Entrepreneur Brad Hines’ first solar company crashed and burned, but he’s already started another venture, a story which offers cues on how the entire green-tech sector can reinvent itself in tough times.

In 2005, Hines left his work as a NASA engineer to build a radically new and powerful type of rooftop solar collector. But even after taking in tens of millions of dollars from top-shelf investors, the company, Soliant Energy, ultimately failed and its intellectual property was sold off, reportedly at bargain basement prices.

Now Hines is at work on another solar startup called Thermata with a whole new approach. Rather than try to reinvent the solar panel, he’s using existing concentrating solar thermal technology to address a very specific business need–making steam for industrial boilers. Getting funding is a completely different game than it was in 2005, too.

“It was a time when a naive new entrepreneur could have a good idea and get funded. In this market, just a good idea won’t get you funded. You need a lot more.” said Hines. “And in solar, the days of quantum changes in cost and performance are over…It isn’t like microprocessors where you can keep doubling the speed.”

Welcome to green tech 2.0. In the first wave, venture capitalists threw billions of dollars at technologies with potential to disrupt the energy industry and stall climate change. Now, entrepreneurs need to be far more savvy about raising money and smarter about how to build a business. In short, people who want to do good by the planet and do well financially need a new playbook.

What’s at stake isn’t just whether the next Google will come out of the green-tech sector. It’s not a cure-all, but innovation in clean-energy technologies can help perk up the U.S. economy while addressing environmental problems and cutting the country’s fossil fuel use. If businesses–the engines of green-technology development–are starved of investment and public interest, the pace of innovation could slow down.

The good news is that entrepreneurs are still being attracted to clean-energy technologies, often motivated by a desire to work on something meaningful. But the realities of venture capital mean that science experiments most likely won’t get funded by those sources anymore. Projected cuts in federal spending don’t bode well for a big influx of research funding either.

Instead, funding could come from multiple sources, including VCs, and innovation may be as much about business models as technology. For example, some of the most successful startups in solar are installers which offer solar leases, a financial innovation that’s helping make rooftop solar panels accessible. Even with a big technical advance, say in energy storage or fuel cells, people need to be very calculating about how to get a commercial foothold.

“The first wave of clean tech belonged to the material scientists. The next wave belongs to the entrepreneurs,” said green-tech investor and industry observer Rob Day. “There’s plenty of technology innovation that would make an improvement on the status quo…The biggest challenges are actually commercializing it.”

Ambitious green companies should apply their technology to solve a specific problem and bundle it up in a way that’s easy and low-risk for customers to adopt, said Rob Day. The computer industry learned that years ago: instead of selling a PC, IBM reinvented itself selling packaged solutions which include hardware, software, and services–a strategy many others have copied.

Breakthrough versus slow and steady 
Revisting just a sampling of ambitious green-tech startups from last decade today shows that things haven’t always worked out as planned. Venture-backed companies don’t fully represent all innovation in green technologies, as large companies and research labs are known to innovate as well. But the wave–some would call it a bubble–of VC activity created high expectations and buzz around the idea of making money by being green.

The solar industry is seeing the dangers of competing in an industry where you’re creating a commodity product–a flow of electrons. Dozens of Silicon Valley solar startups bet on thin-film solar cells, which remains viable technology. But the onrush of Chinese manufacturers in traditional silicon solar cells has lowered the cost per watt by over 50 percent in the last two years, making it difficult for companies without a technical edge and low-cost manufacturing to survive. Evergreen Solar filed for bankruptcy protection this month, but analysts say that there will be tough times and consolidation among the others.

Another popular investment target, biofuels have failed to scale beyond pilot stage or meet government mandates. A dismal example is Range Fuels which last year secured $162 million in local, state, and federal subsidies for a plant to makeethanol from locally harvested wood chips. But the plant shut down earlier this year after technical challenges couldn’t be overcome.