The energy sector is at the vortex of the world economy. And with a strong emphasis on environmental concerns, the opportunities for those with innovative ideas will multiply. "We are excited that the wider market has recognized that renewables are a mainstream option," says Jim McDermott, managing partner of Los Angeles-based U.S. Renewables Group that invests in clean energy assets. "The opportunities to invest in and develop such options will only expand."

Undoubtedly, fossil fuels and nuclear energy will continue to get the preponderance of tax incentives. After all, they provide about 90 percent of the fuels that run electric generators. But the wind and solar industries in particular are the beneficiaries of generous incentives that are designed to spur new technologies and more development -- all with an eye toward creating economies of scale so that one day these nascent industries won't need any government help.

It seems to be working. Companies ranging from BP and Chevron to Goldman Sachs and Chase to General Electric want in on the action. Basically, a lot of firms that had been allocating investments to high-tech in the late 1990s are now creating clean tech divisions. GE, for example, has allocated $2 billion just to its wind unit.

And, GE, along with PowerLight Corp and Catavento, are now building the world's largest solar plant in Portugal. It will be an 11 megawatt facility with 52,000 photovoltaic modules when it is finished in early 2007. The price: $78.5 million. Clearly, these publicly-held companies would not be making such large investments if they didn't think they would be profitable.

"Clean technology is emerging as the enabling technology of post-modern industrial society -- the next and necessary wave of innovation," says Bob Epstein, co-founder of Environmental Entrepreneurs, which is a consortium of clean energy businesses. Ann Arbor, Mich.-based Cleantech Venture Network predicts that between 2006 and 2009 as much as $8.8 billion of venture capital will go into green technologies.

Vote of Confidence

Attracting capital is the immediate hurdle. And venture capitalists are far more conservative than they were five years ago. But they're still looking for the right opportunities and once again are beginning to invest in projects where they see bright financial futures.

Investors now have their eye on power grid optimization, renewable power and energy management. And in a vote of confidence for the "New Economy," the nation's biggest pension fund, Calpers, says that it is pumping $200 million into clean energy technologies over the next several years.

Others say that most of the investment in energy concerns is going toward projects that produce cash flows and that require growth-related financing. Take Prospect Energy, which invests in energy companies with annual revenues of less than $250 million and in transaction sizes of less than $100 million. Prospect is interested in providing capital to companies looking at development, growth, acquisitions, or recapitalization -- and does so without taking a control position.

The economic downturn in early 2001 meant that fledgling companies with innovative ideas were starved for cash. Now, investors have come up for air and green energy enterprises are getting a second look.

In the first quarter of 2006, 67 separate deals were done representing more than $513 million in investment, says Cleantech Venture Network. That's nearly a 53 percent increase in investment from a year earlier. The trend is the culmination of political, economic and technological conditions, the firm says. And it all works to increase investor confidence.

The main reason any enterprise allocates capital to a project is because it sees earning reasonable rates of return in the foreseeable future. For example, U.S. Renewables Group owns a plant that produces geothermal energy -- power derived from steam that emanates from the earth -- located in Northern California. That facility is cost competitive with fossil fuel and is expected to provide favorable returns to investors, says managing partner McDermott. The power will be sold to Pacific Gas & Electric.

Utilities, generally, avoid risky investments. But some invest in such enterprises either directly or through venture capital firms. Under any circumstance, utilities prefer emerging and rapid-growth companies that have the potential to revolutionize their industries. Hydro Quebec's CapiTech and Ontario Power's OPG Ventures are active in clean energy investing.

"Private equity in emerging growth companies in energy is going to quadruple in the next few years -- and it could grow faster than that," says Buz Barclay, partner with the Toronto-based international law firm Torys, in an earlier talk with EnergyBiz Insider.