Dips in oil prices, falling demand and supply chain issues brought on by the COVID-19 pandemic are causing traditional oil and gas companies to increase their focus on alternative energy, carbon reduction and other environmentally friendly solutions. Globally recognized names in oil and gas, such as Chevron and Shell, have created funds with the aim of investing in the development of clean energy technologies. This investment in clean energy technology is a way for oil and gas companies to hedge their bets and efficiently pivot to alternative energy solutions through investment in startup companies.
Chevron Technology Ventures, the technology development arm of Chevron, launched the Future Energy Fund in 2018 to “invest in innovative startups with the potential to play a critical role in an energy system that is increasingly electrified, decarbonized, digitized and decentralized.”1 Chevron most recently invested in San Jose-based Blue Planet Systems Corporation, a carbon capture and utilization startup aimed at reducing the carbon intensity of industrial operations.2
Shell Ventures, one of the first corporate strategic venture funds in the oil and gas industry, has also increased its focus on strategic investments in renewable and green energy startup companies. Shell Ventures now has a portfolio of more than 16 companies, the vast majority of which are dedicated to renewable and green energy technologies.3 One of their most recent investments is ZeroAvia, a company whose mission is to transition the world to zero-emission airplane travel.
It is not just oil and gas companies that are turning their investing capital towards energy technologies, corporations and venture capitalists from all industries have taken notice of the multi trillion-dollar opportunity created by the global focus on developing technology intended to reduce GHG emissions. VC firms alone invested at least $15.7 billion in clean energy technology in 2020.4 Many prominent VC funds, including Sequoia Capital and Founders Fund, have announced that they are seeking climate tech related opportunities. Even tech giants such as Amazon and Microsoft have made significant investments in clean energy. Amazon announced a $2 billion Climate Pledge Fund in June 2020 that is aimed to invest in companies that are building products and services geared towards reducing the carbon footprint of corporations.5 Similarly, Microsoft announced early in 2020 that it will invest $1 billion over the next four years into companies geared towards the development of carbon-removal technology.
Improvements to battery technology is set to play a key role in a transition to clean energy. It is estimated that energy storage will have to grow exponentially in order to meet the world’s sustainable energy goals.6 VC companies invested more than $500 million in battery startups alone last year.7 With more and more corporations making pledges to become carbon-neutral or 100% renewable, many are entering into power purchase agreement contracts with energy storage projects. These clean energy contracts serve as a way to increase storage project financing and reduce reliance on fossil fuels. Other emerging trends in energy storage, such as the decreasing costs of lithium batteries and state mandates for energy storage, indicate that we are poised for a boom in the battery and energy storage industry, along with increased corporate investment, into and beyond 2021.
Renewable and clean energy will continue to garner attention as a new presidential administration with a greater focus on environmental matters takes over. President Biden has pledged to tackle climate change by investing in energy innovation, offering incentives to companies that offer low-carbon solutions, and tie the US economic recovery to clean energy through the creation of jobs and infrastructure.8 There has been a shift in public opinion towards the importance of climate change and as a result, consumer demand for renewable and clean energy technology has increased drastically over the past several years. Due to this increased consumer demand and the new administration, alternative energy funds have already attracted more than $5.2 billion in 2021. We expect this trend to continue throughout the year, with vast opportunities innovation and investment.
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