Cascade of climate-tech funds take aim at $10 trillion energy transition opportunity

ImpactAlpha Editor

Amy Cortese

ImpactAlpha. April 14 Sign of the times: A clean energy venture firm launching in the heart of Texas’ oil patch.

Houston-based Energy Transition Ventures, seeking to raise $75 million, cites the dramatically falling costs of renewable energy, which have made it cheaper to build new clean energy than to operate existing fossil fuel plants.

At least 500 multi-billion dollar energy companies globally, and a big chunk of global GDP, “are going to get disrupted in the energy transition,” said ETV’s Neal Dikeman, an oil industry transplant who created cleantech venture funds, including at Royal Dutch Shell.

The contours of the massive opportunity created by the energy transition are coming into view. “I look at this as one of the greatest investment opportunities over our lifetimes,” BlackRock’s Larry Fink said this week in unveiling Decarbonization Partners, a new $600 million partnership with Temasek to invest in carbon-cutting startups. BlackRock, which also raised a $4.8 billion global renewable energy fund, sees a $10 trillion investment opportunity in the transition to a net-zero economy.

Clean trillion

An estimated $1.6 trillion to $3.8 trillion is needed each year in low-carbon energy and other climate-smart infrastructure to stay within the global warming goals. Such spending by public and private players peaked in 2017 at $612 billion globally – and has been flat or declining ever since.

Multi-trillion dollar green COVID recovery packages in the U.S. and Europe, and ambitious emissions reduction targets ahead of the COP26 global climate summit in November, could finally break the logjam.

Billion-dollar babies

Breakthrough Energy Ventures, Energy Impact Partners, Amazon, Microsoft and Generate Capital each have launched funds of $1 billion or more aimed at accelerating the transition to a low-carbon future.

Other signs of the surge: Renewable energy and storage companies raised a record $20 billion in public markets in 2020; and electric vehicle makers raised nearly $28 billion, according to BloombergNEF. Some $732 billion in sustainable debt was issued.

Energy Transition Ventures’ more modest $75 million fund will invest in early stage startups. GS Futures, the corporate venture capital arm of Korea’s GS Group, backed the fund’s first close. Dikeman’s ETV partner, Craig Lawrence, led cleantech investing at Accel Partners and held operating roles at SolarBridge Technologies and SunEdison.