By ANDREW HERNDON and CHRISTOPHER MARTINA
of Bloomberg News
SAN FRANCISCO — Silicon Valley investors that helped build the solar industry are shifting cash into electricity-grid technology and energy-storage developers after bets on panel manufacturers failed to pay off.
Companies including VantagePoint Capital Partners and Khosla Ventures are stepping up funding for systems to manage electricity, which are typically less capital-intensive than solar-panel factories. Venture capital and private-equity financing for renewables dropped to its lowest in at least six years in 2012, according to data compiled by Bloomberg.
Competition for the best investments from Blackstone Group to Warren Buffett along with a plunge in profit from the solar and wind industries prompted the shift. It pushed Silicon Valley into taking smaller stakes in emerging technologies that help squeeze efficiency and flexibility from power supplies.
“We are going through a repositioning of ‘clean tech,’ ” said Wal van Lierop, founder of Chrysalix Energy Venture Capital, based in Vancouver. “The big sectors — solar, wind and LEDs — are in the process of being consolidated. They’re maturing, so they fall out of the clean-tech opportunity basket. We now are trying to find the next hot spots.”
Investment flowing from private equity and venture capital firms into renewable energy fell 34 percent to $5.75 billion last year, according to Bloomberg New Energy Finance, the lowest since at least 2006. That accounted for 2.2 percent of the $268.7 billion invested in the clean energy industry, down from as much as 6.5 percent in 2008.
Chrysalix invested in the energy-management providers Enbala Power Networks and AlertMe. Khosla funded LightSail Energy, which is developing energy storage devices.
“Our specialty is with large technology risk, where if the technology works there’s a big economic breakthrough,” Vinod Khosla, the billionaire founder of Khosla Ventures in Menlo Park, said in an interview. “That’s what we keep looking for in all areas.”
Alan Salzman, chief executive officer of VantagePoint Capital Partners, said systems that allow energy to be used more efficiently and help the grid cope with variable supplies from wind and solar plants represent the richest new areas.
Energy storage is “an essential component” for renewable energy to thrive, Salzman said. “That’s an area that has been hugely underserved historically that we think remains hugely interesting,” he said.
A few parts of the solar industry remain attractive for investors, even after the slump in the costs of panels. Elon Musk’s SolarCity has more than doubled since its initial public offering on Dec. 12. It develops rooftop solar systems, which are more economical to install since the price of cells plunged.