Industry convergence, private market capital flows, hawkish monetary policy, fragmenting supply chains, and rising carbon costs—as the race to net zero intensifies.
FREMONT, CA: Governments, corporations, and investors must act more quickly to tackle climate change. Businesses and investors now prioritize industry convergence, private market capital flows, hawkish monetary policy, fragmenting supply chains, and rising carbon pricing. As the battle to reach net-zero intensifies, let's examine how these developments may affect the climate-tech sector in 2022.
All roads lead to renewable energy
As many industries converge on renewables, projects and once unimaginable alliances are releasing opportunities. The oil and gas industry collaborates with emerging energy firms on green hydrogen initiatives. To aid the offshore wind industry, shipping companies construct wind turbine installation vessels. And mining firms invest in and even build renewable energy generation.
Increasing emphasis on hydrogen, for instance, continues to encourage industry-wide collaboration. Crosswind, a Shell and Eneco-led company, will construct and operate a 750MW floating wind farm in the Dutch North Sea. The project will also include floating solar, an electrolyzer, and energy storage in 2023 to make and store green hydrogen. Siemens Energy and Korea Gas Corporation announced a partnership to manufacture green hydrogen and develop its application in turbine-based power generation.
Last year, ABB received a $330 million contract for wind turbine installation vessels, a trend that is anticipated to continue as 80GW of offshore wind power will be required annually through 2030 to achieve net-zero by 2050.
And South Africa Mines is to invest $2.7 billion to construct its power plants, which will rely heavily on wind and solar energy, in response to frequent power outages. As the energy transformation becomes a global priority, all roads will lead to renewables.
The Rise of Climate Technology
Industry convergence has the potential to alter the investment landscape. Consequently, investors should seek out businesses with skill sets that extend beyond a specific specialty, such as wind or solar. For example, companies that can combine their power with batteries and set up green hydrogen projects through partnerships with off-takers will spur the next wave of investment.
The point is driven by oil and gas firms' investment trends. Last year, Chevron decided to purchase an equity stake in ACES Delta, a joint venture between Mitsubishi Power Americas and Magnum Development that produces, stores and transports green hydrogen throughout the United States. Last year, 41 of the world's major oil and gas refiners collectively invested a record $21 billion in sustainable energy, a 53 percent increase over the previous year. Wind and solar dominated investment, but hydrogen and storage made strides.
Opportunities extend beyond the production of energy. Climate-tech solutions for greener transportation, buildings, industry, and agriculture continue to attract significant investment. In 2021, the climate-tech sector raised $165 billion in corporate financing, with transport and energy obtaining 82 percent of the flows from public and private markets. The majority of the $53.7 billion raised by eight climate-tech startups came from venture finance and private equity.