Against the backdrop of a 17 percent surge in clean energy investment last year, as reported by BloombergNEF, the cleantech industry’s performance in Q1 2024 demonstrated its resilience and adaptability amidst evolving economic conditions and heightened focus on sustainability. Investors filed a record number of climate resolutions for companies in North America, according to a Ceres tally.
“In Q1 of 2024, we saw more of the ‘new normal’ in venture & growth investing — following the explosive years of financing during the pandemic, equity financing levels have essentially leveled out but have settled at average levels higher than the averages pre-pandemic,” Anthony DeOrsey, research team lead at Cleantech Group, told the Investing News Network.
He identified investment growth in hard-to-abate sectors such as green steel and cement, and a successful venture quarter in hydrogen production technologies. Additionally, Q1 was marked by decreased levels of investment activity in the Asia Pacific region compared to 2023, when China was the biggest market in cleantech spending, as well as growth in the European market.
The discussions and agreements at COP28 highlighted the importance of addressing climate change through a swift and just transition to renewable, sustainable energy sources. This urgency provided a backdrop for evaluating the performance of the cleantech industry in Q1 2024.
What trends impacted cleantech in Q1?
Cleantech policy news
In February, the US Department of Energy announced it would invest US$100 million to support pilot projects and testing facilities focused on carbon dioxide (CO2) removal technologies. This funding is part of the Carbon Negative Shot Initiative, which aims to reduce the cost of capturing and storing CO2 from the atmosphere to less than US$100 per net metric ton by 2032.
The Biden administration also demonstrated its commitment to addressing climate change by allocating US$6 billion to fund 33 projects focused on decarbonizing energy-intensive industries, such as aluminum and other metals, cement and concrete, chemicals and refining, iron and steel. The project is part of the administration's Investing in American Agenda, with funding coming from Infrastructure Law and the Inflation Reduction Act.
According to a press release, these efforts are expected to reduce the equivalent of over 14 million metric tons of carbon dioxide emissions annually, comparable to the emissions of 3 million gasoline-powered cars.
Simultaneously, the Environmental Protection Agency (EPA) announced a new rule in March that limits tailpipe emissions on light-duty and medium-duty vehicles starting in 2027, intending to expand the market by incentivizing automakers to produce more hybrid and plug-in models and promote consumer adoption of these vehicles. This rule, which the Biden administration has called the “strongest-ever” of its kind, is part of the larger Investing in America Agenda and is funded by the Infrastructure Law and Inflation Reduction Act.
Green steel and cement
Cement and steel are two of the world’s most-produced materials and are among the globe’s top sources of carbon emissions. “These traditionally hard-to-abate sectors now have enough of a slate of innovation solutions to start charting a path forward to decarbonization,” said DeOrsey.
“We are now at an interesting stage in which there are new green steel and cement production technologies that are entering the market (mostly through demonstration plants, but some at commercial scale) – a first “tranche” of technologies is emerging while the more nascent technologies are seeing more venture support.”
Cleantech Group'stake on the “tranches” of green steel and green cement development.
Chart via Cleantech Group.
Brimstone received a US$189 million federal investment to build a new plant to deploy its decarbonized process for producing cement, and Sublime Systems was selected to receive a US$87 million award to accelerate the construction of a cement factory in Massachusetts that reduces its carbon emissions by replacing limestone with calcium silicate, thereby producing industry-standard cement with electrochemical reactions instead of applying heat. Also, Skyven Technologies, a California-based startup, received US$145 million to deploy steam-generating wind pumps to manufacturing facilities worldwide.
Overseas, H2 Green Steel and Boston Metal have recently made significant advancements in this area. Stockholm-based H2 Green Steel secured 6.5 billion euros in financing to build the world’s first large-scale green steel plant in Europe, with contributions from institutional investors such as Microsoft Climate Innovation Fund, Mubea, and Siemens Financial Services, along with a 250 million euro grant from the EU Innovation Fund. Meanwhile, Boston Metal raised US$20 million in Series C2 funding from Marunouchi Innovation Partners, totaling US$282 million, to expand its presence in Asia and further develop its platform for decarbonized steelmaking using Molten Oxide Electrolysis.
EV developments
The first quarter of 2024 saw notable developments in the electric vehicle (EV) industry. Tesla (NASDAQ:TSLA), facing backlash from investors after reporting Q1 sales figures that were 8.5 percent lower than the previous year, opened its Supercharge stations to Ford (NYSE:F) EVs. AutoForecast Solutions says the company could bring in US$6 - US$12 billion in annual charging revenue by 2030 if it made its charging stations available to non-Tesla EVs. To improve profit margins and combat falling earning estimates, Tesla also chose to raise the prices of its Model Y electric vehicles by 2,000 euros in Europe and by US$1,000 in the US.
Additionally, Chinese EV manufacturer BYD (HK.1211) debuted a new, affordable EV model priced below US$10,000, which could have significant implications for the accessibility and popularity of EVs. Despite the potential growth in the EV market, China's overall EV sales growth has slowed in recent months. Nevertheless, BYD has reportedly set an ambitious target to increase its annual sales by 20 percent, aiming to sell 3.6 million units in 2024. The company is aiming for half a million of those sales to be overseas.
Meanwhile, Waymo, a subsidiary of Alphabet (NASDAQ:GOOGL), made progress in the autonomous vehicle sector by securing approval to operate its self-driving cars at speeds up to 65 miles per hour on highways and local streets in specific areas of Los Angeles and the Bay Area.
However, newcomer Fisker (OTCPINK:FSRN), who launched its first EV in 2023, encountered substantial difficulties, as demonstrated by the company’s decision to reduce the price of its Ocean SUV by 39 percent. The company was also forced to halt production, is facing a potential bankruptcy was delisted from the New York Stock Exchange on April 22. These developments highlight the varied experiences and challenges faced by different players in the evolving EV and autonomous vehicle markets.
“An interesting pull-through effect of global EV roll-out has been the opportunities it is creating for innovation and growth of new technologies in EV charging – Europe has seen consistent venture activity in this regard over the past few years,” said DeOrsey.
What factors will move the cleantech market in 2024?
Enhanced geothermal
“A space to watch is enhanced geothermal,” said DeOrsey. “Despite having significant potential to provide 24/7 firm clean power, challenging project economics have remained a barrier. New technologies in drilling and closed-loop systems have shown promise to better access the latent power potential in hot, dry rock geothermal deposits.”
Some recent developments in this space include the US$17 million Series A funding round led by Chesapeake Energy (NASDAQ:CHK) to develop EarthStore, Sage Geosystems’ first commercial geopressured geothermal systems facility, in Houston in Q4 2024. Also, geothermal energy start-up Fervo Energy raised US$244 million to further operations at a project in Utah that aims to bring 400 megawatts of clean electricity to the grid by 2026.
Quaise Energy, identified by DeOrsey as another geothermal energy company to watch, raised US$21 million in a series A1 funding, with new investors Mitsubishi (T:8058) and Standard Investments joining Prelude Ventures and Safar Partners. The funding will enable the company to expand its operations and secure the supply chain. Quaise Energy is developing terawatt-scale geothermal energy by vaporizing rock with MIT-researched techniques that use millimeter-wave microwaves to dig deep geothermal wells.
Finally, as a testament to the ongoing quest for innovative solutions to global environmental challenges, 24 new climate tech startups joined Greentown Labs, the largest climate and cleantech start-up incubator in North America, in Q1 2024.
Other developments
As the EV market evolves, Tesla faces a potentially difficult year, with analysts anticipating decreased sales. However, the success of emerging competitors like Xiaomi (HK:1810), whose debut of the SU7 model resulted in a 16 percent surge in share value, demonstrates that the EV landscape remains dynamic.
“The subsidies to Chinese EV manufacturers is very significant and (have) allowed for a rapid scaling of EV production and sales, both within China and Chinese-produced vehicles for export,” DeOrsey told INN.
“There is already a high 27.5 percent import tariff on Chinese-built vehicles in the U.S.,” he continued. “The onus will now be on U.S. manufacturers to slash costs through learning effects and use of technology.
“Leveraging new technology is one of the best ways U.S. and Western EV producers can start reducing costs to compete better globally. There are many variables to consider in cost reduction, but our hypothesis at Cleantech Group is that innovation will reduce costs of cathodes in batteries – batteries can comprise up to 40 percent of vehicle cost and cathodes 30 percent of that battery cost.”
DeOrsey mentioned Ascend Elements’ US$162 million funding round, which will go towards the construction of North America’s first sustainable cathode precursor manufacturing facility, set to open in early 2025, as one innovative space to monitor.
If GE Verona (NYSE:GEV), a spinoff of GE that encompasses GE Renewable Energy, GE Power and GE Digital, continues to demonstrate a strong performance on the New York Stock Exchange, it could serve as an indicator of investor confidence in the renewable energy and power sectors.
Finally, a recent partnership between Canada’s Heliene and Georgia-based Suniva marks an important development for US Solar project developers, as it enables them to take advantage of a new federal subsidy offered under President Biden's Inflation Reduction Act. By joining forces, Heliene and Suniva will produce "Made in USA" solar panels, incorporating Suniva's U.S.-made solar cells into Heliene's U.S.-made solar modules. This strategic sourcing contract demonstrates the industry's commitment to expanding domestic solar manufacturing and benefiting from the Inflation Reduction Act's incentives for clean energy production.
As the world increasingly embraces clean energy technologies, investors can strategically allocate their resources by staying informed on these recent and emerging trends, policies and partnerships shaping the renewable energy landscape.
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Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Image 1: Waroona Project – Debt Financing Process and indicative timing