Wind power market in difficulty

Investment in U.S. turbine farms and wind energy businesses tumbled 38 percent last year to $9.7bn, as the economic climate worsened for wind power companies, which are finding it increasingly difficult to attract venture backers.

According to data from Bloomberg New Energy Finance, venture capitalists have practically left the sector altogether. They invested only $177.6m in wind startups last year, down 71 per cent from the year before, BNEF found.

Wind power is bucking a broader trend for clean energy, which is experiencing a surge of investment. Venture backers pumped $4.29bn into the green tech industry in 2011, up 13 per cent from the previous year, according to the National Venture Capital Association.

With wind, it’s harder for early investors to afford the large outlay of cash needed to get a business off the ground, says Jason Matlof, a partner at Battery Ventures in Menlo Park, California.

“We can’t compete as venture investors in capitalizing energy companies,” Matlof says.

There’s also a glut of turbine production—fueled by investments over the last half-decade in the U.S., Europe, and Asia—and not enough demand. Global purchases of turbines will fall 14 per cent this year from 2010 and won’t surpass 2011 levels for two years, BNEF estimates.

That’s hurting the biggest makers of turbines, the giant fan-like devices that turn kinetic energy from gusts of wind into mechanical energy. Vestas Wind Systems (VWS:DC) in the Netherlands and India’s Suzlon Energy (SUEL:IN) reported wider-than-anticipated losses last month, and China’s Sinovel Wind Group (601558:CH) estimates that its 2011 profit fell by more than half from 2010.

These companies have seen their stocks plunge in the past year.

With a market that’s battering publicly traded companies, there’s little room for startups to find opportunities, says Matlof, whose firm has invested in one early stage wind company, Modular Wind Energy.

“Historically, there’s been a handful of wind turbine companies that own all the development, all the technology, and all the integration,” he says.

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