Periods of energy upheaval, such as the one we are currently experiencing, provide an opportunity for disruptive innovations.. A helping hand for clean energy start-ups can help respond to the current energy crisis while also accelerating progress towards climate targets. A new IEA report released today, on How Governments Support Clean Energy Start-Ups, provides a timely review of the different approaches taken in countries around the world as they seek to become home to the next Tesla, BYD or Vestas.
Small businesses with huge ideas for upgrading our energy systems and lowering greenhouse gas emissions are now getting a lot of funding. Since the beginning of 2022, innovators such as Addionics, Evage, H2Pro, Kula Bio, and PassiveLogic have each raised more than USD 25 million. New technologies are emerging from a diverse spectrum of research initiatives and countries. Digital, electronic, consumer-focused, and modular energy solutions are emerging. Some of the world’s brightest and most innovative minds are working to lay the groundwork for tomorrow’s clean energy grid.
In many cases, government policies and programs have laid the groundwork for success in this sector, which is also known as “cleantech” or, more recently, “climate tech.” Since the Paris Agreement was signed in 2015, public sector assistance in bringing new clean energy technology to market has increased dramatically.
These support measures are important – not because civil servants are good substitutes for venture capitalists, but because governments possess a range of unique resources that energy technology start-ups need for success. Drawing on 14 detailed country case studies and 23 in-depth interviews, the new IEA analysis highlights the ways in which governments have stepped in. This includes, for example, providing access to patient providers of capital and world-class laboratories, mentoring and peer-to-peer networking, and targeting technologies or groups that can face additional obstacles to break through, including female entrepreneurs.
The examples in the new report come from a wide range of countries: Chile, India, Morocco and Singapore have inspiring policy designs to share, alongside examples from Canada, Germany, Norway, Sweden, the United Kingdom, the United States and others.
Overall government support to clean energy innovation has picked up in recent years, spurred by the pursuit of net zero goals and efforts to stimulate economic recovery from the pandemic. Examples include the Japan Green Innovation Fund, the US Infrastructure Investment and Jobs Act and many initiatives in Europe and elsewhere.
If history is any guide, today’s elevated fossil fuel prices and energy security concerns could further bolster the priority governments are attaching to clean energy innovation. This was the case following the oil shocks of the early 1970s. Between 1974 and 1980, IEA member governments more than doubled their spending on non-fossil public energy research and development. Between the mid-1990s and early 2010s, they increased it by over 70% as oil prices rose again.
In the new report, the IEA gives practical guidance on how governments can create thriving energy innovation ecosystems, alongside their more traditional role in providing direct funding for energy research and development and large-scale demonstration projects. All of these approaches will be crucial to meet today’s energy security and climate imperatives while also creating lasting value in terms of economic activity and employment.