European Green Energy Companies Are Often Underfunded

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LONDON — When Jakob Bitner was 7 years old, he left Russia for Germany with his parents and sister. Twenty-eight years later, he is determined to solve a vexing green energy problem that could help Germany end its dependence on imported energy from Russia or elsewhere.

The problem: How to make wind and solar power available 24 hours a day, seven days a week, even if the sun is not shining or the wind is not blowing.

VoltStorage, the company he co-founded in Munich in 2016, has had some success selling storage batteries for solar energy to homeowners in Europe. Now the company is developing much larger batteries, each about the size of a shipping container, based on a chemical process that can store and discharge electricity in days, not just hours, like today’s most popular battery technology.

These ambitions to tackle the unreliable nature of renewable energy are in perfect harmony with Europe’s goals to reduce dependence on fossil fuels. But Mr. Bitner’s company is faced with a frustrating reality that threatens to undermine Europe’s plans and poses an even greater challenge in the global fight against climate change: a lack of money to get the job done.

VoltStorage needs “significantly” more money to develop new battery technology, said Mr. Bitner. In 2020 and 2021, the company raised 11 million euros, or 12 million dollars. Now, trying to raise €40 million more by this summer.

“Although we have large early stage investors from Germany and Europe who continue to support us, it is very difficult to raise the tickets we need right now,” said Mr Bitner, referring to individual investments.

Europe offers a preview for the rest of the world. The European Union has aggressive targets to reduce greenhouse gas emissions, and there is broad political support for tackling climate change. Blok poured public money into grants to develop new technology.

But once they receive start-up money or grant funding, businesses struggle to raise funds for the innovative, large-scale projects needed to complete the transition from carbon-emitting energy sources. The funding gap means Europeans either fail to meet their ambitious climate goals or face further energy shortages and rising costs.

Experts said solutions are available if a financial backing is given. According to the International Energy Agency, almost half of the reductions in emissions to meet net zero targets by 2050 will come from technologies currently in their infancy. In theory, there is plenty of capital for the multitrillion dollars globally. the task of financing this transition to greener energy.

The war in Ukraine has made Europe’s energy transition even more urgent. The European Union has said it will cut imported Russian gas by two-thirds this year and completely by the end of the decade. While some of this supply will be met by imports from other countries such as the United States and Qatar, expanding local renewable energy capacity is a critical pillar of this plan.

However, it is difficult to attract investors to projects that are trying to go beyond mature technologies such as solar and wind energy. Venture capitalists, once green energy cheerleaders, are falling more and more in love with cryptocurrencies and start-ups that deliver food and beer in minutes. Many investors are put off by capital-intensive investments. And governments have muddied the waters further with inconsistent policies that have undermined their bold commitments to reduce carbon emissions.

Tony Fadell, who has spent most of his career as an executive at Apple and founder of Nest trying to transform emerging technologies into mainstream products, said that even as the world faces climate change risks, money is flowing into less urgent developments in cryptocurrency. So-called metaverse and digital art collections sold as NFTs. According to PitchBook, last year venture capitalists invested $11.9 billion in renewable energy globally, while $30.1 billion in cryptocurrency and blockchain.

According to PitchBook, only 4 percent of the $106 billion invested by venture capitalists in European start-ups last year went to energy investments.

“We need to be realistic,” said Mr. Fadell, who now lives in Paris and has offered ideas on energy policy to the French government. “Too many people invest in things that won’t solve our existential problems. They just invest in quick money.”

It didn’t help that the industry was previously burned by a green tech boom. About 15 years ago, the next big thing in Silicon Valley was seen as environmentally conscious start-ups. Kleiner Perkins Caufield & Byers, one of the leading venture capital firms, has made former Vice President Al Gore a partner and promises that clean energy will eventually account for at least a third of its total investments. Instead, Kleiner became a cautionary tale about risks. Investing in energy-related companies as the firm missed the early support of social media companies like Facebook and Twitter.

There is evidence that these old fears are waning. Two years ago, 360 Capital, an early stage venture capital firm in Paris and Milan, launched a private fund that invests in clean energy and sustainability companies. The firm now plans to open the fund to more investors and increase it from 30 million Euros to 150 million Euros.

There are a growing number of private funds for energy investments. But even then, companies tend to be software developers, which is considered less risky than the builders of larger-scale energy projects. Of the seven companies supported by 360 Capital’s new funding, four are artificial intelligence companies and software providers.

Still, the company’s founder, Fausto Boni, said the situation has completely changed since the company’s first major green energy investment in 2008. “We see a lot of money potentially coming into the industry, and many of the problems we had 15 years ago are about to be overcome,” he said. However, he added that the availability of larger investments needed to help companies expand in Europe still lags behind.

Breakthrough Energy Catalyst, backed by Bill Gates, is trying to fill the gap. It was established in late 2021 to help move promising technology from development to commercial use. A $1 billion venture in Europe With the European Commission and the European Investment Bank to support four types of technologies (long-term energy storage, clean hydrogen, sustainable aviation fuels and direct carbon dioxide capture) it believes need to be scaled up quickly.

“There are significant challenges in the scale-up phase” in Europe, said Ann Mettler, vice-president for Breakthrough Energy Europe and former director general of the European Commission. There’s money for start-ups, he said, but when companies are reasonably successful and a little bigger, they’re usually bought by American or Chinese companies. This leaves fewer independent companies in Europe focused on the energy problems they set out to solve.

Companies that manufacture complex and often expensive equipment such as Mr. Bitner’s batteries for long-term energy storage have a particularly difficult time finding investors willing to absorb the risks. After several investment rounds, the companies are too big for early-stage investors, but too small to appeal to institutional investors looking for safer places to park large amounts of cash.

“If you look at typical climate technologies like wind and solar and even lithium-ion batteries, it took more than four decades for them to move from initial R&D to large-scale commercialization and cost competitiveness,” Mettler said. refers to research and development. “Four years – which we don’t have.”

There are some signs of improvement, including more funding focused on clean energy or sustainability, and more companies securing larger investment rounds. But there is a sense of disappointment as investors, companies and European governments agree that innovation and adoption of new technology must be much faster to significantly reduce carbon emissions by 2030.

“You won’t find a place in the world that is more adaptive to what is needed than Europe,” said Ms. Mettler. “It’s not because of a lack of ambition or vision – it’s difficult.”

But investors say government policy can help them more. Despite climate promises, current regulations and laws have not created strong enough incentives for investment in new technologies.

Mr Boni, founder of 360 Capital, said industries such as steel and concrete should be forced to adopt greener production methods.

According to Mr. Fadell, who has invested his personal fortune in Future Shape, government permits for energy storage, hydrogen, nuclear power and other large-scale projects should accelerate, cut taxes and secure appropriate funding. societal difficulties.

“There are very few investors willing to risk anything to invest $200 million or $300 million,” Mr. Fadell said. “We need to know that the government is on our side”

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