Growing investments in smart grid

be lots of funding available,” said Awais Khan, director of venture capital practice at KPMG.

Some big institutions are already braving the risks.

Calpers, the largest U.S. pension fund, revealed this week that it committed $60 million to prominent Silicon Valley-based Khosla Ventures in June for a new seed-stage fund that will primarily focus on green companies.

Green technology companies — which include everything from renewable energy, electric vehicles and energy storage to effective transmission of power — had seen record number of dollars come their way in 2007 and 2008 on heightened worries about global warming and soaring oil prices.

Investments dried up last year, however, as oil prices tumbled from their July 2008 peak of $147 per barrel and the U.S. economy slipped into a recession.

Solar companies, which had cornered a majority of green investments in the past, were the hardest hit by the economic downturn. Solar venture investments hit a three-year low in the second quarter, according to a joint study by the Cleantech Group, which tracks the market, and accounting firm Deloitte.

Vollen of Robert W. Baird & Co said investors now are more interested in technology that was less capital intensive, such as those associated with the smart grid infrastructure and energy efficiency. “Everybody still recognizes that energy storage is the holy grail of the sector,” he added.

Inventing less costly ways to store energy has so far been a stumbling block toward widespread use of renewable energy.

That quest helped lithium-ion battery maker A123 Systems attract $69 million last quarter to expand battery manufacturing, while residential smart grid company Tendril attracted $30 million in June. Energy efficiency company CPower and Grid Net, which builds software for smart meters, also were successful in raising money.

Some companies like A123 Systems and biotech firm Codexis are actively monitoring the markets to launch their initial public offerings. Drew Clark, director of strategy at IBM’s Venture Capital Group, said he spends about 90 percent of his time assessing opportunities in the smart grid space. “VCs, in this era of illiquidity, have been looking for lower capex cost plays in cleantech,” said Clark, who partners with about 120 venture capital firms to help IBM identify promising technologies. “Plays that are more like a software kind of play. You want something that takes a few smart people and very little equipment, and produces a Facebook.”

Facebook, created five years ago in a Harvard dorm room, is now the world’s largest Internet social networking company with more than 250 million registered users.