, mirroring the drop of investments in other sectors.

However, venture capitalists did boost their investments into one specific clean-tech area: energy storage. Auto makers, in particular, are looking for more efficient batteries for electric cars, and so VCs are backing companies building new battery technologies. VCs plowed $114 million into energy storage companies during the first quarter, more than double the $50 million they invested into the sector a year ago, according to a survey just released by accounting firm Ernst & Young and Dow Jones. VCs invested $69 million into companies specifically building battery technologies. The rest of the $114 million went into other types of energy storage companies.

Here are the core stats:

  • The $277 million total raised by cleantech companies in 24 deals in Q1 09 represents a 63% decrease in terms of capital and 48% decline in deals compared to Q1 08.
  • Battery storage companies raised $69 million in the first quarter, a 37% jump from Q1 08.
  • Fuel cell companies raised $45 million in Q1 09 compared to no investment in Q1 08.
  • Battery manufacturer A123 Systems, a lithium ion battery supplier from Watertown, Mass., completed the largest cleantech deal this quarter with $69 million infusion.
  • Energy/electricity generation companies raised $56 million in Q1 09, a 73% decrease compared to Q1 08.
  • Solar companies accounted for the majority of activity in this “energy/electric generation” category, raising $48 million.
  • The largest solar deal, and second largest cleantech deal of the quarter, was completed by eSolar, a provider of solar thermal power plants in Pasadena, Calif., that raised $40 million.
  • The eSolar deal was completed jointly by two strategic investors: NRG Energy, a power generation company in Princeton, NJ, and Acme Group, an energy infrastructure company based in India. This is just one of the four corporate deals that rounded out the top 10 VC deals of the quarter.
  • The top five deals accounted for 62% of the capital raised — notable early stage deals gave an indication of important emerging sectors. Oasys Water, a Developer of engineered osmosis desalination and water treatment technology based in Cambridge, Mass., raised a $10 million first round co-led by Advanced Technology Ventures and Flagship Ventures. EnergyHub, a producer of residential smart grid products, based in Brooklyn, NY, also raised a first round.

More from the press release after the jump:

Q1 2009 cleantech market developments and drivers

Despite the difficult economic conditions, significant cleantech deals were closed across transaction categories. New Energy Finance (NEF) recorded 28 completed asset financings in the US last quarter with a disclosed value of $1.3 billion. This figure includes SunEdison’s $20 million tax equity project financing from Union Bank of California. NEF also tracked 10 private equity deals with a disclosed value of $369 million.

Additionally, there were 18 US M&A transactions that raised $1 billion, which included San Antonio-based, Valero Energy’s acquisition of three biofuel entities for a total of $477 million, according to J.S. Herold.

Corporate commitments to cleantech continued to be announced through a challenging quarter. For example, Google and announced a prototype software of Google PowerMeter, a consumer home smart grid application that is targeted for completion by the end of 2009. Royal Dutch Shell Plc announced plans to increase its stake in biofuel company Codexis, based in Redwood City, CA. AT&T Inc. committed to investing $565 million over 10 years on alternative-fuel vehicles for its corporate fleet. Similarly, Coca-Cola Enterprises pledged to deploy 185 hybrid electric trucks across North Americas in 2009, bringing its total number of hybrid electric delivery trucks to 327.

“This economic climate demands that cleantech companies think more creatively about resources and partnerships, as government becomes an increasingly important constituent in the cleantech market,” explains Muscat.

Government funding has begun to enter the market as a Department of Energy grant was recently rewarded to Fremont, California-based Solyndra Inc., a cylindrical photovoltaic systems manufacturer that plans to use the $535 million loan to expand its solar panel manufacturing capacity in California. More substantial funding is coming with the US American Reinvestment and Recovery Act (ARRA), which contains over $100 billion of dollars in direct spending, loan guarantees and incentives to promote the development of cleantech in energy, water and environment.

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