More Investors Eye Alternative Energy

More Investors Eye Alternative Energy

SAN FRANCISCO -- Apr 06 - USA TODAY

SAN FRANCISCO -- As oil and gas prices soar, investor interest in alternative energy start-ups is rising for the first time in four years.

Venture-capital firms pumped $520 million into energy technology start-ups last year, up from $509 million in 2003. While that 2% gain was small, it was the first annual increase since 2000, says a new study by Nth Power, a San Francisco VC firm focused on energy. More growth is expected this year, Nth Power says.

California, often at the forefront of energy trends, has launched a Clean Energy Fund with $30 million. The non-profit fund last month hired Nth Power and two other venture-capital firms hunting for promising start-ups, such as those developing solar power tech.

VCs invested in a range of energy start-ups last year, from software controlling lighting to hardware for power meters.

But a top focus was fuel cells -- devices using chemical reactions to create power exceeding the lifespan of conventional batteries. The long-elusive technology could be used to power automobiles. It also could be used for laptops, cellphones and other mobile computing devices. ''Everyone is racing toward this market,'' says Rodrigo Prudencio, an Nth Power principal.

Investor interest in energy start-ups last peaked in 2000. VCs pumped $1.3 billion into energy tech, a time of record investing in many industries. Among those getting funds: solar products maker Evergreen Solar, now publicly traded. While no one is predicting a return to 2000's levels, interest is climbing anew because of:

* Rising oil prices. Goldman Sachs warned last week that oil could surge past $100 a barrel, driving gasoline prices still higher. Oil closed Tuesday at $56.04 a barrel, down 97 cents. The price a year ago: $34.38.

Rising gas prices threaten auto sales, spurring automaker interest in fuel cells. General Motors and DaimlerChrysler last week signed agreements to split $88 million in U.S. Energy Department grants for hydrogen fuel-cell vehicles. The vehicles are experimental.

* Mobile computing. Growth in wireless Internet access via laptops and other gizmos places a premium on longer battery life.

Many laptop batteries now last four hours, says Samir Bhavnani, a mobile computer analyst at consultant Current Analysis. ''Not enough for a lot of people,'' he says.

Samsung and Toshiba have fuel-cell prototypes for laptops, Bhavnani says. But they're not likely to hit the market before next year.

Start-ups getting VC money include PolyFuel in Silicon Valley. It got $18.4 million last summer to develop specialized membranes, a fuel-cell component allowing water and methanol to generate electricity for laptops and other devices.

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