NTT DATA, a global IT and business services company, released the research report yesterday “Energy Trends† It contains current trends in venture capital investments in tech startups and new business models in the energy sector. In the period from 2018 to 2020, a total of 5.98 billion euros was invested. Based on these investments, it is possible to bring about potential changes within this sector.
There has been a turnaround in the energy market as a result of various initiatives. One of these is the European Union’s Green New Deal, for which the European Climate Act forms the legal basis. The aim is to make the EU the global leader in the fight against climate change. Another initiative is the issuance of Next Generation bonds by the EU. These serve to raise funding for investments in low-carbon energy generation solutions. These initiatives reflect the European Union’s strong commitment to the energy transition. 30% of all EU money will be invested in energy and climate plans.
For almost 6 billion euros in investments
Investment in startups is still picking up. Since 2008, there has been an annual growth of 17 percent. However, the corona crisis caused a sharp drop in the number of investments. According to estimates, there could have been 132 deals in the energy sector had the pandemic not thrown a spanner in the works. However, the number of investments in 2020 fell to 46 with a total value of approximately six billion euros. The average amount of the top five new investments during the period under review was 190 million euros.
The research report shows that in recent years there has been a change in the trend for energy companies to invest more intensively than oil companies. The last group is now leading the way. They participate 20 percent more in investments than energy companies.
Investments by geographic region
The main investment hubs are in the United States and Europe. California and Germany are leading the way. The United States accounted for almost half of all investments. Europe accounted for almost 40 percent. However, these key investment regions are giving way to emerging markets, and the Middle East in particular, with eight percent of all investment.
In Latin America, Asia, the Middle East and Africa, the ecosystems of innovation are beginning to flourish. This is due to the boost large energy companies are giving startups in their region, creating their own pipeline of talent. This will contribute to the emergence of important new nodes in the coming years that will facilitate the creation of new start-ups and development of innovative solutions. This, in turn, will fuel growing investor interest in setting up headquarters in the vicinity of these regions.
Trends in the energy sector and a vision for 2030
The number of venture capital investments in startups is expected to continue to grow annually. This is the result of all government support and measures for the implementation of new energy supply models. Exponential growth in innovation in the energy sector is expected in the coming years. This is due to direct investments in renewable energy through Next Generation funds and the commitment of the United States and Asia to adopt cleaner models in production, storage and mobility. Disruptive models will be applied that will increase the value and application possibilities of the energy sector.
This growth will be further fueled by the consolidation of new collaboration models between large enterprises and startups. These models are particularly attractive to both parties. They are characterized by lower risks and offer startups greater independence without limiting their growth or flexibility.
About the research
The research analyzed the investments of the 33 largest companies in the energy sector measured by turnover. In the research period from 2018 to 2020, a total of 317 investments were made in 258 startups.
Download the full research report here.