Climate experts and scientists warn that the world’s average temperature could rise by as much as 4 degrees Celsius by 2100, unleashing chaos and destruction on an unprecedented scale. It could lead to widespread flooding, intolerable heat waves, droughts, fires, stagnant seas and uninhabitable cities.
While governments and organisations mull various carbon targets aimed at keeping human-induced global heating within safe levels and funding for coal- and gas-fired power generation continues to decline, investors are seeing the value of renewable-energy start-ups and other carbon-reducing technologies.
Fossil fuels out, clean tech in
A report by the International Energy Agency shows that more than 100 globally significant financial institutions have constrained investments into carbon-intensive fossil fuels like coal, aimed at keeping human-induced global heating within safe levels.
A group of billionaire philanthropists, which includes Gates, Bezos and Ma among others, have even set up a £0.790 million fund called Breakthrough Energy Ventures to assist 14 companies involved in research of everything from battery storage to fusion energy “to make sure that everyone on the planet can enjoy a good standard of living, including basic electricity, healthy food, comfortable buildings and convenient transportation, without contributing to climate change.”
In the last few years, there has been a substantial increase in the number of technologies in ‘clean tech’ appropriate for investment,” says Mo Rassolli, senior consultant at London-based TrendScout. “It goes beyond three or four technology verticals.”
Today, a cleaner energy future has a much wider choice of investment targets. This has attracted the attention of a lot of deep-pocketed investors, ranging from major global investment banks to billionaire philanthropists such as Bill Gates, Jeff Bezos and Jack Ma. A shift towards cleaner energy, rising environmental concerns and drastic changes in perception about the use of fossil fuels makes it logical to invest in companies and projects in the clean energy space.
Also, technologies ranging from wave farms, better battery technology nuclear fission (and potentially fusion), sophisticated distributed grid storage systems and solar power, among others have evolved substantially since 2008 when the last renewable investment boom fizzled out in the face of a mounting financial crisis.
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Breakthrough Energy Ventures (BEV)
Breakthrough Energy Ventures (BEV), which features dozens of high-net-worth individuals from 10 countries as well as its founders Bill Gates, Richard Branson, Jack Ma, Michael Bloomberg and Jeff Bezos, was formed in the December of 2016 to "focus on fighting climate change by investing in clean energy innovation."
The $1 billion (£0.790 million) fund seeks to relinquish short-term profit in favour of the much-needed time and operating capital required by researchers and companies involved in capital-intensive renewable energy space. The fund currently lists 14 companies in its portfolio, ranging from start-ups working on battery and grid storage technologies to companies involved in R&D into fusion power, capturing water from the air and carbon in concrete, geothermal power generation and other long-range efforts. The capital injected into each of these companies ranges from $200,000 (£1,58,050) to $20 million (£15.81 million), depending on the company’s needs, technology, the work it is undertaking in the realm of clean tech and the stage of development.
Prominent companies and start-ups that are the focus of attention and investment include: next-generation battery start-up Form Energy and underground pumped hydro storage start-up Quidnet Energy. Also in the list is QuantumScape, a solid-state (lithium-metal anode) battery start-up developing tech in areas such as fusion energy, atmospheric water harvesting and capturing and new ways to capture carbon and make fertilizer.
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Big numbers & improved regulation
A February research note by UBS points out factors such as fast-paced urbanisation, rising population, and technological advances that bring down the cost in the renewable space and an improved regulatory environment are primary factors, making renewable energy sector a highly profitable prospect for rapid ROI. Globally, cumulative investment in renewables will surpass $9 trillion (£7.13 trillion) by 2050, they say, while cumulative investment in energy efficiency and clean-air technologies will balloon to $35 trillion (£27.72 trillion) by 2030.
Breakthrough Energy Ventures (BEV) fund, however, is not the only fund at the forefront of investing in technologies related to cleaner energy. Another case of this support for investing in cleaner sources of energy was the Renewable Energy Buyers’ Alliance, aiming to encourage more companies to opt for energy generated through wind, solar and other renewable sources rather than fossil fuel. The demand for electricity coming from cleaner sources is likely to encourage more companies to invest in cleaner sources of energy.
On the flip side, it has been found that big banking institutions around the world are taking a contrary approach to the big tech companies increasingly focusing on cleaner energy. It has been found that big banks, perhaps lured by quick return on investment, are still betting on fossil fuel.
A recent report from a group of environmental organisations dubbed banking on climate change found that investment in fossil fuels from some of the largest banks in the world still shows no signs of slowing down. The report reveals that big American banks, including Wells Fargo, JP Morgan, Citi, and Bank of America were the biggest culprits investing as much as US$1.9 trillion (£1.5 trillion) in the oil and gas industry between 2016 and 2018. These top oil and gas spenders were followed by RBC and Barclays.
However, experts suggest that the end of a complete fossil-free era at present is neither possible nor feasible. Post fossil fuels, we will require unprecedented electricity production to cater to the needs of the growing population and an equally growing affluence in many parts of the world. Despite the long-range bets on start-ups, promising everything from fusion power to underground pumped hydro storage to solar panels that capture water from the atmosphere may pay off handsomely in the near future, but oil and gas will continue to be with us for quite some time.