Subsectors

Tackling Climate Change is moving to the next phase, following “offsetting emissions” (trading schemes), “reducing emissions” (renewable energy etc.), adding “eliminating emissions” (via carbon capture, storage & utilisation). A host of promising “eliminating” approaches (to complement nature-based sinks) are emerging, as is the cohort of carbon-focused (“ClimateTech”) investment funds. There’s everything to play for, for start-ups, investors and corporates.

The “Hydrogen Economy” is taking off and seems to be “different this time”, as various supporting drivers are aligned. Fundamental hydrogen technology has finally reached pre-commercialisation phase, but significant effort is still required to drive the cost curve as well as build out the broader ecosystem. This is leading to an explosion in innovation and start-ups. Policy and industrial activity has exploded over the 2019-2020 timeframe and investor interest – especially among corporates – is very strong

There is increasing momentum towards a formalised ‘Circular Economy’ (CE) from linear (make-take-dispose), driven by a combination of natural resource depletion, environmental impact and scope for huge economic benefits. The CE will impact all major global industrial & service sectors; with different drivers, currently greatest application is being pursued in food, plastics, construction, textiles and scarce raw materials

Digital / “smart” technologies – including artificial intelligence, blockchain, (industrial) IoT, cybersecurity – are beginning to impact traditional cleantech-relevant sectors like Power/Energy, Transport, Industrial & Manufacturing. These new (software-enabled) approaches will deliver new business models, which can ultimately have profound implications for incumbent industry participants.

The IT/ICT sector is heavily, and increasingly, exposed to broader resource efficiency themes (climate change, resource constraints, energy costs…) across its value chain. The migration from distributed to cloud computing and the associated explosion in energy-intensive datacenters is driving the adoption of renewable energy and energy efficiency measures, with the latter offering significant scope for innovative companies.

The huge Food & Agriculture sector, its value chain presenting broad scope for innovation, is accelerating the adoption of new technologies to increase efficiencies in the face of rising constraints. While certain subsegments are experiencing greater activity / interest than others currently, vast swathes of the sector are set to be impacted over the coming years.

The sustainable chemicals & materials sector has multiple solid long-term drivers, and is expected to capture a growing share of the huge materials market in coming years, led by less price-sensitive segments. A slow sector ramp and notable disappointments have led investors to prefer early-stage companies with strategic backing, low capital requirements and/or drop-in solutions.

The largest (ex-hydro) renewable energy sector possesses a healthy long-term growth outlook, despite a weakening of support measures and pressure from a resurgent natural gas generation sector. Offshore wind enjoys strong governmental support, and significant industry-wide effort will be deployed to attain long-term cost objectives. Innovative early-stage companies can find niches among the industry behemoths.

Smart grids (SG) are a key component of worldwide energy efficiency initiatives, promising improved grid reliability, loading and security, while paving the way for increased distributed generation (DG) and electric vehicle (EV) penetration. Depending on the specific geography, smart grids are moving beyond the initial smart meter deployment phase and promise to deliver their contribution to broader energy efficiency efforts.

Despite sector turmoil recently, the photovoltaics (PV) sector continues to promise high growth in coming years, enabled by the abundance of sunlight and a steep technology-driven cost curve. In lead geographies, PV generation is being weaned off subsidies, as levelised cost of electricity (LCOE) converges with that of incumbent generating approaches. Scope exists for significant innovation along the entire value chain.

Driven by the increasing penetration of (intermittent) renewable energy generation and electrification, cost-effective energy storage systems (ESS) promise huge value upside for the electricity sector, via energy arbitrage, ancillary services, reduced CapEx. As such, ESS represents the “holy grail” of the electricity sector and there is still much to be played for. Technology category leaders will emerge, addressing the myriad different application segments for ESS, before larger entities likely acquire their way into the space.

Representing the low-hanging fruit of greenhouse gas abatement, energy efficiency includes a plethora of different consumer, commercial & industrial, and utility solutions. While some energy efficiency subsectors have already attracted significant investor attention (LEDs, smart grid, energy efficient semiconductors, fuel cells, …), many more opportunities exist.

With road transport contributing ~20% of worldwide greenhouse gas emissions and accounting for ~55% of oil demand, the Mobility Transition offers ample scope to radically alter the global energy landscape. The coming decades will witness successively huge growth waves for hybrid, electric and fuel cell based vehicles, and considerable innovation in vehicles, infrastructure as well as usage patterns and business models.

Water scarcity/quality represents an enduring global megatrend. The increasingly technological water sector offers a host of investing segments (waste water treatment, desalination, filtration/purification, monitoring and infrastructure) across a broad range of vertical end-markets. Innovation will come from both larger groups and trailblazer technology start-ups, with the former being increasingly acquisitive.

Distributed generation, led by PV & energy storage, is becoming a prominent force in remote areas and frontier markets. Grid-oriented business models have begun to catch-up with generation models. Energy/Power majors are ambitious in relation to energy access goals in frontier markets as well as actively embracing decentralised technologies.