By Jennifer Kho

Clean energy is poised to skyrocket into a $226 billion worldwide market by 2016 from the $55 billion it occupied in 2006, according to a Clean Edge report on Tuesday.

In 2006, the market jumped 39 percent to $55 billion. Companies focused on biofuels and wind saw the most revenue, raking in $20.5 billion and $17.9 billion, respectively. Solar electric companies made up $15.6 billion in revenue, and fuel cell companies sold $1.4 billion.

“Solar and wind represented $2.5 [billion] and $4 billion industries in 2000,” said Ron Pernick, a principal at Clean Edge. “What we see is annual growth rates more akin to computer and wireless growth rates than the more staid and steady energy sector. That means that they need to manage growth in a different way.”

The report is the latest forecast for stellar growth in the clean energy industry. According to Clean Edge, mainstream acceptance of climate change, a new level of commitment from U.S. politicians, significant corporate investments, and growing U.S. venture investments in energy technologies have played into the growth.

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According to Rodrigo Prudencio, a principal at energy technology venture capital firm Nth Power, U.S. venture investments in energy technologies nearly tripled to more than $2.4 billion in 2006, making up 9.4 percent of total venture investments.

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Biofuels grabbed $813 million, with distributed energy including solar power and fuel cells raising $580 million, and energy intelligence technology raising $476 million.

Mr. Prudencio said investors probably don’t need to worry about an energy tech bubble because the median deal size grew only slightly from $6.5 million in 2005 to $8 million in 2006—with most of that growth in later-stage deals.

But in one “curious” trend, VCs invested $1 billion in infrastructure plays instead of technology development, he said.

The trend implies that returns in some of the deals, particularly in biofuels, aren’t likely to match typical early stage venture investing models because they are capital intensive, lower-risk investments with longer return times, he said. (Mr. Prudencio is not the first to have this idea.)

If the unexpected venture community behavior doesn’t continue next year, 2007 investments could drop compared with 2006, he said. The big question is whether any drop would fall above or below the 2005 mark, he said. “2006 might be a little peak that sticks out over a long-term trend going upward, or it could be a peak before an overall downturn,” he said.

Whatever happens with venture capital, the biofuels and solar industries are on track for continuing market growth, according to Clean Edge.

In particular, the solar market has grown more than 50 percent per year in the last couple of years, Mr. Pernick said. “Solar is going to be a very unique story.”

The biofuels industry’s growth also could make the Clean Edge predictions—it expects a $80.9-billion market in a decade—look conservative, Mr. Pernick said.

U.S. President George W. Bush has called for 35 billion gallons of biofuels per year by 2017, for example (see Bush Backs Alternative Fuels, U.S. Treasury Pitches Alt Fuel Plan, Energy Dept. Pumps Ethanol $385M), and companies like Imperium Renewables are rapidly ramping up their production capacity (see Imperium Raises $214M), he said.

U.S. Treasury Pitches Alt Fuel PlanImperium Raises $214M