December 2021 Cleantech Roundup: Year in Review
For the December edition of the Roundup, I wanted to look back at some of the most important stories that happened this year. I’ve also included some of the other news headlines I was keeping track of, although to be honest, COP26 pulled forward a lot of action and announcements, and the holidays tend to be a slower time, so it wasn’t a particularly revelatory month in Cleantech news.
While the year has had a lot of news, there were few major topics that showed up over several months:
1. The development of the infrastructure, services and support to enable the rapid electrification of transportation
2. Leadership from corporations to be committed first customers for products that can decarbonize the economy
3. Middling government action
Also, one crosscutting theme that is hard to avoid is the significant increase in new climate tech investment funds.
Let’s look at these one by one.
The development of the infrastructure, services and support to enable the rapid electrification of transportation
Throughout the year, we saw supply chain investments in EV battery materials and battery recycling, announcements about the growth of changing networks branded by automakers as well as increasing interoperability; we also saw several companies who provide EV fleet management services acquired (including BP’s acquisition of Amply, below).
I think it reflects the inflection point we are currently at with vehicle electrification. As the vehicles start to be interesting to the mass market and start to be purchased in real volumes (a transition happening now), rational corporate actors are going to invest where it is needed to ensure they are set up for a successful transition (and government incentives aren’t hurting, either).
eadership from corporations to be committed first customers for products that can decarbonize the economy
Several announcements around COP 26 highlighted corporates who had made commitments to be early customers for new technology solutions, in order to help create market pull — this included the First Movers Coalition and Breakthrough Catalyst, but they weren’t the only ones making moves.
Stripe’s support for carbon removal companies has been an innovative approach; later in the year we touched on some of the lessons learned from the carbon removal purchases Microsoft and Stripe has undertaken. Also worth mentioning on the corporate front is the purchases and support for Sustainable Aviation Fuel from airlines, particularly United Airlines.
While governments have a significant role to play in helping usher in these new solutions; in the absence of certain policies, corporates and other stakeholders can make a big impact on the market for these emerging technologies by committing to buying specific volumes of these products.
These moves can help the emerging companies by making it easier for them to attract financing while also giving them an opportunity to start working their way down the cost curve.
Middling government action
There were several substantial climate policy bills at the state level, including Washington State’s carbon price and the climate legislation passed in Illinois. Tangible research, development, and demonstration support for new energy technology was also included in the infrastructure bill. That said, COP26 was underwhelming for many, and the climate/reconciliation bill was declared dead (although rumors of its death have been greatly exaggerated).
As noted above, governments have a significant role to play. While observers agree that not nearly enough has been done yet, it does seem like there is an increasing recognition of the need for significant action on the part of public and private stakeholders.
Gridlock is still a problem, but there is optimism as climate has risen in the US to become a top-tier political issue (as it is already in western Europe).
One other trend that is sure to be clear to folks following the space is the incredible surge in climate tech investment over the year (really over the last couple of years). There are tons of new investors, new fund closes being announced, bigger rounds in the space — it’s clearly in vogue.
I don’t actually cover the week to week fundraising announcements much in the roundup as raising money is just a means to an end, but that doesn’t mean the dollars aren’t valuable in helping companies grow and succeed!
Also, while money has poured in across the climate tech sector and across stages, the figures tend to be distorted by the mammoth late stage funding, especially those going to electric vehicle companies (much as it was a couple years ago with funding to scooter/ micromobility companies). A $200 million investment in an autonomous electric vehicle is not that relevant for someone trying to raise a million to develop sustainable plastics.
Further, while there absolutely is more early stage money, it has so far been extremely concentrated in and around the coastal hubs (San Francisco, New York, Boston, Los Angeles).
Ample Number of Fleet Electrification Acquisitions:
BP acquired Amply Power, a provider of EV charging services for fleets. It’s boom times for EV fleet services M&A, with NextEra’s acquisition of eIQ Mobility (fleet electrification service provider) last December and the Ford acquisition of Electriphi (maker of changing management and fleet monitoring software) in June.
Fleet management of EVs is a lot more complex than just plugging in a car in your garage (as companies need to be concerned about charging locations, dwell times, and avoided peak demand charges), and this is a great opportunity for energy focused companies to both get their foot in the door here and acquire businesses that have the potential for significant recurring revenues.
Breakthrough Energy announced an RFP for project-level financing of deployments of several key technology areas: direct air capture, sustainable aviation fuel, green hydrogen production, and long duration energy storage. RFPs are by design not exciting, but expect interesting stuff coming out of this initiative. Link
New Auto Efficiency Standards:
The EPA announced new tighter auto pollution standards, requiring passenger vehicles to average 55 miles per gallon by 2026, up from 38 miles per gallon today (for context, electric vehicles tend to be a bit above 100 miles per gallon equivalent). Link
One Utility EV Charging Initiative to Rule Them All:
A new combined coalition of utilities and other stakeholders was recently announced to support EV charging infrastructure. The National Electric Highway Coalition combines the Electric Highway Coalition and the Midwest Electric Vehicle Charging Infrastructure Collaboration (affectionately referred to as MEV-ciC by no one).
While a lot of charging infrastructure is going to be created organically by charging infrastructure companies, supported and enabled by interested businesses, federal, and state governments, utilities have an important role to play in making sure it is easy enough to install new charging capacity. They also have a lot to gain from EV adoption.
Some utilities may be focused on the small ball of owning EV chargers so that they can rate base the asset, but the real opportunity for utilities is the growth in electric vehicle demand as we transition from petroleum to electricity as the primary input for transportation vehicles. Link
Battery Materials R&D Driving Down Costs:
A recent MIT study attributed more than 50% of rapid cost declines for lithium ion batteries to investment in materials & chemistry R&D (as opposed to just manufacturing scale-up / economies of scale, which accounted for about 30% of cost declines in this analysis). Link
Ford leans in with a meme heavy approach to addressing range anxiety via social media. Link