In green tech, there are a few markets — solar and efficiency come to mind — where startups stand a halfway decent chance of becoming a going concern or a ripe acquisition target. Efficiency revolves around hardware and software, while solar seems to give birth to new sub-niches all the time.

You’re not going to start a crystalline silicon solar module company in the U.S. today, but a company that can produce thin, inexpensive crystalline wafers for Chinese module makers could enjoy a bright future.

Power electronics — high-demand, novel concepts, and a lot of established chipmakers have been dozing on this issue — could become a robust sub-market for acquisitions.

Bioplastics? Modular homes? Smart grid? Which green market gives you the willies?

And then there are the industries where doom lurks around every corner. Consider biofuels. In 2005, biofuels looked easy. Peak oil loomed, feedstocks like wood chips, algae and corn stover had little economic value. Plus, the people making money in this business lived in Houston: if they were so smart, how come they live there, VCs asked themselves.

The answer came hundreds of millions of dollars later. Growing algae in ponds might be cheap, but separating the algae from water has been an unsolved technical issue since the late ’70s. Microbes that convert forest waste to alcohol can die at low levels of fuel production. Distribution is another hurdle: Don Paul, the former CTO of Chevron, once estimated that it takes about $3 billion and 15 years to get a new fuel from the lab to the market.

The rising price of oil and a growing interest among large corporations to stabilize their commodity expenses has helped revive the market. Amyris, Solazyme, and Gevo have all recently successfully held IPOs. All three companies, however, remain in the early stages of development. All three have targeted specialty chemicals — which can fetch higher prices — instead of fuel.

Home networking? Unlike commercial building management, the gains from home automation are small on a monthly basis compared to the cost of a system, so utilities and demand response providers will have to subsidize this. In turn, that means for every company like Tendril or EcoFactor that wins a major contract to blanket a territory, there will be 16 also-rans. Approximately 108 home networking companies have received VC funding. “Not too many of them have made a lot of traction,” said Steve Goldberg of Venrock recently.

But home networking companies have it easy compared to water startups. Electric and gas utilities are zippy Web 2.0-like outfits compared to municipal water districts, which are even more strapped for money than their counterparts are for power. Desalination plants must also pass through the colonoscopy of public land use hearings.

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