The head of Scottish Equity Partners (SEP), which raised one of Europe's largest venture capital funds in 2006, said his firm was wary of investing in alternative energy sources despite the current hype surrounding wave and wind power.

Calum Paterson, managing partner at SEP, said he was "fairly cautious" about the sector despite surging interest in alternative energy sources.

Although SEP will likely put some of its cash into the sector eventually, the group has to date passed over numerous proposals from start-up firms working in this area.

Paterson said although alternative energies would undoubtedly become very important in years to come, there was "little clarity" in the sector at the moment. Many fundamental questions remain about how to best capture and transmit energy from natural sources, making it difficult to assess the potential effectiveness of new innovations.

However, Paterson said the biggest barrier was the fact that the sector is heavily regulated and influenced by government.

Much of the current interest in alternative energies is being driven by strong support from Europe, the UK and the Scottish Government.

"But from an investor's point of view, we have got to think about the long term," Paterson said. "What happens if the government changes, or priorities shift?"

SEP is currently investing from its £160m SEP III fund, which it raised last year from blue-chip European financial institutions. Earlier this week, it was named UK venture capital firm of the year at the UK private equity awards in London.