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Will green tech be the next investment bubble?

  • Story Highlights
  • Large investment in green tech lead to speculation that it may be overhyped
  • Many ideas in development stage, many may never make viable products
  • Long term future is secure, but short term may have some 'wild rides'
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By Matt Ford
For CNN
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(CNN) -- Recent world events have shown in stark relief how financial speculators hype industries up, only to scare and scatter when a bubble bursts leaving the value of stocks and shares to tumble.

In for a bumpy ride: Long term forecasts are good, but short term green tech investors may have some rough times.

In for a bumpy ride: Long term forecasts are good, but short term green tech investors may have some rough times.

We've seen it in the property sector, in hedge funds. Before that it was dotcoms. It seems to be a cycle as old as banks and financial markets. But could the next victim be green technology?

Recently, many millions of dollars have been invested in new eco-friendly technology companies offering solutions to the twin threats of runaway climate change and declining fossil fuel stocks.

But is there too much money going, too quickly, into companies that won't deliver?

Blogs and financial sites have been full of speculation. Is it all talk? A jittery community of investors burned by their failure to spot the housing bubble, now seeing trouble everywhere? Or is there really something to worry about?

Despite the financial crisis, the green tech sector looks set to be on the verge of a boom. Over the last few months trillions of dollars of investments have been liquidated and many speculators are now looking for something to do with their cash.

Add to this the fact that the Obama administration put the environment at the center of its policy during its election campaign, as well as announcing plans to spend billions on infrastructure, which will include green projects, in an attempt to fight the recession and create jobs.

This means that investors looking for a solid, government-backed sector are likely to suddenly discover a new interest in all things green.

But in many ways recent events have only steepened the upward trend of investment going into the sector, and things have been looking good for green for sometime.

This boom is being felt most acutely in Silicon Valley where a new generation of high-tech businesses are transforming the region, just as the information technology sector did in the 1980's and 1990's. Another hotspot is Austin, Texas.

But it is important to remember that many of the companies proving so attractive to circling capital only exist in the laboratory. Despite the huge, even revolutionary potential of many, they have yet to provide an actual, commercially-viable product. Never mind take it to market.

For example, creating fuel from algae could go a long way to saving humanity from itself, and make some people very, very rich in the process. But to date no-one has been able to take the technology from the test-tube to the consumer. Perhaps they never will. It's inevitable some investors are going to be disappointed.

Could this mean that in a year or two's time we will see another bubble burst as speculator's expectations aren't met by the scientists and they pull their money out?

The answer seems complex: yes and no.

While many believe that over the long term, the sector is secure, of course some companies will undoubtedly go to the wall and take their investors with them.

"I don't think it's a bubble, I think it's definitely underhyped as a long term fundamental because of some of the technical innovations that are the underpinnings," says Jennifer Fanstad, MD Draper Fisher Jurvetson.

"But short to medium term there may be some significant volatility... we may see some wild rides."

The problem is that after years of get-rich-quick strategies, many still judge investments based on the likelihood of short-term gains. Whereas, with the green tech sector they need to look far into the future for a return.

"It depends where your measuring point is. If you're looking at short term, quarter-to-quarter... there's no question there's a lot of volatility," John Wooland, CEO Bright Source Energy.

"A lot of this stuff in the public markets could be very overhyped and overvalued."

Over the coming decades there is no getting away from the fact that the world faces huge challenges, which only new technology can solve.

If we are to maintain growth and a western standard of living while urgently cutting CO2 emissions and finding alternatives to oil stocks that, according to Fatih Birol, chief economist to the International Energy Agency, could plateau in 2020, green tech is the best hope we have.

As companies and consumers increasingly realize the business case for using eco-friendly technology, those in a position to supply it will prosper. The only thing slowing this process down is perception.

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"I'd like to see the clean tech space renamed the efficient space," says Mike Biddle, MBA Polymers. "Because clean tech is a bit of a misnomer. It still has that residue of ten years ago. 'Clean tech means I'm not going to make a lot of money'. I think it's all about efficiency."

Efficiency is not something that's ever going to go out of fashion, and despite some choppy waters ahead, it seems the future's bright, the future's green.

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