NEW YORK (CNNMoney.com) - Venture capital investors are flocking to clean energy technologies, a market expected to grow to $167 billion worldwide in the next decade, but some in the sector worry about too much money chasing too few deals.

Venture capitalists have been pumping increasing amounts of money into so-called clean energy technologies, ranging from solar power to alternative fuels and battery solutions. Venture capital funds invested $917 million in U.S.-based firms in the sector last year, up 22 percent from the previous year, according to Nth Power, a venture capital fund that focuses on energy technologies.

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"It's a real neck-and-neck race between new money coming in and the new opportunities coming along. At the moment, there's probably more money than opportunities," said Michael Liebreich, CEO of New Energy Finance, a research firm devoted to the energy technology industry.

Big names in the venture capital industry are getting in on the sector, which once was invested in mainly by niche energy funds, driving up deal valuations. Kleiner Perkins Caulfield & Byers, which backed Google and Amazon.com in the dotcom heyday, said it was committing $100 million to green technology this year, and other firms like Draper Fisher Jurvetson also have been ramping up investment.

"In the beginning there were a lot fewer folks in clean tech, but now you see every traditional VC in there," Warren Dowd, founder and CEO of Envoy Capital Management, a Canadian venture capital firm that backs technologies which help burn fuel more cleanly.

Venture capitalists generally help young start-up firms develop new products by providing financing and management expertise. They expect to generate a higher rate of return on their deals compared to traditional investments since they usually take on more risks.

Despite the competitive landscape, innovation is keeping deal flow interesting, industry players said.

"We're continuing to see growth both in the number of venture capital funds dedicated to the area as well as companies being funded. That combination says to me that 2006 will be robust," said Rodrigo Prudencio, principal at Nth Power.

Furthermore, with everyone from Capitol Hill to Main Street concerned about high oil and gas prices, enthusiasm for the sector remains upbeat.

"With gas prices and oil prices being what they are, there's going to be more of a focus going to alternative energy as long as VCs can find the types of companies that offer the returns (their investors) demand," said Clare Chachere, director of venture capital research at PricewaterhouseCoopers.

Public market valuations for some segments of the sector may have peaked, though. Solar companies accounted for the three largest technology IPOs last year, raising more than $800 million, according to Clean Edge, a green energy market research firm.

The WilderHill New Energy Global Innovation Index (Research), which tracks companies worldwide that focus on renewable energy and the advancement of low-carbon energy solutions, has gained more than 30 percent this year.

But Prudencio said public appetite for some energy tech deals, such as alternative fuels, remains high. One of his fund's investments is Seattle Biodiesel, which produces biodiesel from refined vegetable oil and animal fat.

"It's becoming more affordable to run diesel fleets on bio-based fuel," Prudencio said. And demand for ethanol is expected to surge as refiners shift from the gasoline additive MTBE to ethanol.

Liebreich from New Energy Finance said the outlook for clean energy technologies is extremely bullish, but warned about indiscriminate investing fueling a bubble in the industry.

"VCs need to have very strong discipline and not get carried away," he said. "Otherwise they will fall prey to the VC cycle which we've seen in the past."

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