The greatest promise of startups has conventionally been the promise of innovation - the capacity to invent and reinvent, chipping away the status quo incrementally, or sometimes through sheer disruption.
There is a realization amongst the more traditional energy players today that innovation is only part of the equation, and that even greater collaboration with startups may hold the key to bridging the C02 emission reductions gap to meet global net-zero 2050 targets.
According to the International Energy Agency (IEA), to meet 2050 ambitions, a 40-50 per cent reduction in carbon emissions will need to come from technologies not yet commercially deployed in the market, especially in sectors where emissions are particularly challenging to reduce, such as shipping, aviation, chemicals and heavy industry.
The more traditional energy players are starting to look to startups more than ever as one way to overcome this challenge, realizing that co-innovation and collaboration will be key in clean energy. An example of this shift towards the impact of clean energy startups is the significant increase in investment over the last year alone.
In Europe, more early and mid-stage venture capital funding flowed to clean energy startups in the first-half of 2021 than in 2019 and 2020 combined. Public spending also ramped up, with markets for clean technology innovation receiving a boost, triggered by Fit for 55 ambitions, build back better agendas, and COP26 commitments.
The digital fitness of these startups has been another driver. Most clean energy startups are cloud native from inception, understanding the benefits from a cost perspective. And also how cloud helps achieve scalability, speed, agility, security and automation. Fostering innovation with startups that have digital hardwired into their DNA provides an opportunity for bigger energy companies to make greater strides forward, faster.
There is also a realization of the economic value these partnerships can bring. It’s estimated that successful partnerships in the pursuit of net-zero could create a market for clean technologies worth over $1 trillion a year by 2050 with the development of hydrogen electrolyzers and fueling, wind turbines, solar panels, long duration energy storage, carbon tracking tech, and advanced materials.
Some startups already making an impact include Hydro Wind Energy (UAE), Ionomr and E-zinc (Canada), Ethosgen, Persefoni, and Utility Global (US), SmartPulse (Turkey), Flexidao (Spain) and SmartHelio (Switzerland) to name a few.
The AWS Clean Energy Accelerator program was set up to boost growth of clean energy innovators and encourage collaboration between startups and traditional energy companies, to co-create solutions to tackle climate change.
Startups as partners
The competitiveness of startups is also a draw. This is not just down to how they manage to creatively address key industry topics and challenges, it’s also embedded in how these young firms subvert traditional organizational structures. Tackling a problem with a willingness to experiment and taking risks lies at the core of innovation.
Startups are also a product of their local environments. The Middle East is emerging as a global supplier of innovators and entrepreneurs. Those under 24 years old account for nearly half of the region’s population and are expected to enter the productive phase between 2018-2040.
One example of establishing a long-term vision for leveraging this human resource effectively is the UAE, establishing a federal youth authority, fostering youth entrepreneurship ecosystems and access to finance, and it’s starting to pay off.
Maryam Ahmed Hassani, Co-Founder and Chief Innovation Officer at Hydro Wind Energy, a UAE-based startup, explains the impact of public sector support and collaboration: “The UAE has long understood the value of public-private partnerships, and we frequently see that in practice across various initiatives, regulatory reforms, and a flourishing innovation ecosystem.
“As the country looks to deliver on the ‘Energy Strategy 2050’, the government sector is welcoming innovation from startups, in recognition of the vital role they play in enabling the country to reach its energy objectives and maintain its competitiveness in today’s rapidly evolving world.”
Achieving net-zero carbon goals is simply not a journey that can be taken alone. Anyone who thinks a single player is going to find the cure-all answer is underestimating the challenge that lies ahead. Partnering with startups, while learning how to work with them and from them, will continue to be a promising way of gaining access to, and expediting, the game-changing clean energy solutions the world needs to achieve net-zero emissions.