EU Cleantech
Quarterly Briefing
2Q22

Amid global venture capital downturn, cleantech becomes a priority for the EU.

Welcome to your
Quarterly EU Cleantech Briefing

JULES BESNAINOU
Executive Director

Judging by investment numbers only, Q2 2022 was a slow quarter for the cleantech. Venture capital investments dropped across the globe, and cleantech followed the same trend. The decline was steepest for scale-up investments, the ones we need most to industrialise cleantech across the continent.

At the same time, positive policy signals emerged. For the first time, the EU acknowledged the strategic role of cleantech in tackling the dual climate and energy crisis. We must continue building momentum to ensure that cleantech start- and scale-ups are given the support they need. The Commission’s high ambitions should translate into detailed plans for the wide deployment of clean technologies, including innovative renewables, energy storage, grid improvements, renewable hydrogen and more.

Overall, the EU’s climate agenda is progressing. The European Parliament approved a revised carbon pricing mechanism this quarter, paving the way for an effective carbon price for heavy industry by 2032. Parliament and Council also agreed to phase out fossil fuel cars by 2035.

However, the Green Deal is far from a done deal, as evidenced by the European Parliament’s assent to label gas as “green” under the new Taxonomy for sustainable investments. This means cleantech will now have to compete with gas to raise “green” funding, at a moment when the EU looks to phase out imported gas.

Throughout these important debates and decisions, we continue to carry the voice of cleantech in Brussels and beyond, and look forward to keeping in touch with you along the way.

EXECUTIVE SUMMARY

01
Global venture capital experienced a marked slowdown in Q2 2022
After a few quarters of explosive growth, global cleantech investment fell significantly.
This downward environment is due to the broader economic dowturn.
02
Electric mobility and renewable electricity for all lead the quarter
Strong traction continues for electric vehicle innovators. This traction is set to continue, as the EU just agreed to ban the sale of new fossil fuel-powered cars by 2035.
Deployment of renewable energy also attracted significant funding. This market is also likely to get a boost from the EU’s increased renewable target, pushed to 45% by 2030.
03
In Focus: a European grid innovation strategy
The latest REPowerEU plan, designed to wean the EU off Russian energy imports, directly cites cleantech as an area of focus to reach energy security
However, the plan still lacks concrete strategies for key building blocks, such as energy storage and grid improvements
04
Clean technology makes its way to EU policymaking, but more ambition is needed
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
Latest policy decisions show the fight for a greener economy is far from won. The European Parliament just approved the European Commission’s proposal to label gas as green, in the EU taxonomy for sustainable investments

EU cleantech deals rise, driven by late-stage investments

EU Cleantech investment dropped in Q2, following a general downturn in global VC investment 
While number of growth-stage deals dropped, early stage deals increased slightly, showing that the innovation pipeline is still strong, especially for seed funding
EU’s share of global cleantech VC decreased slightly to 17.9% from 18.3% in Q1, still an increase over 2021
EU27 Cleantech Seed, Series A, Series B and Growth investment, 2018-22
EU cleantech VC investment by sector Q1 2022

Q2 deal distribution: geography & sector

Deals are happening across 18 out of 27 EU member states. Most active countries were Germany, France, Sweden, Spain, Netherlands, Belgium and Ireland
Strong continued traction for electric vehicle innovators helps Transportation & Logistics lead the quarter
Circular economy businesses showed strongest deal volume, both early and late stage
Largest investment rounds took place in electric mobility, innovative renewables and circular economy
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)
Energy Management
Germany
€200 M
Portugal
€25 M
Germany
€22.5 M
Industial Energy Efficiency
Germany
€119 M
Sweden
€36.7 M
Robotics
Germany
€38.5 M
Alternative Protein
France
€35 M
France
€27.5 M
Electric Mobility
Germany
€30 M
France
€22.9 M
Prefab Construction
Austria
€30 M
Circular Economy
Sweden
€25 M
France
€20 M
Germany
€12 M
Germany
Undisclosed
Belgium
€2.5 M
Carbon Monitoring
France
€21.1 M
Germany
€10.55 M
Hydrogen Economy
Spain
€12.5 M
Marine Ops Optimisation
France
€11 M
Advanced Materials
Netherlands
€5 M
Carbon Capture
Denmark
Undisclosed
Late-stage investments
(series B and growth equity)
Electric Mobility
Croatia (Hrvatska)
€500 M
Portugal
€150 M
Sweden
€55 M
Sweden
€17 M
Circular Economy
Germany
€121 M
Germany
€120 M
Spain
€109 M
Carbon Monitoring
France
€79.5 M
Fleet Optimisation
Denmark
€54.5 M
Storage
Germany
€32.7 M
Hydrogen Economy
Estonia
€24 M
Germany
€12 M
Agritech
Belgium
€20 M
France
€19.6 M
Advanced Materials
Germany
€7 M

Investor

NEWS
€150
million

Climentum Capital’s inaugural fund, aimed at reducing CO2 emissions and accelerating Europe’s green transition, reached first close at €150 million

€410
million

Kiko Ventures announced a €410 million evergreen cleantech venture platform

€150
million

Demeter and Cycle Capital announced the first close of their Circular Innovation Fund, a €150 million fund aimed at scaling circular solutions

$145
million

TiLT Capital Partners announced first close of its Fund I at €145, backed by the European Investment Bank, the European Investment Fund and BpiFrance

$600
million

McWin partners launched the McWin Food Ecosystem Fund, a €250 million strategy focusing on the agtech industry

In Focus: the need for a European grid strategy

The dual climate and energy crisis is putting pressure on the EU to accelerate the transition of its energy system, from one reliant on imported fuels to one running on renewable energy
The European Commission just proposed to raise renewables targets from 40% to 45% by 2030
The grid of the future needs to accommodate more flexible assets while supporting increased levels of electrification. It can do so with a mix of grid capacity build-up, seconded by a wide deployment of innovative grid technologies, like grid flexibility, aggregation, vehicle-to-grid, nowcasting, etc.
EU DSOs forecast an annual investment increase of 50-70% over the next ten years to adapt
The graph below shows VC investments in grid and networks innovation is already very high in North America, but lagging in the EU. To catch up, the EU should come up with a clear strategy for how to integrate new grid technologies into grid improvement plans.
VC investment in grid & networks innovation: EU27 vs. North America, 2017-22

EU innovator

profile
Sympower operates an automated demand-response platform to optimise the energy consumption of its customers while contributing to grid stability.
Founded in 2015 and headquartered in Amsterdam, Netherlands
Raised €5.2 million Series B round led by Kees Koolen with participation from Rubio Impact Ventures, PDENH, Enfuro Ventures and Casper Peeters
Funding will be used to enter new European markets, including Greece and Czechia
Demand response facilitates the integration of variable renewable electricity by regulating consumption to compensate for discontinuous generation patterns

eu policy

update

REPowerEU Plan
What is it ?
On 18 May, the Commission published its REPowerEU plan . outlining the EU’s path to energy independence from Russian fossil fuels by 2027.

Key measures include:
96% of REPowerEU investments by 2030 intended for non-fossil fuel infrastructure
New targets of 45% of renewable energy and 75% of renewable hydrogen by 2030
Investments to update power grids
Fast-track permitting of renewable energy projects
EU-wide scheme of carbon contracts for difference to support renewable hydrogen
Reference to several key clean technologies to support the transition such as energy storage, hydrogen pathways for industry, geothermal
potential impact on eu cleantech
Cleantech named as an EU strategic priority: the plan leverages a combination of measures allocating public funds earmarked for COVID recovery to Horizon Europe, the sale of emission credits under the EU ETS and the roll-out of carbon contracts for difference to scale clean technologies
Increased demand for renewables: strong impetus for the massive deployment of wind, solar and heatpumps
look out for:
Lack of operationalisation strategies: absence of concrete deployment strategies for technologies like energy storage
Inefficient energy targets: national targets to reduce energy use remain indicative. National binding targets could enhance regulatory investment security to tap into the full energy savings potential of Member States
Buildings renovation: need for more specific instruments such as Mortgage Portfolio Standards to support renovations
Taxonomy Complementary Delegated Act
What is it ?
On 2 February, the Commission released the Complementary Climate Delegated Act (CDA). The CDA puts forward specific technical screening criteria under which activities in gas and nuclear sectors can qualify as green investments under the Taxonomy Regulation.

The European Commission included these activities in order to facilitate the transition towards a “predominantly renewable-based future”.

While nuclear energy is a zero-emission energy source, gas is not. Methane emissions from gas activities have  much greater impact on climate change than CO2 emissions.

On 14 June, the European Parliament Committees in charge of scrutinising the CDA rejected it. Despite this pushback, on 6 July, the European Parliament plenary greenlighted the CDA, which will enter into force on 1 January 2023. Austria and Luxembourg  have announced their intention to take legal action over the CDA as it conflicts with many EU environmental laws.
potential impact on eu cleantech
Derailing the EU’s climate trajectory: Additional gas capacity will result in large amounts of locked-in GHG emissions
Undermining the EU’s energy independence agenda: With most of the gas in the EU coming from Russia, further investment in gas will only result in greater dependence on an energy source that has proven to be extraordinarily volatile
Jeopardising the EU’s cleantech leadership: Inclusion of gas will divert capital allocation from clean technologies. Increased competition for funding with gas could encourage clean technologies to migrate to other jurisdictions, thus harming the EU’s green industrial leadership
Disincentivising institutional investors from investing in cleantech: Until now, the Taxonomy has been considered the green global standard. Including gas in the eligible activities will cause confusion on what constitutes a green investment and will limit investors’ ability to align their portfolios and investments with net zero targets
A new European Innovation Agenda
What is it ?
On 5 July, the Commission unveiled its innovation roadmap, which sets forth both legislative and non-legislative actions to position the EU as a global innovation leader.

Key measures include:
Developing regional deep-tech innovation valleys across the EU in sectors such as AI, blockchain, quantum and cleantech
Training at least 1m people in cleantech and deeptech skills over the next three years
Tracking the uptake of innovative solutions and services in public procurement
Easing the listing process for start-ups and tackling the tax bias in favour of debt funding
Putting in place test beds to trial innovations in the hydrogen economy
potential impact on eu cleantech
Regulatory clarity around innovation: putting forward concrete definitions related to startups, scale-ups and deeptech innovation will make the EU’s regulatory framework fit for clean energy innovation
Increased access to funding: reducing the cost of listings and making equity more attractive will channel more private money into cleantech
A new impetus for renewable hydrogen: establishing innovation test beds for renewable hydrogen under Horizon Europe will ramp up demand for green hydrogen solutions
look out for:
Administrative Delays: the agenda foresees a strengthened role for the European Innovation Council, which recently went under fire for delaying grant payments to start-ups
Fragmentation of the EU innovation ecosystem: connection to global ecosystems is key to the success of regional innovation valleys

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