Ausra, which develops solar energy for sale to utility companies, is emblematic of the current generation of "clean tech" energy firms that seek to find newer, cost-efficient ways to generate and store energy via renewable sources and advances in fuel cells and related technologies.

The company's core technology, which uses sunlight to drive steam turbines to generate energy, was originally commercialized on a small scale in 2004 in Australia. Last September, Ausra, which was formed in late 2006 to take the technology to a larger scale in the U.S. and worldwide, raised more than $40 million in a first round of funding from blue-chip Silicon Valley venture capital firms Kleiner Perkins Caufield & Byers and Khosla Ventures.

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This isn't the 1970s, when spiking oil costs and heightened concern over energy security caused the spotlight to shine on alternative energy sources and then fade. Nor is this a niche market in which only those with HAVE YOU HUGGED A TREE TODAY? bumper stickers are investing. Many of today’s companies are well-funded, large-scale operations, raising record amounts of capital with an eye toward massive initial public offerings—even as the economy as a whole heads down a shaky path and funding for other risky startups dries up.

Khosla Ventures' Vinod Khosla, a founder of Sun Microsystems, has invested in 45 clean energy ventures since 2004, putting $205 million into nine companies in the first quarter of 2008 alone. And he's far from alone. Venture capital firms sunk $2.2 billion into 166 clean tech firms in 2007, most of which are energy related, according to the National Venture Capital Association. That's up from $1.5 billion invested in 2006, and the pace is only quickening. In the first quarter of 2008, clean tech companies received $625 million in V.C. funding, according to the N.V.C.A.

With global energy demand and alarm about the environment and global warming reaching unprecedented heights, those backing clean energy companies say there's a timely market opportunity in the sector. Global energy needs are projected to be more than 50 percent higher in 2030 than they are today, with China and India accounting for 45 percent of that increase.

"You start to see this rise in enormous appetite for energy, and someone's got to feed that mouth," says Erik Straser, general partner at Mohr Davidow Ventures, a V.C. firm that has invested more than $400 million in clean energy ventures.

Clean energy backers point in particular to the significantly declining costs of developing and producing alternative energy as evidence of the economic viability of these ventures. For example, in the 1970s, large-scale solar energy solutions cost about 30 times more to implement than they do today. And new, larger wind turbines now generate 120 times as much electricity as 1980s' models at a quarter of the cost. Some of the newer technologies promise to bring costs down even further.

"The primary difference between what is happening now and what has happened in prior market cycles is it's now economically feasible and desirable to pursue these types of solutions," says John Balbach, managing partner at Cleantech Group, a network of clean technology investors and companies. "If the outcome is less pollution or reduced carbon or some impact on climate change, that can benefit in a positive way, but the primary [concern] is return on investment."

"At the end of the day, there has to be financial incentive for people to make an investment in the sector, and there is," says Patrick McCloskey, managing director of Evolution Markets Financial Services, which provides banking services to clean energy companies and their investors. "John Doerr [of Kleiner Perkins] and Vinod Khosla wouldn't be spending the time in the energy sector unless there was financial gain to be made."

Investors seeking a measure of how these companies might fare can look at the significant returns from the generation of alternative energy companies started in the 1990s.

Last year, Goldman Sachs made $900 million from its two-year investment in Horizon Wind Energy after it sold the wind farm to a Portuguese power company for $2.2 billion. And First Solar, a Phoenix-based manufacturer of "thin-film" equipment for collecting solar energy, went public in November 2007, raising $400 million and handsomely rewarding its backers like True North, an investment firm founded by now-deceased Wal-Mart heir John Walton. (First Solar now sports a market cap of almost $23 billion.)

At Ausra, things are moving ahead at full, uh, steam. Its U.S. steam facility is expected to go online this summer, and the production of its solar mirrors is starting this month. "It's just a matter of time before we begin to deploy on a large scale," says Robert Fishman, the company’s C.E.O. Some studies suggest that the market for the type of energy generated by Ausra could reach $200 billion a year by 2030.

To be sure, the path to success for most alternative energy companies will not likely be as smooth. For one thing, clean energy firms are often heavily dependent on the support of the government, which can be inconsistent.

"The problem is, all this investment is being poured into these firms, based upon the idea the government is going to regulate the heck out of the energy business," says William Yeatman, an energy policy analyst at the free market-oriented Competitive Enterprise Institute. "That's not the best basis on which to guide one’s investment."
 
In addition, wind and solar energy, which so far have been the energy sources most supported by the government, still face challenges related to energy storage and generation for times when the sun is not out or the wind is not blowing.

Despite these challenges, though, V.C.'s firmly believe that the companies that can eventually roll out their products and technologies on a mass scale will bring huge rates of return. Khosla, for one, says he is "very bullish" on the long-term prospects for clean energy, although he thinks the investment cycle may take as long as 10 to 20 years to play itself out.

"One has to keep perspective in mind," Khosla says. "There are few winners and lots of losers. In 1995, what could you predict about the internet? Almost nothing."

Other V.C.'s, like Mohr Davidow's Straser, believe that we’re only one or two years away from seeing blockbuster I.P.O.'s and billion-dollar acquisitions, particularly as large, established businesses like General Electric and Siemens look to startups for ways to reduce the energy consumption of their products and technologies. In the short term, Straser expects that the solar industry will see a handful of investments in the $100 million to $150 million range to fund the new technologies and expand production facilities.

Just as with the development of the internet, though, there's bound to be plenty of ups and downs in the clean energy business.

"Venture capitalists have a belief that there will be some very large wins here—[but] there's also going to be an awful lot of blood on the floor at the end of the day," says Emily Mendell, vice president of strategic affairs at the N.V.C.A. "The ones that are going to win are going to win very big."