As investors pour more greenbacks into green technology, recent venture-capital investments suggest that the market may be maturing.

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SIOUX FALLS, S.D. — As investors pour more greenbacks into green technology, recent venture-capital investments suggest that the market may be maturing.

Venture-capital investments in U.S. cleantech companies grew by 41 percent to $961.7 million during the second quarter of 2008, according to a recent Ernst & Young report.

While the majority of the $2.5 billion in 2007 deals were seed and first-round transactions, investments so far in 2008 have been distributed more evenly across the board with later-stage deals during the quarter accounting for more than 38 percent compared to nearly 34 percent in 2007.

“What we’re seeing is a little bit of the maturation of the companies, and in that process the type of capital that they’re requiring is more in general,” said Joseph Muscat, Ernst & Young’s Americas director of cleantech and venture capital.

Muscat said energy companies in a variety of subsectors including utilities and transportation fuels have traditionally put a smaller percentage of earnings toward research and development than other industries, but that trend is starting to change as firms recognize the potential value of technological innovation. The cleantech industry is seeing innovation across the spectrum in solar, alternative fuels, biofuel enzymes, energy storage and wind.

“I think what you’re seeing is sort of pent-up investments now in R&D,” he said of the company’s research, based on data from Dow Jones VentureSource.

Cleantech subsectors include alternative fuels, energy and electricity generation, energy storage, water, environment, industry-focused products and services and energy efficiency.

Clean Edge, an environmental-research firm, said revenue in solar photovoltaics, wind, biofuels and fuel cells jumped 40 percent to $77.3 billion in 2007. The firm projects these four benchmark technologies will grow to $254.5 billion within a decade.

A February report from the McKinsey Global Institute said an additional annual investment of $170 billion between now and 2020 could not only cut greenhouse-gas emissions in half, but also provide investors with an internal rate of return of about 17 percent.

New avenues to invest in such technology could help boost investments.

Firsthand Funds created its Firsthand Alternative Energy Fund in October to give regular investors interested in alternative energy a place to invest their money, said Kevin Landis, who manages the new energy fund.

“We see kind of a gap in there in that there’s lots of venture capital funds out there but there’s not many mutual funds for people like you and me to put money to work in this,” he said.

It’s not all photovoltaics, wind or biofuels that are attracting investments either, Landis said.

Building automation, advanced lighting and improved insulation are “the here and now technology,” he said.

Rising energy costs have pushed alternative energy into the public spotlight, but Muscat said he’s not sure about any direct correlation between rising oil prices and increases in cleantech investment.

He said oil prices are typically volatile, and venture capital would happen separate and distinct from changes in any commodity price.

Muscat said fundamental demands from emerging nations and expected restrictions related to carbon-dioxide emissions from the consumption of fossil fuels are two of the big drivers moving people toward alternative energy.

“That really sits at the heart of cleantech innovation,” he said.

And although these investment opportunities can draw in environmental advocates, return on investment will always be the primary driver, Landis said.

“What you’re really doing is commercializing a technology because you see the price of something going up and you want to give people another alternative for it.”