FIGURE 3-2 Public and private energy R&D.

SOURCE: Daniel Kammen, Testimony before the Committee on Appropriations, Subcommittee on Energy and Water, U.S. House of Representatives. February 28, 2007.

capital industry total, by 2000 that number had dropped to 2.4 percent. Of the $2.5 billion in venture capital invested in energy companies, the vast majority went to firms in later stages of development rather than seed stages or early stage firms.

In the past three years, energy markets have reversed course. The weak market for oil that contributed to a low level of interest in energy R&D over past decade and a half has been replaced by a very tight market in which prices have responded sharply to perceived shifts in fundamentals. Oil prices have increased dramatically. These shifts have created new opportunities for energy technology companies that are reflected in the recent venture capital numbers: In the second quarter of 2006, both the number of deals and total equity investments by venture capital firms in energy companies tripled in relation to the previous year. A growing public concern in the United States around the need to strengthen the nation’s capabilities to produce energy from a variety of sources has driven a growing consensus on the need to increased investments in energy R&D. To the extent that budgetary priorities shift again, this time in favor of energy R&D, DoE SBIR program will take on an even greater role in supporting the development and commercialization of new energy technologies.

Figure 3-2 shows that public investments in energy R&D have fallen in real terms since the mid-1980s, and that private sector investments have not replaced the declining public funds.

The lack of funding is especially apparent in the limited VC interest in energy-related companies, described in Table 3-1.

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