California: Breeding Ground for Climate Tech Innovation

Big Tech Driving Demand In 2021, big tech giants (Amazon, Google, Microsoft, and their subsidiaries) contributed approximately a quarter of the $37B in venture funding that poured into climate tech, as per Statista. At Microsoft, we learned from the Senior Director of Energy Strategy about the company's plan to achieve net-zero Scope 1 and 2 emissions by 2025. In fiscal Year 2022, they signed new Power Purchase Agreements (PPAs) around the globe to procure 13.5 GW of carbon-free energy. Additionally, on May 10th, they signed a PPA with a nuclear fusion startup Helion Energy in 2028. To make the rapid data center expansion — propelled by exponential AI development — compatible with sustainability, they are investing in supply-side technology and boosting transparency to foster collaboration with governmental agencies and power utilities.  

Agile State Policies Accelerating Infrastructure Transitions Conversations with the Chief Advisor for Energy and Climate Research at the California Energy Commission shed light on system-level solutions being considered to mitigate climate change. California has been playing a leading role in this field, including its innovative emissions trading system. Last year, an impactful bill was passed that bestowed new authority on the California Energy Commission to approve and site renewable energy projects of 50 MW or more, aimed at expediting the bureaucratic approval process and getting the most benefits out of federal IIJA and the IRA. The state is also exploring effective strategies to improve the efficiency of regional grids and streamline interconnection queue processes.  

Financial Institutions Nurturing Technology Climate VCs are not only betting big on high-potential startups but are also instrumental in shaping their growth trajectory. Banks like BNP Paribas are also playing a pivotal role, incubating climate-tech companies through their venture capital arm, and offering solutions to clients seeking decarbonization. These financial players carefully assess the status of existing solutions, the technical proficiency and evidence of new entrants, and the velocity of their growth. The venture capitalists we met suggested that aspiring venture capitalists should find their own niche, understand both the technology and regulatory landscapes, study macro-system changes ahead, and identify investment opportunities, instead of simply transacting what comes in front of them.

Author:  Ai Takahashi, Linkedin: https://www.linkedin.com/in/ai-takahashi/