Renewables funding is on track to top last year's peak. An increasing percentage of this funding is going toward solar companies, at the expense of wind companies. Here are the top-line bullets you need to know.
Renewables have seen massive growth in recent years, driven by falling costs and a societal shift away from conventional fossil fuels.
Total funding in the renewables tech space more than doubled from 2018 to 2020, and is on pace this year to surpass last year’s record funding. These trends are expected to continue due to a potential influx in government spending from the proposed infrastructure bill in the US Congress.
Solar funding, in particular, has driven an increasingly large portion of renewables funding. Funding going to solar-focused companies is up from $1B in 2016 to $2.4B in 2021 YTD.
This has come at the expense of companies that focus solely on wind. Funding to the wind sector peaked at $1.3B in 2017, but has since fallen to $368M this year.
This shift could in part be driven by the ease of deploying solar vs. wind — for instance, solar can be placed on residential roofs while wind is typically best deployed in large wind farms. Solar has also been mandated for new home construction in certain areas, such as California.
In the near term, renewables funding going toward solar companies will dominate. However, funding to smaller categories, like ocean & hydro and hydrogen, is growing. As these categories find their business niches and gain traction, expect them to play an increasingly important role in renewables.
WHAT YOU NEED TO KNOW:
- Solar sees sunny forecasts outside of the US. While solar uptake in the US has risen steadily over the years, developing countries have struggled to adopt solar given its relatively expensive costs. Startups like Zola Electric are working to change that, particularly in Sub-Saharan Africa. The company provides a solar-as-a-service model to reduce risk for its customers, and is targeting households that currently lack access to reliable electricity. Investors, including TotalEnergies Ventures, continue to provide ample funding, with the company raising $45M in a Series E round in September 2021.
- Wind is going offshore. Since wind production is hard to forecast on land, wind companies are increasingly looking offshore to provide more consistent winds. Offshore wind is more regulated than onshore wind, but that hasn’t deterred startups from gaining traction. As an example here, Ireland-based Gazelle raised $1.3M in seed funding in August 2021 to build more efficient offshore platforms for wind turbines.
- Bio-energy refuels after disappointing hype. Funding to bio-energy companies peaked in 2018, with $452M invested across 52 deals, but investment activity has dropped sharply to less than $50M in funding so far this year. Key companies, however, continue to raise funds. Fulcrum BioEnergy, for instance, raised $5M in July 2020 from investors including BP Ventures to convert waste to renewable fuels.
- Hydropower is on the cusp of a watershed moment. Large hydropower dams were built in the 1970s during the oil embargo crisis, but have fallen out of favor for more ecologically friendly renewable energy sources. Companies are looking to change that, with Natel Energy leading the pack with a $20M Series B round in July 2021. The company is developing low-head hydropower dams that restore watershed ecosystems by elevating the local water table.