The Continued Rise of Energy Efficiency

On June 25th, President Obama addressed a crowd at Georgetown University to lay out his long-awaited plan to combat climate change. In his speech, the President spoke of bypassing congressional gridlock through executive orders to support green technology and renewable energies. The White House’s goal will be to reduce carbon pollution by a total of three billion metric tons by 2030. The President stressed the potential of appliance and building code standards to reduce emissions, and pushed for federal agencies to derive 20 percent of their electricity from renewable sources by 2020.

As a result, the Department of Energy (DOE) published new regulations that require all new federal buildings to meet more strict energy efficiency standards. Effective July 2014, these new requirements expect to save 18.2 percent more energy than previous regulations and cut energy costs by an estimated $1.74 billion over 30 years. Obama conceded that these standards may not sound “all that sexy” but the potential benefits and savings will benefit everyone. “It is a great deal, and we need to be doing it”, the President concluded.

What does this mean for the cleantech world? Energy efficiency has been a strong sector in past quarters, and this boost from the government could allow these companies to gain real momentum. At Cleantech Group, the second quarter has shown great results for the energy efficiency sector. In our 2Q13 Quarterly Investment Monitor , energy efficiency had the highest percentage share of dollars invested at 18.9 percent. Looking at the number of venture capital deals, energy efficiency’s lead on other sectors is even more pronounced. Out of the top ten deals of the second quarter, three companies specialized in energy efficiency: Blu Homes, View, and Aligned Energy.

2Q13 Top Cleantech Sectors by VC Deal Count

# of deals (percentage change +/- over 1Q13)
# of deals (percentage change +/- over 1Q13)

After big recent failures such as Better Place, venture capital firms appear to be shifting their focus towards capital-light investments such as cleanweb companies. The energy efficiency sector offers many such companies, which do not require large amounts of money for manufacturing plants or research centers. The stage has been set for energy efficiency to really take off and dominate the cleantech market. Perhaps the rising interest in energy efficiency will widen the IPO window for cleantech companies, allowing them more access to public markets.

About the blogger: Juliette is a research intern at Cleantech Group for the summer, providing the research staff with support in research across multiple cleantech sectors. She is a rising senior at Wellesley College outside of Boston, Massachusetts where she is studying Applied Mathematics. In addition, she is pursuing a certificate in mechanical design engineering from Franklin W. Olin College of Engineering. Juliette has technical experience working on research in wind, geothermal, and solar.