Green startups won the lottery last year. Investors have since become cautious, putting additional pressure on wealthy companies to supply better batteries, greener materials and faster electric cars.
Nearly 1,200 private green start-ups raised a record $45 billion last year, about double the previous year, according to PitchBook. Sustainability-related companies have made just as much by entering US stock markets, giving the once-undercapitalized industry a $90 billion war chest.
Whether investors make a profit or not, cash could provide a boost to the shift away from fossil fuels if companies achieve breakthroughs in solving long-standing problems in areas such as energy storage, sustainable products and raw material supply.
The scale of the new cash could avert a recession like the one that ended the previous green investment boom. Bankruptcy of solar company Solyndra LLC and battery company A123 Systems Inc. in the early 2010s caused a multi-year funding gap.
“It’s a big difference this time around,” said Eli Aheto, who helps run a climate-focused fund at investment firm General Atlantic. “You have these businesses that are properly funded.”
This money has changed the rules of the game for many companies. Battery maker Freyr Battery SA FREY 1.96% raised about $700 million last year after previously raising about $30 million since its founding in 2018. Northvolt AB, another battery company, raised $2.75 billion in a single fundraising round last year. Electric vehicle manufacturer Rivian Automotive Inc. raised nearly $14 billion in the largest U.S. initial public offering since 2014.
“There is big progress ahead,” said Robert Piconi, chief executive of Energy Vault Holdings Inc., an NRGV -2.51% energy storage startup based out of Los Angeles and Switzerland.
Energy Vault is one of many companies trying to store renewable energy to provide electricity when the sun is out and the wind isn’t blowing. The company uses excess renewable energy to lift 30-tonne blocks into what looks like an elevator shaft, then lower them when needed to generate power.
Energy Vault CEO Robert Piconi in 2019.
Photo: Michael Short/Bloomberg News
Over the past six months, Energy Vault has raised about $350 million and gone public through a merger with a Special Purpose Acquisition Company, or SPAC. Before that, since its founding in 2017, the company has raised about $60 million. It recently announced a partnership and investment from energy giant Saudi Arabian Oil Co., known as Aramco, and mining company BHP Group Ltd. This year the company plans to build its first commercial projects. .
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Companies like Energy Vault still have to prove their technology works on a large scale and answer naysayers who claim it’s overpriced because of their meager current earnings. Shares of many publicly traded startups have fallen recently as risky stocks have sold off. Investors say the changing market environment is slowing the pace of clean energy fundraising and increasing pressure on companies promising breakthroughs.
Money is a stumbling block in climate change negotiations around the world. As economists warn that limiting global warming to 1.5 degrees Celsius will cost many more trillion than anticipated, the WSJ is considering how the funds can be spent and who will pay. Art: Preston Jesse/WSJ
“We have to earn trust,” said Tom Jensen, CEO of Freyr, a Norwegian company that makes low-cost, environmentally friendly batteries. Freyr plans to open large battery factories in Norway, Finland and the US over the next few years. About $700 million the company raised last year came from investors, including mining company Glencore GLNCY 1.84% PLC and a division of private conglomerate Koch Industries Inc.
Swedish battery maker Northvolt has been one of the biggest winners of the 2021 fundraiser frenzy. It is working on mass-producing batteries after raising $2.75 billion last summer from investors including Volkswagen AG, Goldman Sachs Asset Management and asset manager Bailey Gifford.
Nearly 40 sustainability-related companies completed the SPAC merger in 2021, raising about $25 billion in cash led by electric vehicle startup Lucid Group Inc., LCID 4.14%, according to a Wall Street analysis of SPAC Research data Journal. Many of the SPAC deals that were announced at the end of 2021 are expected to close soon, raising billions more. Last year, 27 green companies went public through regular IPOs and raised more than $20 billion, according to the magazine’s data analysis of Dealogic.
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Cash flows often went to competitors in new industries, forcing some to try to get ahead at the risk of new setbacks. “The next couple of years are going to be explosive” as companies accelerate their plans, said John Bissell, co-CEO of Origin ORG 2.25% Materials Inc., a startup working to make plastics and other materials from wood chips and other plants. based products.
Origin, founded in 2008, raised about $500 million last year in conjunction with SPAC. Two other sustainable materials companies, Danimer Scientific Inc. and Footprint International Holdco Inc. have entered into SPAC deals in the last 18 months with investor commitments of approximately $1 billion.
A plant under construction for the Swedish company Northvolt, which plans to begin mass production of batteries after receiving $ 2.75 billion from investors.
Photo: Handout/Agence France-Presse/Getty Images
Write to Amrit Ramkumar at [email protected]
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