With 2022 in retreat, investors have made no secret that they’re looking for safe investments. In a challenging market with higher interest rates, that’s no surprise, but what might raise eyebrows is where investors think those quality investments lie. Increasingly, it’s in climate tech.
As much as venture capitalists like to say their investment decisions are unswayed by political and geopolitical developments, it’s likely that next year’s deal flow will be driven by just that.
So with more investors looking to dip their toes in the climate world, let’s take a look at where they’re likely to put their money to work.
Russia’s invasion of Ukraine drove many countries to embargo the aggressor’s oil and gas. It also sent them searching for alternatives. While renewables can’t replace that sort of demand in a few months, the self-imposed shortage caused many economies to reconsider their reliance on fossil fuels. That, in turn, has sparked a surge of interest in wind and solar power and, more importantly, large batteries to ensure those intermittent sources can provide continuous, stable electricity to the grid.
As renewable projects grow more sophisticated — made possible in part thanks to batteries — developers will need software and platforms to manage them. In the coming year, I expect we’ll see growing investor interest in startups with software solutions that are focused on renewables and grid-scale batteries.
In addition to renewables, the IRA gives carbon capture projects a boost through enhanced tax credits. While all forms of carbon capture benefit from this, I suspect investors will be paying the most attention to direct air capture, which, instead of absorbing carbon dioxide from an exhaust stream, draws it directly from the atmosphere. The IRA offers a tax credit of up to $180 per metric ton, a significant increase from the $50 per metric ton offered previously.
Six 🔥 climate tech trends to watch for in 2023 by Tim De Chant originally published on TechCrunch
