Nearly a decade of Valley watching has made me realize one thing: VCs will jump at a chance of investing in any technology that they fail to come to grips with – market realities be damned. Take for instance the current obsession with Broadband Over Powerline, a technology whose record of failure matches that of expensive and bumbling trades made by the New York Yankees. Despite BPL getting as much if not more coverage than WiMAX, the fact remains that BPL is an iffy-bet at best. (BPL is a way to send high speed internet signals over the power lines instead of phone or cable lines!)

FCC’s incessant championing of the technology is partly to blame, and a bit of blame is on folks like me who never use the technology but write about it in glowing terms. Regardless, the venture capital community has started to pump in the dollars into this business, and according to Venture Wire email newsletter, Amperion, has raised $10 million as part of a Series A recap round. This is a company which has been through some topsy turvy times, and has emerged as a rival to publicly traded Ambient, which switched gears a few years ago from making smart cards. Investors include Aspen Ventures, Argo Capital, Global Internet Ventures, Pennsylvania Power and Light, Redleaf Group and Telkonet. Venture Wire says,

“Amperion has so far installed 25 of these networks.” Actually those are trials and how many will go into commercial deployment, no one knows. A market research study by Platts which makes a living out of tracking the energy business revealed that while consumers were willing to try the BPL only if it was cheaper than DSL and Cable.

“The industry has proven the technology, but not the business case,” Clark W. Gellings, a vice-president at the Electric Power Research Institute (EPRI) told Business Week recently. “If you could use the same asset to deliver home-entertainment and appliance monitoring to consumers, that’s phenomenal.” In theory you can get about 3 megabits per second downlink, but in reality the age of the copper lines and the noise on those lines delivers much less performance. Then there is the other issue of massive and expensive upgrades that powerline companies would have to undertake in order to make their switching centers network capable. I don’t think Wall Street investors will stand for that.

Companies like Duke, Progress and several others are only now coming out from under the dark cloud cast by their disastrous and mega-billion dollar flirtation with optical networking. Energy and power company investors looks for a predictable and perhaps more reasonable return on their investment and new ventures cut into the already wafer thin margins.