NTT DATA recently submitted its report ‘Energy Trends’, where he analyzes the investment of corporate venture capital funds in startups in the energy sector. These investments, which have focused the commitment of the large companies in the sector to the innovative technologies, They have represented a total turnover of 5,980 million euros between 2018 and 2020.
The objective of this report is to give an overview of the current trends in the energy macro-sector, around the venture capital investments made in startups and new business models, thus being able to anticipate potential changes in the sector in view of the investments made. To do this, the study goes into depth in the analysis of different trends and business cases, providing an in-depth view of what response and solutions the open innovation ecosystem is providing.
In the energy sector, there is a change in the business agenda, driven by different initiatives such as the Green New Deal, the European Climate Law, which aims to make the European Union the global leader in the fight against climate change or NextGen bonds. This distribution reflects the great commitment to the change in the energy paradigm, since, of all the community funds, 30% will be invested in energy and climate plans, and the Integrated National Energy and Climate Plan of Spain (PNIEC ).
6,000 million euros in investment
Investments have continued on an upward trend with growth recorded at annual rates of 17% since 2008. However, the arrival of the pandemic in March 2020 caused a significant drop in the number of agreements and investments. These operations, which the sector estimated could have reached 132 investments, fell during 2020, reaching 46 investment events. All this, bordering on 6,000 million euros.
In regards to the maximum amount invested during this analyzed time rangethe average amount of the TOP 5 of new investments has been 200 million dollars.
As a novelty regarding the sector, the report prepared by NTT DATA detects a substantial change in relation to the leadership of the electricity companies against the oil companies. A trend that has reversed over the last three years, as the latter have taken the lead by participating in 20% more investment events than electricity companies.
“This report shows us that, since its origins, the energy sector has opted for innovation as a fundamental pillar of the industry, impacting the way of life of millions of citizens around the world. For this reason, adaptation to these new trends is being experienced as a process of sectoral growth. Applying the new energy models of the future, models that must be efficient and responsible, both socially and environmentally”assured Héctor Pinar, Partner responsible for Gas & Power at NTT DATA Europe & LATAM.
Investment by geographic area
The main investment poles, based on the headquarters of the invested startups, are in the US and Europe, California and Germany being the most prominent. The USA concentrates almost 50% of all investment events, while the Old Continent accumulates almost 40%. However, these main investment points are giving way to emerging markets, with the Middle East standing out above all (8% of total investments made).
LATAM, Asia, Middle East and Africa are beginning to make their innovative ecosystems grow, thanks to the promotion of their large corporations in startups in their own geography, betting on their own talent, which will lead in the coming years to the appearance of relevant hubs that increase the creation of new startups and innovative solutions for the sector, in turn creating greater interest from investors in establishing offices near these geographical areas.
Hydrogen, synthetic fuels or energy storage
The market situation at a global level, propitiated by the current social situation, means that the different alternatives rise strongly against the more classic energy generation models such as gas and oil. Among them, synthetic fuels or energy storage driven by renewables and digitization stand out, as well as hydrogen, which continue to grow.
The synthetic fuel It is something that has a long way to go in the coming years. e-Fuels (those produced using hydrogen generated from renewable electricity and incorporate either carbon to produce hydrocarbons or methanol, or nitrogen to synthesize an alternative fuel such as ammonia) are still little known, but they are expected to play a relevant role in complementing to electric mobility or being the main alternative when electrification is not feasible. In Europe and other advanced economies, light land transport tends towards the electric vehicle, in the rest of the modes of transport (heavy land, marine or aviation) and geographies, decarbonization will require solutions such as e-Fuels.
This field also includes the generation of low-emission hydrogen, one of the technologies that is currently being talked about the most. This includes green hydrogen, produced by renewable sources, and blue hydrogen, produced by fossil fuels with CO2 capture and storage.
On the other hand, the growth of renewable generation together with the digitization of the electrical system accelerates the deployment of storage, mainly in countries such as India, Italy, Australia, the US, Chile, Germany, Japan and the United Kingdom. National policies in many of these countries are turning to storage to reduce reliance on energy imports, improve the resilience of their power grids, and advance the goals of decarbonizing their economies.
In short, these data (volume per investment, number of events, CVCs, startups invested) are expected to continue increasing year by year, due to the boost offered by government aid and measures, launched in favor of these new models. Direct investment in renewable energies through the Next Generation funds, or the commitment of the United States or Asia to less polluting production, storage and mobility models, lead us to foresee an exponential growth in innovation in the sector in the coming years, applying disruptive models that increase the value of the energy sector and its possible applications.
This growth will also be driven by the consolidation of new models of collaboration between corporations and startups, models highly attractive to both parties offering less risk and more independence for startups, thus not limiting their growth or agility.