"Clean tech," as the overall industry is called, is not a single sector. It's made up of many, diverse investment opportunities: fuels, solar, wind, geothermal, materials, even water purification. Each has prospects and risks. For a refresher on the status of each sector, read "Clean Tech Revolution."

Venture capital and entrepreneurial talent are migrating from IT to clean tech, especially energy. Solar has been the strongest money magnet since 2005, but biofuels started catching up in 2006 and energy efficiency is getting attention this year.

Ira Ehrenpreis of energy VC firm Technology Partners says some big growth opportunities could be found at the nexus of clean tech and biotech. Biological advances are targeting clean tech applications, such as cellulosic biofuels.

Investing in clean tech takes focus and commitment. It's risky and remains the territory of qualified investors. Successful VCs have developed strong networks, technology expertise, and public-policy intelligence. They're forming new funds quickly to meet the rising demand by LPs.

Public companies will multiply as the exit environment shifts in the coming few years. The trend is positive, but thus far their numbers are few. Solar was the poster child of clean tech investment, with IPOs in 2005 by SunPower (NASDAQ: SPWR), Q-Cells AG (FRA: QCE), SunTech (NYSE: STP), followed by more in 2006.

The trend will continue, fueled by energy costs and subsidies as much as by corporate and public concern for the environment. Watch for biofuels (ethanol, biodiesel) and demand response/peak load management (commercial & industrial energy efficiency) IPOs next.

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