Money flowing to new ideas in energy

With rising energy prices stoking demand for new technologies, venture capital firms are showering attention, and hundreds of millions of dollars, on a field investors have long ignored: alternative energy.
Start-ups working with solar, battery, hydrogen, wind, and fuel cell technologies raised $445.1 million in venture funds nationally in the first six months of this year, 56.1 percent more than the $285.2 million raised by such companies in all of 2005, according to figures newly compiled by the National Venture Capital Association trade group.
In New England, venture investments in alternative energy companies spiked to $87.9 million in the first half of 2006, six times more than the $13.5 million invested all of last year.
At today's higher energy prices, ``a lot of the things that didn't look economical in the past are starting to look more economical," said Jeff Andrews , a partner at Atlas Venture in Waltham who's been prowling for alternative energy investments.
Andrews said interest in the field has been heating up at venture firms across the country as soaring oil prices leave financially pinched businesses and consumers clamoring for alternatives. ``You don't have to look very far to see what the cost of energy is," he said.
Among the Massachusetts start-ups that have drawn venture funding are A123 Systems, a Watertown company that is pioneering a new kind of rechargeable lithium ion battery that would be more powerful and durable than the batteries that now power hybrid cars. The company raised $30 million in February -- the largest funding round so far in 2006 for an energy start-up in New England -- from a consortium of venture investors that includes North Bridge Venture Partners of Waltham and Silicon Valley powerhouse Sequoia Capital.
Earlier this year, A123's batteries entered the consumer market powering a new cordless line of Black & Decker's DeWalt power tools, such as hammer drills and circular saws. A123 executives are now talking to American and European automakers about incorporating the lithium ion batteries in new hybrid vehicles scheduled to be introduced between 2009 and 2011. ``I believe we have the right technology at the right time," said A123 cofounder Yet-Ming Chiang , a materials science professor who developed the tiny nanomaterials used in the batteries in his lab at the Massachusetts Institute of Technology.
At least some of the fervor for funding energy start-ups can be attributed to the souring of interest in other sectors of the economy.
``Venture capitalists have gone through a dry spell finding attractive investments in telecommunications and software," said Howard R. Berke , founder and chief executive of Konarka Technologies Inc., a Lowell company developing flexible plastic solar cells for use in everything from building materials to mobile phones. ``They see clean energy as a new focus area."Continued