Quarter 2
While 2022 was a volatile year for global energy, Energy Technology continued to grow in 2022 after a record year in 2021. Global economic development and growth rely on energy. Governments have made climate pledges to reduce greenhouse gas emissions and achieve net-zero carbon emissions and are under pressure to invest in alternative sources of energy to provide more energy security, resilience and affordability. Geopolitical events (such as Russia's invasion of Ukraine and its accompanying sanctions1) highlighted the need for countries to find alternative sources of energy and, in the long term, continue to transition to clean energy sources, which can facilitate greater energy independence and resilience.2 Governments' desire to lead in clean technology have resulted in changes to the regulatory environment to increase incentives to develop and commercialize new energy technologies. Government policy, regulation and funding support the research and development for new technologies, in part, because they give private investors and corporate partners more incentives to invest in the commercialization and scaling of new technology. This, in turn, accelerates the deployment of new solutions to capitalize on business opportunities, help achieve climate goals and resolve energy crises. In addition, the private sector has undertaken initiatives to reduce its carbon footprint, find climate solutions and manage environmental, social and governance risks and opportunities. Continuing supply chain issues have also created additional market opportunities for new approaches to clean energy.3 These factors have encouraged action in the form of policy, regulation, venture investment and corporate strategy.
The 2021 Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law (the "BIL"), provides for $1 trillion in funding. The funding is aimed at strengthening supply chains by improving transportation options through the upgrading of airports and ports, the expansion of passenger rail, and the building of a national electric vehicle charger network. The funding is also focused on the delivery of clean, reliable energy through power infrastructure upgrades and support of programs that enable the development, demonstration and deployment of clean energy technologies that reduce greenhouse emissions.4
The Inflation Reduction Act of 2022 (the "IRA")5 provides $369 billion in policies to address climate change and accelerate the transition to clean energy,6 through tax credits and direct investment for clean energy businesses. The IRA's expanded tax credits will make it easier to fund and build projects, help reduce costs of construction, and help make renewable energy projects more competitive, which will result in more funding and building of new projects, leading to new jobs and economic development. The IRA's direct investments allow companies developing new technologies to obtain grants and loans that minimize the likelihood of investor dilution, helping ensure the companies remain attractive for later investment. The IRA is expected to "be a core driver of US investment in carbon and emissions tech—supporting both new startups and existing projects,"7 and make renewables more competitive.8 The IRA is also expected to lead to greater foreign direct investment,9 as companies outside of the U.S. move to take advantage of the incentives. For example, "Kia announced it will shift some of its EV assembly to the U.S. by 2024 to qualify for IRA incentives."10
Further, although the IRA is only applicable to U.S. companies, other countries are following suit "to avoid losing an 'advantage' to the US market due to potentially favorable incentives the Inflation Reduction Act provides."11 Although the increased market competition is "bound to create friction among major powers," there is also a recognition that this is an opportunity for increased investment in clean energy by other countries.12
Venture capital investment and corporate investment in clean energy businesses continued to grow despite an overall slowdown in venture capital investment in 2022. In fact, the factors described above led investment into clean energy to match investment in the production of oil, gas and coal for the first time, exceeding $1 trillion,13 a record increase of $250 billion14 or 31%15 from 2021. New highs were reported in nearly every sector, from "renewable power to batteries to heat pumps to carbon capture technology."16 Based on the IEA's Energy Technology Perspectives 2023 report, "There is a global market opportunity for key mass-manufactured clean energy technologies worth around USD 650 billion a year by 2030 – more than three times today's level – if countries worldwide fully implement their announced energy and climate pledges."17
Related clean energy manufacturing jobs are expected to more than double, and continued industrial and employment growth is anticipated in the following decades.18 Long term efforts are required to achieve results in clean energy technologies, businesses and climate initiatives, but the confluence of support from government, universities, research organizations, venture investors and corporations are enabling the development of transformative solutions to energy and climate challenges and capitalizing on their related business opportunities.
Footnotes
1 "Clean Energy Report," PitchBook Q3 2022 Launch Report.
2 Id.
3 Cleantech Market Forecast: Top Trends That Will Affect Cleantech in 2023 (investingnews.com).
4 Fact Sheet: The Bipartisan Infrastructure Deal, , White House Briefing Room Statements-Releases, November 6, 2021.
5 H.R.5376 - Inflation Reduction Act of 2022, 117h Congress (2021–2022).
6 "Clean Energy Report," PitchBook Q3 2022 Launch Report.
7 "Carbon & Emissions Tech Report," PitchBook Q3 2022.
8 The Inflation Reduction Act Is Accelerating The Energy Transition (yahoo.com).
11 Cleantech Market Forecast: Top Trends That Will Affect Cleantech in 2023 (investingnews.com).
12 EU Struggles To Match Renewable Energy Incentives In Inflation Reduction Act - CleanTechnica.
13 $1 Trillion Green Investment Matches Fossil Fuels for First Time - Bloomberg.
14 Green Energy Investment Sets $1.1 Trillion Record in 2022 | Time.
15 Id.
16 Clean Energy Saw as Much Investment as Fossil Fuels for the First Time in 2022 - Yale E360.
17 The world 'is at the dawn of a new industrial age,' IEA says (cnbc.com).
18 Id.
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