U.S. infusion of federal funds into clean technology projects has prevented the collapse of many green firms, revived enthusiasm and is now generating optimism for the emerging sector in 2010.

The impact of the aggressive stimulus from the U.S. government's Department of Energy (DOE), which has promised nearly $100 billion for a number of green projects, will begin having a visible impact on the sector next year, industry executives and venture capitalists told the Reuters Global Climate and Alternative Energy Summit in San Francisco.

But the stimulus also had an unintended impact on the sector. It slowed the pace of activity this year, given the rigorous and lengthy process of applying for the U.S. government funds.

I think it's basically set the stage for a great 2010 and beyond, said Steven Chan, chief strategy officer of Chinese solar panel maker Suntech Power Holding Co Ltd. I think in 2009, it had the interesting effect of maybe even slowing the market.

In the short term, it's a little bit of a negative, but it's a long-term positive for the market and the industry, Chan added.

Investment in green technology -- which includes everything from renewable energy, electric vehicles and energy storage to effective transmission of power -- dropped in the last nine months following the economic recession and plunge in oil prices.

Both venture capital funds into the sector and financing for green projects, including solar, were hit hard by the economic downturn and financial crisis.

With the DOE funding, the sector is already seeing some activity. The department announced more than $2 billion in funding for 48 advanced battery and electric car projects about a month ago.

With the first $535 million loan guarantee awarded under a 2005 U.S. program for advanced clean energy, privately held Silicon Valley solar company Solyndra began construction on its second solar panel manufacturing plant.

Along with the government money, venture funds are also coming back into the sector as in many cases the companies had to raise part of the project cost themselves while applying for federal money.

In Solyndra's case, the company is using $198 million it received from an equity financing round for the construction.

While the government has announced grants and loans linked to the economic stimulus, much of that money has yet to make its way to the companies, executives said.

Some companies like smart grid company Silver Spring Networks are still waiting for DOE to grant the money to its partners, mainly power utilities.

Silver Spring Chief Executive Scott Lang said while the federal funds in the smart grid sector will provide a boost, not everyone who applied for it will get the money.

I think it's going to be way oversubscribed, just going by the number of applications I have countersigned, Lang said. I think we'll see an acceleration in the expansion, new features put into the (power) infrastructure.

The company, which has contracts with power utilities that serve 25 percent of the U.S. population, expects 2010 to be a very strong year for booking orders, mainly because of the expected stimulus money flowing into the sector.

While many applaud the U.S. government for stepping in at the right time, some say there is room for the United States to do more to boost green technology, which is often billed as the area that could herald the next boom.

A few years worth of funding would not go a long way in the emerging green sector, according to Google Inc Green Energy Czar Bill Weihl.

The stimulus package is great start, he said. It's a stimulus. It's like a shot in the arm. At some point the shot wares off.

Weihl said he would like the U.S. government set aside $20 billion or $30 billion for 10 years, mainly to develop ideas at the laboratory stage.

Sustained funding is really critical, he said.

(Additional reporting by Laura Isensee, Nichola Groom, Peter Henderson, Braden Reddall and Mary Milliken in San Francisco; Editing by Richard Chang)

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