The climate tech market continues to develop, and commercialization is becoming more real. Renewables are set to surpass coal-powered electricity production for the first time this year, as they become cost competitive with traditional generation methods.
As investors, we recognize that we are at a tipping point in this market. Climate tech innovation is meeting wider demand and driving adoption at scale. Considering commercial advancements—along with growing support from regulators, consumers, and the business community—now is a great time to focus on the climate tech market.
The term “climate tech” encompasses everything from sustainable food and new materials to renewable energy and climate data analytics. While we see promise in several subsets of climate tech, we are most excited to invest in the circular economy, decarbonization, and energy.
Below, we dig into our interest in that third category, specifically, the shift towards a more decentralized electrical grid.
Investment focus area: Transitioning to a distributed electrical grid
Electricity is already the largest supplier of useful energy, and demand for it is only rising, projected to increase 27% by 2050. At the same time, the current American grid is becoming more unstable. Climate change, weather issues, and poor maintenance have contributed to a 5X increase in outages in 2021 vs. 2000. The grid will face further strain as the AI boom persists.
Today, the way that electricity is produced, distributed, and consumed is changing. Non-fossil fuel energy sources are increasing, and we’re seeing a shift towards power generation from non-utility sources.
As a result, we are increasingly moving away from electricity production at centralized power plants owned by large utility companies (e.g., ConEd, Exelon, PG&E) and towards a more mixed generation base of utility players and non-utility players (e.g., independent power producers, end consumers with at-home generation). This transition is already under way: Independent power producers generated nearly half of US electricity in 2022.
This shift towards a more distributed grid largely supports the generation of renewable energy—but there are a host of challenges and opportunities to consider.
Our investment focus is on early-stage software and tech-enabled companies contributing to this fundamental shift in our grid infrastructure. We have several areas of interest, ranging from how we better optimize the grid to how we electrify our buildings.
- Resiliency software: Solutions that help existing large-scale grid players (e.g., utilities, transmission, and distribution companies) identify risks in their operations, with a goal of mitigating future outages.
- Interconnection: The interconnection queue refers to the backlog of new (primarily renewable) energy projects that are unable to connect to the grid and begin producing electricity. Often, the problem isn’t the supply of available energy; it’s connecting it to the grid and making it usable. Software-enabled platforms are alleviating these issues.
- Power purchase agreements software and marketplaces: As electricity volatility amplifies, businesses—led by big tech companies with large electricity expenditures—are increasingly procuring power in bulk through power purchase agreements (PPAs). This allows businesses to lock in longer-term visibility into energy costs and can help them hit net zero goals.
- Building electrification: Consumers and businesses continue to electrify, generate their own power (e.g., solar panels), and support their own energy storage (e.g., home battery systems) for energy backup and to manage energy intermittency.
- Virtual power plants & next-gen utilities: As consumers and businesses electrify and install more distributed energy resources, virtual power plants can become major players in their local markets, providing energy supply back to the grid.
Get in touch
We are continuing to dig into the future of the electrical grid and other areas of climate tech generally. If you are working in the space, drop us a note. We’d love to chat!
Anna Barber, Partner
anna@m13.co
Mark Grace, Investor
mark@m13.co
The climate tech market continues to develop, and commercialization is becoming more real. Renewables are set to surpass coal-powered electricity production for the first time this year, as they become cost competitive with traditional generation methods.
As investors, we recognize that we are at a tipping point in this market. Climate tech innovation is meeting wider demand and driving adoption at scale. Considering commercial advancements—along with growing support from regulators, consumers, and the business community—now is a great time to focus on the climate tech market.
The term “climate tech” encompasses everything from sustainable food and new materials to renewable energy and climate data analytics. While we see promise in several subsets of climate tech, we are most excited to invest in the circular economy, decarbonization, and energy.
Below, we dig into our interest in that third category, specifically, the shift towards a more decentralized electrical grid.
Investment focus area: Transitioning to a distributed electrical grid
Electricity is already the largest supplier of useful energy, and demand for it is only rising, projected to increase 27% by 2050. At the same time, the current American grid is becoming more unstable. Climate change, weather issues, and poor maintenance have contributed to a 5X increase in outages in 2021 vs. 2000. The grid will face further strain as the AI boom persists.
Today, the way that electricity is produced, distributed, and consumed is changing. Non-fossil fuel energy sources are increasing, and we’re seeing a shift towards power generation from non-utility sources.
As a result, we are increasingly moving away from electricity production at centralized power plants owned by large utility companies (e.g., ConEd, Exelon, PG&E) and towards a more mixed generation base of utility players and non-utility players (e.g., independent power producers, end consumers with at-home generation). This transition is already under way: Independent power producers generated nearly half of US electricity in 2022.
This shift towards a more distributed grid largely supports the generation of renewable energy—but there are a host of challenges and opportunities to consider.
Our investment focus is on early-stage software and tech-enabled companies contributing to this fundamental shift in our grid infrastructure. We have several areas of interest, ranging from how we better optimize the grid to how we electrify our buildings.
- Resiliency software: Solutions that help existing large-scale grid players (e.g., utilities, transmission, and distribution companies) identify risks in their operations, with a goal of mitigating future outages.
- Interconnection: The interconnection queue refers to the backlog of new (primarily renewable) energy projects that are unable to connect to the grid and begin producing electricity. Often, the problem isn’t the supply of available energy; it’s connecting it to the grid and making it usable. Software-enabled platforms are alleviating these issues.
- Power purchase agreements software and marketplaces: As electricity volatility amplifies, businesses—led by big tech companies with large electricity expenditures—are increasingly procuring power in bulk through power purchase agreements (PPAs). This allows businesses to lock in longer-term visibility into energy costs and can help them hit net zero goals.
- Building electrification: Consumers and businesses continue to electrify, generate their own power (e.g., solar panels), and support their own energy storage (e.g., home battery systems) for energy backup and to manage energy intermittency.
- Virtual power plants & next-gen utilities: As consumers and businesses electrify and install more distributed energy resources, virtual power plants can become major players in their local markets, providing energy supply back to the grid.
Get in touch
We are continuing to dig into the future of the electrical grid and other areas of climate tech generally. If you are working in the space, drop us a note. We’d love to chat!
Anna Barber, Partner
anna@m13.co
Mark Grace, Investor
mark@m13.co
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