The climate tech investment will shapeshift in the year ahead. Out: EVs and big battery deals. In: geothermal, nuclear and other clean, reliable power to supply the AI data center boom.
“We’ve seen the first generation of climate tech — wind, solar, batteries — graduate to private equity and project finance, leaving VCs to nurture the next generation of clean fuels, industrial decarbonization, clean firm power, and more,” write Kim Zhou and Mark Taylor of Sightline Climate in their 2024 Climate Tech Investment Trend report. “Alongside the climate transition, we’re in the middle of a funding transition.”
Some highlights from the report:
New normal
Climate tech venture and growth investment totaled $30 billion billion in 2024, down 14% from the previous year — a much shallower drop than the 24% plunge from 2022 to 2023. Deal count was flat, numbering 1,460 deals compared to 1,468 in 2023.
The US presidential election chilled activity in the typically brisk third quarter. This year’s $7 billion in deals was half the size of Q3 2023 funding. The expected rollback of climate-friendly policies under president-elect Donald Trump has created uncertainty, but the Sightline authors see climate tech venture and growth investment settling into “a new normal” after recent peaks and troughs.
Power plays
Investments in geothermal energy nearly tripled last year to $558 million, while money flowing to nuclear almost doubled, to $1.9 billion.
Among the top deals of 2024: San Francisco-based Crusoe and São Paulo-based Scala, which raked in $600 million and $550 million, respectively, to develop clean energy for data centers. X-energy, a Maryland-based nuclear energy developer, raised $500 million.
Investors are also looking to longer term moonshots, such as commercial fusion energy. Pacific Fusion scored $900 million last fall.
Battery tech, which drew some of the last couple of years’ biggest deals, is expected to wane as EV momentum slows. Northvolt, a Stockholm-based battery maker and recycler, hauled in $5 billion last January before filing for bankruptcy in November.
Exit ramps
Despite all the grumbling, climate tech exits hit a four-year high in 2024, with 178 tracked mergers, acquisitions, IPOs, and SPACs. That’s up 136% from 2023.
The bulk of the activity fell into the M&A category, with European oil and gas companies such as TotalEnergies leading the pack as they look to fill out their low-carbon offerings. Most of the deal values were undisclosed, a signal of “smaller outcomes,” Sightline notes.
Many observers expect IPO and dealmaking prospects to pick up this year under a regulation-light Trump regime.
