EU Cleantech
Quarterly Briefing
1Q22

EU cleantech investment continues to grow amid urgent push toward energy independence

Welcome to your
Quarterly EU Cleantech Briefing

JULES BESNAINOU
Executive Director

Clean technologies can help us achieve energy independence. The next generation of industry is ready to take the EU to dual climate and economic leadership.

As the EU adopts short-term measures to wean ourselves off Russian gas, a larger question looms: how to prepare for our medium and long-term energy independence? Building additional fossil fuel infrastructure, like LNG terminals, means we can buy fuels from friendlier nations. But it keeps us locked into an old energy system, and on track for a climate disaster, according to the IPCC. Renewable energy sources, if deployed massively, could fill the gap.

However, renewables face intermittency and seasonality issues. If we want to unlock their full potential, they need to be part of a systemic overhaul of our energy system, one that includes electrifying and reducing demand, building storage capabilities, and re-investing in our electric and gas infrastructure. All the while ensuring our supply of critical materials, designing products in a circular way and ensuring a socially-positive transition.

The good news is the EU is already developing all the technologies needed to achieve this change in our energy, industrial and transport systems. It now needs an ambitious policy push to unlock the remaining barriers to wide deployment.

EU cleantech is on a fast growth trajectory. It is in a position to advance our energy independence, while creating long-term economic and climate leadership for all member states.

EXECUTIVE SUMMARY

01
EU Cleantech continues to grow
More than €3.6 billion were invested in EU cleantech venture capital in Q1 2022
This is the second largest quarter on record for EU cleantech investment, following a record year
Growth equity is continuing to rise in the EU, with close to €2.5 billion invested over 29 deals
Early-stage deal volume is in decline, but amounts are rising, pointing to larger deal averages
02
Transport, circular economy and energy innovation lead the way
Large investment rounds took place in hydrogen production, energy storage energy efficiency
Electrification and increased autonomy of transport and logistics remained strong
Circular business models are attracting massive funding rounds, especially in the recycling and refurbishment of electronics
03
In focus: the path to EU energy independence
Reaching independence will require a complete shift of our energy system
Long-duration storage is needed to balance the intermittency of renewables
Policy needs to support the large-scale deployment of clean technologies to reduce and electrify demand, modernise our energy supply and re-invest in our energy infrastructure
04
Policy update: REPowerEU and Sustainable Products
Energy independence is now the most important theme in EU policymaking
The Commission unveiled the REPowerEU communication, laying out the EU’s vision to cut dependency from Russian gas by 2030
The European Commission put forward three initiatives to make products in the EU market circular and energy efficient

SEED, VENTURE & GROWTH INVESTMENT IN CLEANTECH, EU27, 2018-22

€2.6
€4.4
€4.8
€11.9
€3.6
2018
2019
2020
2021
Q1 2022
Billions

EU cleantech deals rise, driven by late-stage investments

EU27 Cleantech Seed, Series A, B and Growth investment, 2018-22
This is the second largest quarter on record for EU cleantech investment, following a record year
Growth equity is continuing to rise in the EU, with close to €2.5 billion invested over 29 deals
Early-stage deal volume is in decline, but amounts are rising, pointing to larger deal averages
EU cleantech VC share grew significantly compared to other regions. EU share of global cleantech investment rose to 18.3% from 14.7% in 2021

Q1 deal distribution: geography & sector

Deals are happening across 15 of the 27 member states. Most active countries were Germany, France, Netherlands, Spain, Sweden, Austria and Finland
Electrification and increased autonomy of transport and logistics remained strong
Circular business models are attracting massive funding rounds, especially in the recycling and refurbishment of electronics
Large investment rounds took place in hydrogen production, energy storage energy efficiency
Deals by Country, Q1 2022
EU cleantech VC investment by sector Q1 2022

Q1 EU cleantech

top deals & activities

Early-stage investments
(seed and series A)
Industial Efficiency
Ireland
€30.3 M
Agritech
Netherlands
€26.8 M
France
€15.7 M
Austria
€6.25 M
Denmark
€3 M
Sweden
€1.85 M
Sweden
€760k
Buildings / Construction
Luxembourg
€18.6 M
Germany
€4.2 M
Energy Storage
Germany
€18 M
Spain
€2.3 M
Advanced Materials/Bio based Materials
Germany
€10.7 M
Finland
€9.5 M
France
€6.3 M
Finland
€5 M
Estonia
€1.59 M
Carbon Trading
Spain
€8.25 M
Germany
€2.5 M
Circular Economy
France
€2.5 M
Netherlands
€2 M
Late-stage investments
(series B and growth equity)
E-fuels
Germany
€200 M
Germany
€195 M
Agriculture & Food
Netherlands
€50 M
Climate Risk Analytics
France
€40 M
Energy Storage
Germany
€37.6 M
Germany
€36.5 M
Hungary
€24 M
France
€20 M
France
€18.3 M
Circular Economy
Sweden
€17 M
Energy Efficiency
Netherlands
€13 M

Investor

NEWS
€250
million

Eurazeo’s Smart City II Venture Fund completed a  second closing at €150 million and a final target of €250 million

€55
million

Demeter’s VitiRev Innovation fund reached an interim close of €55 million. The fund is the first European fund dedicated to the ecological transition of wine growing

€500
million

CEE Group announced CEE Renewable Fund 7 with target of €500 million for renewable energy project finance

$600
million

Blackrock and Temasek launched Decarbonization Partners, a $600 million partnership to launch a series of investment funds focused on carbon emissions reduction

In Focus: long-term energy storage

Long duration energy storage refers to technology that can store energy for more than a few hours and deliver it back on demand. Seasonal storage works over a few months
As we include more and more variable renewable energy in the power mix, dispatchable storage helps to balance the system at times when demand outstrips supply
Technologies include mechanical (e.g. pumped hydro), chemical (e.g. power to gas), electrochemical (e.g. batteries) and thermal (e.g. power to heat)
Long duration energy storage has the potential to deploy 1.5 to 2.5 Terawatts globally by 2040 and could be cost-competitive with Li-ion storage for durations of >6 hours by 2030
(LDES, McKinsey)
US DoE aims to bring down the cost of long-duration energy storage by 90% by 2030
VC investment in long-duration energy storage: EU27 vs. North America, 2017-21

EU INNOVATOR PROFILE

Electrochaea’s power to gas technology converts surplus wind and solar energy into pipeline-grade renewable gas (RNG).
Founded in 2014 and headquartered in Planegg, Germany
Announced €36 million Series D round in January 2022 led by Baker Hughes with participation from MVP, Storengy, Matterwave, Energie 360°, Caliza, KfW, Focus First and EIC Fund
Partnership with NREL to upcycle waste CO2 via biomethanation
Scale up of first commercial biomethanation plant co-funded by EIC accelerator programme
50MW commercial scale-up in progress
RNG can be used for load balancing and long- term storage

in focus:

3 pillars of European energy security
and independence

Reduce, electrify
and de-fossilise demand
Deploy energy efficiency measures for homes, industry and tertiary buildings
Electrify residential heat: through heat pumps or PV for district heating
Electrify industry: with thermal storage and steam from heat pumps
Accelerate the electrification of transport: including buses, trucks, planes and agricultural equipment
Invest in hydrogen-based industrial decarbonisation: such as hydrogen DRI steelmaking and high-temperature heat
Invest in hydrogen-based mobility: aviation, shipping and heavy-duty vehicles
Replace fossil inputs in chemicals: via bio-based inputs and use of recycled plastic
Upgrade energy supply and storage for a cleanenergy world
Build out renewables: including scale up of advanced geothermal, floating offshore wind, wave power, building-integrated solar and small nuclear
Scale and deploy renewable hydrogen production capacity throughout Europe: including hydrogen conversion, storage and hydrogen-based derivatives
Invest in sustainable aviation, shipping and heavy-duty road fuels: biofuels, synfuels/power to liquids or hydrogen, green ammonia, e-methanol
Scale and deploy long duration energy storage to mitigate renewable intermittency: power to gas, grid-scale batteries, hydrogen storage, mechanical and thermal storage
Ensure the required infrastructure to succeed
Modernise grid infrastructure: software and hardware for grid mapping, high voltage transmission improvements, measurement and optimisation
Deploy pan-European mobility infrastructure: charging for cars and trucks, hydrogen refuelling for heavy duty and long-haul transportation
Build or repurpose gas networks: to enable renewable hydrogen or methane transport

eu policy

update

REPowerEU
What is it ?
Russia provides more than 40% of the EU’s total gas consumption and 46% of its coal imports.
On 8 March, the Commission unveiled the REPowerEU communication, laying out the EU’s vision to cut dependency from Russian gas by 2030 and ensure the bloc’s energy security.

On 23 March, the Commission proposed that member states jointly purchase gas to secure energy supply.

REPowerEU sets forth a range of measures to:
Diversify EU’s gas supplies through increased LNG imports and biomethane production
Slash the use of fossil fuels in the EU by boosting energy efficiency, increasing renewables, electrification and heat pump deployment
Promote the development of power purchase agreements
may 2022:
upcoming roadmap to operationalise REPowerEU
potential impact on eu cleantech
Increased demand for renewables: strong impetus formassive deployment of wind, solar and hydrogen
Easier to bring renewables to the market: less bureaucracy for renewable projects
Making energy efficiency the norm: rising demand for products that save energy and lower utility bills
Accelerating industry decarbonisation: strong demand for innovative hydrogen-based solutions and cost- competitive renewable electricity in industrial sectors
look out for:
Short-term climate setbacks: REPowerEU does not
address gas-to-coal switches or carbon capture and storage solutions to reduce the carbon footprint of fossil fuels
Continued demand for gas: more LNG imports along with upcoming legislation on minimum gas storage undermines cleantech’s role in the EU’s energy security
Resurgence of biogas: feedstocks from waste streams can avoid jeopardising food supply
Sustainable Products
What is it ?
The European Commission put forward three initiatives to make products in the EU market circular and energy efficient.
The Sustainable Products Initiative (SPI) proposes new ecodesign labelling requirements, including a mandatory EUDigital Products Passport. The in-scope SPI products will bedefined at a later stage.
The revision of the Construction Products Regulation sets mandatory sustainability requirements for construction products including a requirement to measure embodied carbon.
The EU Strategy for Sustainable and Circular Textiles includes ecodesign requirements for textile products, action to tackle microfibre pollution and greenwashing and an enhanced producer responsibility.
potential impact on eu cleantech
Making circularity the norm: strong demand for clean product processes to produce durable, reusable and recyclable products
Easier access to funding: significant funding opportunities through Horizon Europe to support the transition to sustainable products
Increased transparency: the EU Digital ProductsPassport will increase the visibility and credibility ofsustainable companies and products
look out for:
Watered down ambition: weakening of sustainability disclosures and limited products’ scope
Insufficient emphasis on embodied carbon: leading to decreased sustainability of construction works and buildings’ energy performance
Weak enforcement: as Member States will be free to design non-compliance penalties, effective market surveillance is crucial to guarantee delivery of the expected environmental benefits

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