The energy transition appears to be under attack, with Republicans in Congress eliminating tax credits for clean energy and the Trump administration threatening to cut off billions of dollars worth of subsidies.
But there are signs that the setback may not be as devastating as the headlines make it seem.
Investor sentiment remains strong, judging by the size of the two new funds. And more founders are flowing into the space. As a result, people and organizations are betting their money and time that the energy transition will not be resolved.
This week, Canadian infrastructure and asset management giant Brookfield announced it had raised $20 billion for its second energy transition fund. Brookfield has already committed $5 billion of that funding to renewable power projects and developments, with an emphasis on solar, wind and battery storage.
Perhaps more notable is the fact that Brookfield raised 33% more money this time than in its first transition fund in 2021. At the time, interest rates were 0% and the economy was bubbly, leading some to speculate that clean energy was entering a bubble. This second, larger capital raised during a less exciting period suggests that the limited partners expect sustained growth going forward.
Also this week, Energy Impact Partners (EIP) announced the closing of its third flagship fund with $1.36 billion in commitments, about 40% larger than the previous one. EIP is a venture fund that invests in early-stage startups after they have proven their mettle. The median round size the company invests in is $26 million, according to PitchBook.
Climate change technology, or whatever people are calling it these days, has seen an increase in new founders flocking to the space over the past five years due to a changing climate that has become impossible to ignore for many. Not all of them will survive (such is the nature of early-stage startups), but enough that investors will find opportunities to fund the next stage of growth.
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Already, EIP has invested about a quarter of its new funding in companies such as GridBeyond, which helps manage distributed energy resources, and Quilt, a consumer heat pump maker.
The investment trends that have developed over the past decade remain strong. Since 2014, major LPs such as pension funds and endowments have committed nearly $1 trillion to the energy transition. And while climate tech venture capital is aiming to raise about the same amount as last year, it has outpaced the broader venture industry and secured a larger share of commitments. The company has raised 3.8% of all venture capital this year, nearly double its share in 2020, according to PitchBook.
In the US, there are headwinds in the short term.
The Trump administration is openly opposed to the idea of an energy transition and is doing everything it can to undo the progress that has been made. As a result, the International Energy Agency (IEA) has revised down its forecast for renewable energy deployment in the United States, predicting that deployment between now and 2030 will be 45% lower than the agency predicted last year.
Nevertheless, global renewable energy capacity is expected to double by 2030, driven by solar installations in China, India, the EU, and sub-Saharan Africa.
The IEA is not alone in predicting that the transition will continue. DNV analysts predict that renewable energy will provide 65% of the world’s electricity by 2040 and nearly all by 2060.
DNV said it was not enough to achieve net-zero carbon dioxide emissions by 2050. But the transition is rarely without its ups and downs, and the momentum appears to be toward more renewable energy, not less.
