eu cleantech

quarterly briefing

1q22

EU cleantech investment continues to grow amid urgent push toward energy independence.

Welcome to your Quarterly EU Cleantech Briefing

Jules Besnainou

Executive Director

Clean technologies can help us achieve energy independence. The next generation of industry is ready to take the EU to dual climate and economic leadership.

As the EU adopts short-term measures to wean ourselves off Russian gas, a larger question looms: how to prepare for our medium and long-term energy independence? Building additional fossil fuel infrastructure, like LNG terminals, means we can buy fuels from friendlier nations. But it keeps us locked into an old energy system, and on track for a climate disaster, according to the IPCC. Renewable energy sources, if deployed massively, could fill the gap.However, renewables face intermittency and seasonality issues. If we want to unlock their full potential, they need to be part of a systemic overhaul of our energy system, one that includes electrifying and reducing demand, building storage capabilities, and re-investing in our electric and gas infrastructure. All the while ensuring our supply of critical materials, designing products in a circular way and ensuring a socially-positive transition.

The good news is the EU is already developing all the technologies needed to achieve this change in our energy, industrial and transport systems. It now needs an ambitious policy push to unlock the remaining barriers to wide deployment.

EU cleantech is on a fast growth trajectory. It is in a position to advance our energy independence, while creating long-term economic and climate leadership for all member states.

Executive Summary

01

EU Cleantech continues to grow

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More than €3.6 billion were invested in EU cleantech venture capital in Q1 2022

This is the second largest quarter on record for EU cleantech investment, following a record year

Growth equity is continuing to rise in the EU, with close to €2.5 billion invested over 29 deals

Early-stage deal volume is in decline, but amounts are rising, pointing to larger deal averages

02

Transport, circular economy and energy innovation lead the way

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Large investment rounds took place in hydrogen production, energy storage energy efficiency

Electrification and increased autonomy of transport and logistics remained strong

Circular business models are attracting massive funding rounds, especially in the recycling and refurbishment of electronics

03

In focus: the path to EU energy independence

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Reaching independence will require a complete shift of our energy system

Long-duration storage is needed to balance the intermittency of renewables

Policy needs to support the large-scale deployment of clean technologies to reduce and electrify demand, modernise our energy supply and re-invest in our energy infrastructure

04

Policy update: REPowerEU and Sustainable Products

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Energy independence is now the most important theme in EU policymaking

The Commission unveiled the REPowerEU communication, laying out the EU’s vision to cut dependency from Russian gas by 2030

The European Commission put forward three initiatives to make products in the EU market circular and energy efficient

eu cleantech deals rise,
‍driven by late-stage investments

This is the second largest quarter on record for EU cleantech investment, following a record year

Growth equity is continuing to rise in the EU, with close to €2.5 billion invested over 29 deals

Early-stage deal volume is in decline, but amounts are rising, pointing to larger deal averages

EU cleantech VC share grew significantly compared to other regions. EU share of global cleantech investment rose to 18.3% from 14.7% in 2021

Q1 deal distribution:
‍geography & sector

Deals are happening across 15 of the 27 member states. Most active countries were Germany, France, Netherlands, Spain, Sweden, Austria and Finland

Electrification and increased autonomy of transport and logistics remained strong

Circular business models are attracting massive funding rounds, especially in the recycling and refurbishment of electronics

Large investment rounds took place in hydrogen production, energy storage energy efficiency

Q1 Eu Cleantech
‍top deals and activities

Early-Stage investments

(Seed and series A)

Late-Stage investments

(Series B and Growth Equity)

investor news

€250m

Eurazeo’s Smart City II Venture Fund completed a second closing at €150 million and a final target of €250 million

€55m

Demeter’s VitiRev Innovation fund reached an interim close of €55 million. The fund is the first European fund dedicated to the ecological transition of wine growing

€500m

CEE Group announced CEE Renewable Fund 7 with target of €500 million for renewable energy project finance

$600m

Blackrock and Temasek launched Decarbonization Partners, a $600 million partnership to launch a series of investment funds focused on carbon emissions reduction

IN FOCUS:
‍long-term energy storage

Long duration energy storage refers to technology that can store energy for more than a few hours and deliver it back on demand. Seasonal storage works over a few months

As we include more and more variable renewable energy in the power mix, dispatchable storage helps to balance the system at times when demand outstrips supply

Technologies include mechanical (e.g. pumped hydro), chemical (e.g. power to gas), electrochemical (e.g. batteries) and thermal (e.g. power to heat)

Long duration energy storage has the potential to deploy 1.5 to 2.5 Terawatts globally by 2040 and could be cost-competitive with Li-ion storage for durations of >6 hours by 2030(LDES, McKinsey)

US DoE aims to bring down the cost of long-duration energy storage by 90% by 2030

eu innovator profile

Electrochaea’s power to gas technology converts surplus wind and solar energy into pipeline-grade renewable gas (RNG).

Founded in 2014 and headquartered in Planegg, Germany

Announced €36 million Series D round in January 2022 led by Baker Hughes with participation from MVP, Storengy, Matterwave, Energie 360°, Caliza, KfW, Focus First and EIC Fund

Partnership with NREL to upcycle waste CO2 via biomethanation

Scale up of first commercial biomethanation plant co-funded by EIC accelerator programme

50MW commercial scale-up in progress

RNG can be used for load balancing and long- term storage

Discover Electrochaea

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IN FOCUS:
‍3 pillars of energy security and independance

Reduce, electrify and de-fossilise demand

Deploy energy efficiency measures for homes, industry and tertiary buildings

Electrify residential heat: through heat pumps or PV for district heating

Electrify industry: with thermal storage and steam from heat pumps

Accelerate the electrification of transport: including buses, trucks, planes and agricultural equipment

Invest in hydrogen-based industrial decarbonisation: such as hydrogen DRI steelmaking and high-temperature heat

Invest in hydrogen-based mobility: aviation, shipping and heavy-duty vehicles

Replace fossil inputs in chemicals: via bio-based inputs and use of recycled plastic

Upgrade energy supply and storage for a cleanenergy world

Build out renewables: including scale up of advanced geothermal, floating offshore wind, wave power, building-integrated solar and small nuclear

Scale and deploy renewable hydrogen production capacity throughout Europe: including hydrogen conversion, storage and hydrogen-based derivatives

Invest in sustainable aviation, shipping and heavy-duty road fuels: biofuels, synfuels/power to liquids or hydrogen, green ammonia, e-methanol

Scale and deploy long duration energy storage to mitigate renewable intermittency: power to gas, grid-scale batteries, hydrogen storage, mechanical and thermal storage

Ensure the required infrastructure to succeed

Modernise grid infrastructure: software and hardware for grid mapping, high voltage transmission improvements, measurement and optimisation

Deploy pan-European mobility infrastructure: charging for cars and trucks, hydrogen refuelling for heavy duty and long-haul transportation

Build or repurpose gas networks: to enable renewable hydrogen or methane transport

eu policy update

REPowerEU Plan

What is it?

Russia provides more than 40% of the EU’s total gas consumption and 46% of its coal imports.
On 8 March, the Commission unveiled the REPowerEU communication, laying out the EU’s vision to cut dependency from Russian gas by 2030 and ensure the bloc’s energy security.
On 23 March, the Commission proposed that member states jointly purchase gas to secure energy supply.
REPowerEU sets forth a range of measures to:

Diversify EU’s gas supplies through increased LNG imports and biomethane production

Slash the use of fossil fuels in the EU by boosting energy efficiency, increasing renewables, electrification and heat pump deployment

Promote the development of power purchase agreements

MAY 2022: upcoming roadmap to operationalise REPowerEU

Potential impact on cleantech

Increased demand for renewables: strong impetus formassive deployment of wind, solar and hydrogen

Easier to bring renewables to the market: less bureaucracy for renewable projects

Making energy efficiency the norm: rising demand for products that save energy and lower utility bills

Accelerating industry decarbonisation: strong demand for innovative hydrogen-based solutions and cost- competitive renewable electricity in industrial sectors

Look out for

Short-term climate setbacks: REPowerEU does notaddress gas-to-coal switches or carbon capture and storage solutions to reduce the carbon footprint of fossil fuels

Continued demand for gas: more LNG imports along with upcoming legislation on minimum gas storage undermines cleantech’s role in the EU’s energy security

Resurgence of biogas: feedstocks from waste streams can avoid jeopardising food supply

Sustainable Products

What is it?

The European Commission put forward three initiatives to make products in the EU market circular and energy efficient.

The Sustainable Products Initiative (SPI) proposes new ecodesign labelling requirements, including a mandatory EUDigital Products Passport. The in-scope SPI products will be defined at a later stage.

The revision of the Construction Products Regulation sets mandatory sustainability requirements for construction products including a requirement to measure embodied carbon.

The EU Strategy for Sustainable and Circular Textiles includes ecodesign requirements for textile products, action to tackle microfibre pollution and greenwashing and an enhanced producer responsibility.

Potential impact on cleantech

Making circularity the norm: strong demand for clean product processes to produce durable, reusable and recyclable products

Easier access to funding: significant funding opportunities through Horizon Europe to support the transition to sustainable products

Increased transparency: the EU Digital ProductsPassport will increase the visibility and credibility of sustainable companies and products

Look out for

Watered down ambition: weakening of sustainability disclosures and limited products’ scope

Insufficient emphasis on embodied carbon: leading to decreased sustainability of construction works and buildings’ energy performance

Weak enforcement: as Member States will be free to design non-compliance penalties, effective market surveillance is crucial to guarantee delivery of the expected environmental benefits