Energy storage tops clean tech returns

Energy storage investments since the turn of the millennium have generated the best returns in the clean tech space, according to a new report

Energy storage investments have delivered the highest returns of all clean tech investments since the turn of the millennium, new data shows.

An analysis of more than 1,500 venture capital and private equity investments made between 2000 and 2016, conducted by Cambridge Associates, found that energy storage investments delivered the highest gross-of-fee pooled return (IRR) of 27.2%. This was closely followed by smart grid investments, which delivered 26.8%.

“We are seeing a growing cohort of promising specialist fund managers taking advantage of opportunities in the Clean Tech sector,” explained Liqian Ma, managing director at Cambridge Associates.

“An increasing number of clients are coming to us with mandates that have a mission-related or strategic focus on resource efficiency.”

In September, ESG Clarity reported how investors were looking more closely at the energy storage opportunities that have surfaced as companies and consumers switch to cleaner fuel sources.

Today’s Cambridge Associates’ report endorsed this view, noting that smart energy has become a key investment theme due to changes in global governmental policy and technological advances which are driving companies towards the more efficient use of resources.

“We think it’s critical to have a deep and nuanced understanding of the dynamics, drivers, and managers within the Clean Tech landscape to help clients achieve their objectives,” said Ma.

The company’s analysis also found that areas such as renewable power component manufacturing, biofuels, and advanced materials have overall generated negative returns over the same 16 year period.

By comparison, the two top performing subsectors, Energy Storage and Smart Grid delivered the highest mean returns of the four major Clean Tech investment groups at 10.1%, ahead of Renewable Power Development at 9.4%, Resource Solutions at 7.0%, and Renewable Power Manufacturing at  -6.7%.