Western government elections, and policy, and AI were major themes for global cleantech investment put under the spotlight this week on a webcast featuring senior analysts from the US and UK-based Cleantech Group.
The event also zeroed in on China’s elevated dominance of venture and growth investment in cleantech firms in the energy and power space, one of six major industry groups tracked by the cleantech researcher and advisor.
Cleantech Group CEO Richard Youngman wrote recently that investment in energy and power cleantech companies globally had increased by nearly 300% since 2020, “stimulated by energy insecurity and geopolitics, enabled by renewables, led by solar, offering such competitive pricing, and in the context that we need to meet the goal of trebling renewable capacity by 2030, as part of the drive towards agreed climate goals”.
In a year in which global venture and growth investments in cleantech measured by Cleantech Group fell for the first time in three years – from around US$55 billion to circa-$41 billion – CG research manager Anthony DeOrsey highlighted the positive long-term investment trend from pre-COVID times and also comparable raised levels of investment across 2021, 2022 and 2023 in energy and power, and materials and chemicals.
In energy and power, $12.37 billion invested in 2023 was still above the 2021 level ($9.64 billion) and not far off last year’s peak at $13.03 billion.
Similarly, $5.78 billion for materials and chemicals in 2023 surpassed the 2021 level but below last year’s $6.13 billion.
DeOrsey said Cleantech Group had recorded a doubling of venture and growth investments in Asia Pacific energy and power cleantech from 2020 to 2023 – representing a “significant underpinning of the energy and power numbers globally” – with investment rounds in China, particularly in solar, dominating the global picture in 2023.
“Solar in China is really the story of the day,” DeOrsey said.
Cleantech Group’s senior energy and power associate, Selene Law, said while China’s dominance of solar panel and component manufacturing wasn’t a real surprise, “they are also investing and innovating and scaling … so, the whole picture”.
“Chinese companies are raising a lot of capital at a time when their Western counterparts may be struggling,” she said.
“This really highlights the story that Chinese solar growth at the moment at least seems unstoppable and it will be quite difficult for Western OEMs to compete with that.”
While a fast-moving, global renewable energy and power supply train (or chain) – assuming it’s meeting environmental and other sustainability check-points – would seem preferable to a slow-moving one, concerns have of course been raised about the diversity, competitiveness and security of vital tech supply chains and this has translated into the usual array of impactful, and failed, government policies.
Youngman wrote that, entering 2024, the global innovation ecosystem had arguably never been stronger, notwithstanding venture and growth investments being in a “re-adjustment phase”.
However, meeting broad decarbonisation and energy transition ambitions – at the speed and scale seemingly required – as well as other development goals and (real or perceived) security threats, required “all other stakeholders to play their part”. They included policy makers as well as big finance and corporate leaders.
In this context, what The Economist called “the greatest election year in history”, with more than four billion people heading to the polls, was described by Youngman as “the elephant in the room” insofar as election outcomes might reshape policies seen as generally conducive to stronger short-term Western investment in some new tech and innovation.
This includes an avalanche of US and EU public funding for green or clean-tech ventures, right up the supply chain to so-called critical raw materials (and substitutes).
‘The struggle is real’
“The three elections to watch, for their impact on the direction of global cleantech for 2025+, are India, the EU and the US,” Youngman said. “India, because of its growing influence and sheer size; the EU, because Europe has been the steady hand setting a consistent tone in global dialogues for three decades, and giving us regulations that tax carbon, ban toxic products, etc; and the US, because having just got itself heading towards a more decarbonised and industrial future, built on technology, and domestic manufacturing and jobs, full-force Trumpism could hit the reverse course button.”
On the policy theme, Law, based in the UK, suggested the picture in Europe was less black and white.
“Only this week we saw a letter from the European solar panel manufacturing industry to the EU basically asking for more protectionist measures – emergency measures – to protect them from the influx of the cheap Chinese panels, or they will be forced to shut down,” she said.
“So, you know, the struggle is real.
“[In] wind … we’ve seen big cancellations of projects. We’ve seen government bailouts.
“Obviously the US is a slightly different story because they’ve got tariffs on Chinese imports.
“But it is very hard to see how you can stop the China train when it comes to wind and solar, especially considering that Chinese solar panels and wind turbines are catching up with the West in terms of quality, but they are still cheaper.”
Cleantech Group materials and chemicals lead, Ian Hayton, suggested materials was another area presenting Western policy makers with some Deep Thought problems.
“If you look at battery materials … certainly in the US this industry has received quite a lot of funding to scale technologies,” he said.
“If you think globally about how materials are extracted, refined and processed in regard to the manufacturing chain, there is an environmental benefit in locating your [downstream] plants either on the mine site or on the battery plant site. If you use lithium as a proxy, extraction, concentrate, refining in China and then back out again … doesn’t make a great deal of sense.
“I’m not really sure [about] a final say on whether or not we’ll be outpacing China in the US and Europe.
“But I think hopefully we’ll see an integration of supply chains.”
Integrated global critical material and downstream manufacturing supply chains? It might be a dilemma best weighed by an AI.
The other elephant in the room, perhaps, for cleantech and deep tech in 2024 and beyond, AI had certainly been proffered as a “distractor” or disruptor of the important upward trend in general deep-tech funding in the cleantech space, DeOrsey said. He, for one, was “generally optimistic” the accelerating pace of AI investment and attention wouldn’t subvert positive broader deep-tech innovation.
He and the other Cleantech Group panellists cited areas where AI was already embedded in deep-tech and cleantech development. Law said in energy and power, the two “went hand in hand”, and Hayton said there was “undoubtedly potential for positive impact” in materials and chemicals.
On a sidenote, McKinsey said this week the energy and materials sector was “uniquely well-positioned to benefit” from advances in AI and analytics.
“Within the agricultural, chemical, energy, and materials sectors, many companies are now moving beyond straightforward use cases and taking increasingly innovative approaches to adopting generative AI, and estimates show that an additional $390 billion to $550 billion of value can be created in the years to come,” McKinsey said.
“Gen AI’s potential to accelerate growth and reduce costs cannot be ignored.
“This is particularly true for the energy and materials space, which relies heavily on data and analytics for innovation and comprises sectors built upon increasingly nuanced and complicated processes.
“Simply stated, gen AI adds intelligence to any data, which can then be used to inform decision making – potentially reducing long processes to a single question – and it enables workers to gain previously unknown knowledge or capabilities.
“With this in mind, the growing list of exciting and nontrivial potential use cases in mining, oil and gas, chemicals, agriculture, power, and materials is ample reason for leaders to seriously consider gen AI.”
Cleantech Group’s Youngman said he expected AI in cleantech to be “looked at harder and harder in 2024”.
Which was “nothing new at one level”.
“But we are busy identifying businesses whose whole value propositions are built on AI’s unique capabilities – versus just a tool to create incremental improvements.
“One area of high potential is the ability to turbo-charge, via higher computing power, the development of new materials, new ingredients, etc.
“Over the last 2-3 years, the heaviest investment area for AI in cleantech has been around precision harvesting, weather prediction, crop and soil monitoring, farm management and smart irrigation.
“Recycling and battery intelligence are areas on the rise, too.”
