Achieving net-zero is a complex challenge for the deeply interlinked energy economy we are living in and have formed over the last century. However, we are in a phase where climate technologies and innovations are happening at a brilliant phase and the key challenges are now around deployment, scale, expansion and getting the economics right.
The right Venture Capital bets in deep tech backed by science and not FOMO or trends will help massively in accelerating the world towards net-zero. It is imperative to support ventures and technologies that take on the crucial market challenges and those adopting innovation that’s scalable and directly impacting emissions reduction, capturing emitted carbon and making the world economy greener.
Let us take a macroscopic look at the emissions scenario globally and then zoom in to understand where the market challenges lie and which crucial technologies to be bullish on to achieve net zero.
Five Key areas of emissions with their current % contribution to emissions :
Electricity 29%
Industry & Manufacturing 29%
Agriculture 20%
Transportation 15%
Buildings 7%
Most solutions to these problems come from scientific innovations and breakthroughs.
Each of these key areas has technological solutions, market challenges and other issues that need to be addressed through groundbreaking ventures.
Growth Venture capital and systematic venture building approach have a huge role to play in taking these technologies from lab and pilots to market and global scale. There lies a huge opportunity for the world of venture capital, innovation and entrepreneurship to create impact and a new greener economy.
Climate Technologies driving optimising and offering opportunity
Green Hydrogen
Green hydrogen is produced through electrolysis of water using renewable energy sources.
The most abundant element in the Universe can hold answers to a lot of our questions to address our climate crisis. The efficient production, storage, distribution and development of innovations around these hold huge promise.
Green hydrogen as a fuel is clean and generates water as the output of combustion. It has the versatility to replace fossil fuel needs across multiple industries
There are great winds from policies that are supporting the investment and innovation around green hydrogen generation and usage in various industries
Due to more efficient electrolyzer innovations and reduced costs of renewable power, the overall costs of green hydrogen could fall by 2030 through scale-up of production.
Versatility in Application: Green Hydrogen can be used to decarbonise multiple industries including use in transportation as Fuel Cell vehicles, industrial processes such as steel production can be supported by green hydrogen, and also energy storage for later use.
The green hydrogen market has a huge CAGR of around 50%
Early investments into technologies for efficient production and usage of green hydrogen for decarbonisation at scale are huge opportunities as the world transitions partially to a green hydrogen economy
LDES [Long Duration Energy Storage Tech]
Long-duration energy storage technologies are another sub-sect I am bullish on.
LDES are a host of different technologies that store and release energy through mechanical, thermal, electrochemical, or chemical means. LDES technologies are still being piloted and tested out, and identifying and investing in a scalable, deployable and cost-effective LDES would be a great opportunity
LDES are needed to support a smooth transition to a renewable energy grid and to solve the challenge of intermittent energy generation
Multiple LDES technologies are being developed and few have been de-risked and are ripe for scale.
Governments, including the UK, across the world are providing policy and regulatory support to deploy LDES in the grids.
LDES would unlock the challenge of demand and supply balance in the grid
Around 1.5 - 2 TWh of demand for LDES by 2040
Driven by these demands, policy and requirements wind in the growth direction
The increased opportunity for exits with PE also pushes capital
LDES technologies are a compelling investment opportunity for a Series-B fund accelerating the transition to Net-Zero. Cost, duration of storage and deployment at scale are the key risks to growth.
Carbon Capture & Storage Technologies: DAC (Direct Air Capture)
While we are making strides by deploying technologies to reduce emissions, the removal of emissions is another huge part of the problem to be solved. This is where Carbon Capture and Storage technologies and innovations have become crucial. The key reasons for being bullish on these technologies are
Huge policy pushes, regulatory support and incentives by governments across the world, US incentives bringing the cost significantly down. Inflation Reduction Act.
The innovative repurposing of the Carbon captured also offers alternative revenues
Heavy industries across the world are increasingly embracing the potential of DAC and other capture technologies as a realistic path towards decarbonization. Great and proven demand from the market.
Technologies are evolving quickly and can capture 90% of emissions.
Huge CAGR are growth of about 50% over the next 10 years offering a huge TAM
All the above factors make Scalable Carbon capture and storage-related technology ventures a phenomenal opportunity to capitalize on and support as a Climate VC fund.
Digital Platforms for a changing economy: Advanced Climate Modelling- Risk Assessment- Market Places for offsetting/transition/credits
The transformational shift in industry, accounting, technology and processes will create huge scope for innovation in digital platforms-based solutions in this rapidly evolving economy.
The need to adapt and meet net zero is pushing industries and enterprises to figure out the risks of the changes.
Platforms that assist corporates, small and medium businesses and industries to switch to better processes, and offset their carbon footprint will have a huge impact and a role to play
Huge scope to build platforms that help model the risks around climate change, and use data to help enterprises manage their transitions in the next few decades would be in demand
I am bullish on these platforms to solve the market, industry and process incongruities generated from the transition to net zero and to achieve a new normal.
Climate Adaptability Tech: While we push the world towards net zero, we also have to adapt to the already accepted levels of temperature increase. Ventures working on solutions to the new normal established are also a great source of value creation.
After delving deep into the science of climate tech and the innovation that can take us to a better and greener normal, I feel optimistic, but we need capital and entrepreneurial spirit at scale and driven by the urgency to achieve that new normal and protect the earth.
Comments