Investors are bullish on the cleantech industry after Democrats won a majority in the United States House of Representatives and made gains in the U.S. Senate during midterm elections.

“It’s clear that with a more Democratic-led administration, the clean technology space will be more likely to continue its strong momentum,” said Mark Donohue, a general partner at venture-capital company Expansion Capital Partners, located in San Francisco.

In recent trading, the WilderHill Clean Energy Index—which tracks U.S. clean-energy stocks—rose 3.14 to 185.74, an increase of 1.72 percent.

The WilderHill Progressive Energy Index, which focuses on technologies that reduce the environmental impact of fossil fuels, also showed an uptick. The index grew 1.26 percent, up 2.83 to 227.19.

Democratic wins in state legislator races, as well as the federal races, should accelerate the adoption of renewable energy, said David Kirkpatrick, a managing director at SJF Ventures, a venture capital firm in Durham, North Carolina.

“In general, I think it’s fairly obvious if you’re a cleantech investor that this is a better result,” Mr. Kirkpatrick said Wednesday. “One would assume this would accelerate adoption of cleantech policies of all sorts.”

More Democratic legislators could lead to policies such as standards for renewable energy and for electronics recycling, he said. “You don’t want your investment strategy to rely on any of those things, but they certainly would help to level the playing field,” he said.

Oil Company Tax Defeated

The elections weren’t all good for cleantech, however. California’s Proposition 87 was defeated 54.7 percent to 45.3 percent.

The proposition would have taxed oil companies between 1.5 and 6 percent for oil extracted in California. The money would have been used to fund cleantech research and commercialization, including consumer incentives, with the goal of reducing petroleum use by 25 percent from 2005 levels by 2017 (see Tech Propositions Go to Voters).

Mr. Donohue called the defeat “very unfortunate” and said fairness would call for the oil companies to share a greater percentage of their profits to support alternative fuels and a reduction in air pollution.

“The fact that oil companies do not pay as much for their drilling licenses and fees as the citizens of California pay for their hunting and fishing licenses seems out of balance with the level of wealth that Big Oil is generating from California’s resources,” he said. “Clearly the alternative-energy industry and the clean-technology industry have a fraction of the lobbying and marketing power of the enormously well-funded interest of Big Oil.”

Rick Cooper, vice president for business development at PolyFuel, a fuel-cell-membrane company in Mountain View, California, said he was “frankly surprised” that voters failed to pass the proposition.

“I would have thought there was a lot more of an environmental movement in the state,” he said.

While neither PolyFuel nor the fuel-cell industry was specifically slated to receive any money from the proposition, Mr. Cooper said he was “quite disappointed” by the result.

“I thought this was great for the state, great for the environment—great for the world, really—and it was a significant disappointment for me personally,” he said.

Negative Ads Helped

Still, the defeat was not a sign of public sentiment, but only an indication that the negative advertisements were effective, he said.

“I believe there is a lot of awareness for environmental issues in the state, and if it weren’t for the negative campaigning, it would have been very straightforward,” he said. “My personal view when I talk to people on the street and when I socialize is there’s an awful lot of interest in clean energy and cleantech in general.”

Jeff Wolfe, chief executive of solar installer groSolar in White River Junction, Vermont, said the defeat won’t have a negative effect on the industry, although a win would have been “a Grand Slam” and “a windfall.”

“It was defeated by the spending of Big Oil,” he said. “This just further shows how out of touch with reality the oil companies are, and that it’s probably going to take some federal legislative effort to bring them more harshly in line.”

Robert Wilder, chief executive of WilderShares, which manages the WilderHill energy indices, said that the proposition would have passed if oil companies had been honest about the real reason they were opposed to the tax: they didn’t want to pay it.

“I don’t think there’s a lot of love for the big oil companies,” he said.

Moving up on the House Agenda

All in all, however, the proposition defeat was less important than the House wins, industry watchers said.

The defeat “was overshadowed by the fact that the House flung to the Democrats,” Mr. Wilder said. “The Dems are going to be much stronger in favor of clean energy than the Republicans.”

Committee chairs who have sat on the sidelines for 14 years or more because they were in the minority are going to want to get things done quickly, he said.

“Clean energy is going to be much higher up on the agenda now, and I think some pieces of clean-energy legislation will be passed,” he said.

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