Investments in climate technology will change in the coming year. Out of: Electric vehicles and big battery deals. In: geothermal, nuclear and other clean, reliable energy to power the AI data center boom.
“We’ve seen the first generation of climate technology – wind, solar, batteries – rise to private equity and project finance, leaving VCs to fuel the next generation of clean fuels, industrial decarbonization, clean corporate power and more,” you write Kim Zhou And Mark Taylor from Sightline Climate in their Climate Tech Investment Trend Report 2024. “In addition to the climate transition, we are in the middle of a financing transition.”
Some highlights from the report:
New normal
Climate technology capital and growth investments totaled $30 billion in 2024, down 14% from the previous year – a much smaller decline than the 24% decline from 2022 to 2023. The number of deals remained flat and amounted to 1,460 deals compared to 1,468 in 2023.
The US presidential election led to a slowdown in activity in the normally buoyant third quarter. This year's $7 billion in deals was half the size of funding in the third quarter of 2023. The expected reduction in climate-friendly policies under President-elect Donald Trump has created uncertainty, but Sightline authors expect Climate technology investments and growth investments are settling into a “new normal” after the recent ups and downs.
Power games
Investment in geothermal energy nearly tripled last year to $558 million, while money flowing into nuclear energy nearly doubled to $1.9 billion.
Among the top deals of 2024: based in San Francisco Crusoe and based in São Paulo Scalawhich raised $600 million and $550 million, respectively, to develop clean energy for data centers. X-Energya Maryland-based nuclear energy developer, raised $500 million.
Investors are also looking at longer-term moonshots, such as commercial fusion energy. Pacific Fusion raised $900 million last fall.
Battery technology, which has been one of the biggest deals in recent years, is expected to decline as momentum in electric vehicles slows. Northvolta Stockholm-based battery manufacturer and recycler, generated $5 billion last January before filing for bankruptcy in November.
Exit ramps
Despite all the grumbling, climate tech exits hit a four-year high in 2024, with 178 mergers, acquisitions, IPOs and SPACs tracked. That is 136% more than in 2023.
The majority of activity fell into the M&A category, including European oil and gas companies such as TotalEnergies They are leaders when it comes to exploiting their low-carbon offering. Most transaction values were undisclosed, suggesting “lower results,” Sightline notes.
Many observers expect the prospects for IPOs and dealmaking to improve this year under a Trump regime with little regulation.