Investing in a Greener Future: Cleantech Progress and the Road Ahead
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On July 20, 1969, Neil Armstrong and Buzz Aldrin became the first humans to walk on the Moon. Part of their mission was to photograph Earth from the lunar surface, capturing how our planet appears from our closest neighbor. The image revealed Earth as a small, fragile dot in the vast cosmos—a powerful reminder that this tiny planet is the only home we have. The photograph sparked a global wake-up call, emphasizing the need to protect our environment. The pro-environmental policies and climate awareness that followed, along with technological efforts to shift to renewable energy, gave rise to the cleantech industry.
It has been more than 50 years since the moon landing, and today, cleantech is a well-established and revenue-generating industry supported by inventors and investors. However, essential questions remain: How far have we come from 1969 regarding energy sources and requirements? Are we ready to move on from fossil fuels and use renewables as our primary energy sources? And most importantly, how long will it take us to become an indeed “green earth”?
We answer this question by taking a deeper look at the current state of cleantech with insights from Paul Burgon .
Fifty Years of Remarkable Progress
After the humbling Earthrise photograph, the first order of business?was to set up policies and frameworks that supported green initiatives. The US put pen on paper for the National Environmental Policy Act (NEPA), the Environmental Protection Agency (EPA), the Clean Air Act, the?Clean Water Act, and even the Endangered Species Act. The Stockholm Conference in the United Nations marked the first time all nations cooperated to solve environmental issues. The Paris Agreement 2015 mandated all countries to limit global warming to 1.5 to 2 degrees Celsius above pre-industrial levels.
The result? Global renewable electricity generation reached 8,300 TWh in 2021, growing over 8% year-on-year - the fastest growth since the 1970s. In fact, 30% of global electricity is now generated from clean sources. The lion’s share belongs to solar energy, which has seen a staggering increase in power generation (23% over the last year alone). Wind energy is also growing in relevance, with 10% year-on-year growth in the last year. The International Energy Agency (IEA) forecasts that renewable energy sources will account for over 42% of global electricity generation by 2028, which is massive. The credit goes to two factors: the growing investment in cleantech and the?affordability of renewable energy components.
Global investments in clean tech and energy transition reached a record $1.8 trillion in 2023, representing a 17% increase from the previous year. Electrified transport took the spotlight from renewable energy as the main investment attraction, accounting for $634 billion (up 36% year-on-year). The Inflation Reduction Act, which aims to strengthen domestic supply chains and?lower household energy costs and greenhouse gas emissions in the United States, brought $303 billion worth of investments in the cleantech industry. For every $1 spent on fossil fuels, $1.7 was spent on clean energy. This ratio was 1:1 five years ago.
Installing renewable energy sources for residential and commercial purposes is now more accessible and cost-effective. The cost of solar photovoltaics (PV) has dropped by 90 percent in the last decade, while offshore wind prices have fallen by 70 percent and batteries by over 90 percent. Lithium prices have plunged by about 84% from their peak of?$82,000 per ton in December 2022 to around $13,000 per ton in early 2024. Affordable lithium means higher production of electric vehicles (EVs) and lower pollution in the coming years.
.. But Challenges Remain
The current situation of the cleantech industry is that of a tug-of-war between significant progress and massive needs. While we are transitioning to renewables and successfully recovered the ozone layer, there is still much work to do to reduce the global temperature and meet future energy requirements.
The Keeling Curve, which has tracked atmospheric CO? levels since 1958, recently recorded its largest-ever 12-month increase. CO? concentrations have risen significantly from around 315 parts per million (ppm) in 1958 to 422.03 ppm in September 2024, according to measurements from the Mauna Loa Observatory. Current CO? levels are higher than any point in at least 800,000 years.
The rise in CO? levels and global temperatures is primarily driven by increased manufacturing and transportation, which heavily depend on fossil fuels. The continued use of plastics also plays a significant role. A recent study found that plastics contribute to planetary warming four times more than airlines. If plastic production continues at its current pace, it could consume nearly 20% of the CO? budget needed to keep global warming below 1.5°C by 2050. While compostable plastics are often touted as a solution, they can contaminate current plastic recycling streams, require high-energy processing, and necessitate separate industrial composting facilities and recycling supply chains.
With the rising population and expanding residential spaces, the need for energy is also growing parallelly. The global grid capacity needs to grow 2.5 times by 2050, with an estimated expenditure of $970 billion. Currently, we have 77 million kilometers of grid lines, and we need to add or refurbish over 80 million kilometers by 2040.
The rapid growth of AI is also placing additional strain on energy infrastructure. Global data centers consume more electricity annually than countries like Italy or Australia. Current trends predict that AI data centers will consume 500% more energy over the next decade. Recently, the CEO of an energy distribution company received a request to power a single data center that would consume as much power as five nuclear reactors or the entire city of Miami. This unprecedented demand will likely rise with the growing grid demands.
It’s High Time The Investors Led From The Front
Considering the challenges ahead for cleantech, it is time for investors to step up and take serious measures to uplift the sector. This is a chance to make a difference for the good without losing more time or waiting for inspiration. It is high time investors prioritize industries with the potential for a?significant positive impact, such as renewable energy, sustainable agriculture, healthcare innovation, and clean water solutions. Impact investing offers a unique opportunity to generate financial returns and positive social or environmental outcomes. Here are some best practices for investors looking to make a meaningful impact:
Market Analysis: Conduct thorough market research to identify potential strategic partners, including current market leaders, adjacent market players, and potential new entrants to the market.
Engage Corporate Venture Capital (CVC) Groups: Many large corporations have dedicated CVC or innovation teams. Reach out to these groups to explore partnership opportunities.
Attend Industry Events: Encourage portfolio companies to participate in relevant trade shows and conferences where potential strategic partners will be present.
Develop Targeted Proposals: Work with startups to create specific partnership proposals that clearly outline mutual benefits.
Build Relationships Early: Start developing partnerships 2-3 years before any planned exit to allow time for relationship-building.
Maintain Independence: Ensure that partnerships are structured in a way that doesn't give the strategic partner too much control over the startup's future.
Align with Strategic Roadmaps: Understand the technology and strategic roadmaps of potential partners to maximize value creation.
By following these best practices, impact investors can maximize their financial returns and make positive contributions to society and the environment. We are not yet ready to move on from fossil fuels, and the dream of running on fully renewable energy is a distant dream. However, if forward-looking investors coordinate with entrepreneurs, we will slowly but steadily inch closer to the dream.
About the Speaker
Paul Burgon is a dynamic operations and investment executive with expertise in strategic analysis, creating and implementing processes, and overseeing consistent execution to generate outstanding results in struggling organizations. He has created and implemented a company-wide M&A process that Institutional Investor magazine has recognized as one of the best in the country. As the managing partner at Exit Ventures, Paul leverages his experience to invest in?and support early-stage companies in cleantech.
References:
Major Markets HCM Account Executive | Strategic Planning, Partnerships, Leadership, Product Management
2 周Great insights. Modern investors should be cognizant of muscle testing to discern the presence of truth or it's absence surrounding trends, executive appointments, and potential societal impacts. It's wise to test organizations and governing bodies to see where inefficiency really appear. If society can weed out the weak/ non supportive factors and personnel, the flow of progress is realized with less friction.
CoFounder/Managing Director: VectorPoint Impact Partners
2 周The clean energy investor community can fill the gap by sharing our knowledge, resources and capital to advance companies providing innovative solutions for clean energy solutions. Is there any higher priority than a healthy planet? Our future is now. Each of us can do our part to change the trajectory. Imagine a world with clean air, clean water and healthy food.