Over the past decade, European cleantech companies have developed world-leading batteries, electrolysers, and supercapacitors, as well as near-zero carbon steel and cement technologies. This tech leadership could underpin Europe’s competitiveness, energy resilience and decarbonisation for decades to come.
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Last year, European cleantech venture capital investments plateaued at €11 billion for the third year in a row. While this demonstrates European cleantech’s resilience in a year of global venture capital downturn, investments are still largely dominated by the United States, with the Asia Pacific region steadily gaining ground since 2020.
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What’s more, a large funding gap at the scale-up stage puts Europe’s next generation of industry at critical risk. The European Commission calculates that to scale the manufacture of just six key technologies under the Net Zero Industry Act — namely solar, wind, batteries, heat pumps, electrolysers, carbon capture and storage — will require €92 billion of public and private investment by 2030. Even in this optimistic view, our latest research shows the EU is facing a €50+ billion investment gap by 2030. This gap could easily grow to hundreds of billions of euros by 2030 if we include the other key technologies we need to scale up: green steel and cement, long-duration energy storage, green chemistry, among others.
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2023 showed some scale-up success stories starting to emerge in Europe. Members of our scale-up Coalition such as H2 Green Steel in Sweden and battery gigafactory developer Verkor in France pushed the boundaries of traditional financing, leveraging a capital stack of equity, commercial debt and subsidies to build multi-billion cleantech projects.
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But these companies are the exception, not the norm, and their fundraising success must urgently be replicated in other strategic technologies such as electrolysers, ultracapacitors, long duration energy storage, innovative renewables and many more.
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2024 is set to be the biggest electoral year in history. As we publish this briefing, political leaders are contending with a difficult budgetary environment, farmers’ movements and a rise of the far right. In this context, the European Green Deal makes for a tempting scapegoat, caricatured as a complex set of Brussels-imposed regulation that harms our competitiveness and adds to the cost-of-living crisis.
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But the rise of clean technologies in Europe offers a positive vision for the continent: a new generation of industry is rising, bringing with it good-paying manufacturing jobs, reindustrialising after decades of offshoring, and contributing to our energy security. This is a pan-European opportunity: in 2023, cleantech investments took place in 24 of 27 EU member states. The Green Deal can enable this industrial renaissance, but only if it starts addressing the “Deal” part.
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This “deal” should be a public sector-enabled, private-sector led green reindustrialisation. Europe should develop and adopt an ambitious Cleantech Investment Plan – one that is both fiscally efficient, and at the scale required to meet our manufacturing ambitions. Cleantech for Europe recently published a report setting out three key proposals :
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(1) mobilising capital from institutional investors
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(2) deploying public guarantees to de-risk cleantech investments;
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(3) earmarking carbon pricing revenues to cleantech manufacturing.
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By unleashing unprecedented volumes of capital, Europe can secure its climate and industrial leadership, for decades to come, promising security, resilience and prosperity for its citizens.