We believe that renewable energy will only displace fossil fuels if it’s price competitive with no subsidies. For example, both onshore wind and solar energy can compete with coal, but not offshore wind. Offshore is notably more expensive than onshore which is why it’s only a small fraction of total wind energy deployed. Orsted is the global leader in offshore wind, and it has been greatly impacted by the high-interest rate now. Cost is one of the top factors that decide if a new technology or product will survive. But in climate tech, the whole context is much more complicated than usual cost numbers. That’s why we need techno-economics analysis.
Questions to discuss in this panel:
ClimateTech Adoption must make economic sense, variables including Capex, Opex, regulation penalty, government incentives, downstream markets or off-taker agreements, even carbon credits, etc., how do investors evaluate if a ClimateTech startup has attractive economic?
How to validate the cost of a new ClimateTech such as carbon capture and hydrogen storage? (technology due diligence)
How can ClimateTech startups sell to large enterprises and shorten the sales cycle?
Case studies of techno-economics analysis with climate tech startups.
Moderator
Hani Elshahawi, Managing Director of NoviDigiTech – Hani is a thought leader in the energy industry, he has more than three decades of experience (18 years in Shell) in global operations, innovation, technology management, business consulting, and the full cycle of innovation from cradle to grave and from concept to commercialization in the energy industry with roles spanning technology, engineering, marketing, business, technology, and management. Before Shell, he had worked in another leading energy enterprise Schlumberger for 12+ years.
Speaker
Amy Henry, CEO of Eunike Ventures – Amy is the CEO/Co-Founder of Eunike Ventures and Lambda Catalzer, angel investor, TiE Houston board member, principal of TiE ATX LLC (Angels of Texas), and co-founder of Texas Innovation & Entrepreneurship Foundation. Amy was named by the Houston Chronicle in 2019, “Women Who Take the Lead in Building Houston’s Tech Ecosystem” (related to the launch of Eunike Ventures). Eunike was listed in 2022 as the ‘Top 6 Accelerators/Incubators Investing in Houston’ and the ‘Top 11 Best and Most Active Accelerators in Houston. Eunike Ventures, Inc., headquartered in Houston, Texas USA is a first-of-its-kind global energy venture builder /hybrid energy technology accelerator that works with innovative, technology companies through commercialization, across the entire Energy value chain. Eunike serves a unique gap in the global innovation system by bringing together energy companies, expert talent, and best-of-breed startups.
Sujatha Kumar, CEO of Dsider – Sujatha is an entrepreneur and senior technology executive, and is the Founder and CEO of Dsider. With a background in senior management roles at multiple technology companies in the energy sector, she notably led one of them to a successful sale to Honeywell. Sujatha and her team possess extensive experience in energy and industrial markets, focusing on mid to large enterprises.
About ClimateTech Investor Panels – This is for accredited private equity angel investors, venture capitalists, and corporate/institutional investors to share insights and investment opportunities and catalyze collaboration to help ClimateTech startups.
Takeaways:
Hani: Although cost parity is crucial for the adoption of new climate tech, the reality is much more complex. Enterprise adopters are managing a systemic change, and new tech providers need to integrate their solutions into whole systems. Techno-economic analysis needs to build assumptions, sensitivity analysis, a process model, and history matching to validate simulations with real data. Enterprises look at the lifetime value of a new investment. When I evaluate climate tech startups for investments, I need to see they have already integrated themselves into their ecosystem and clients’ systems, not just presenting a single-point solution. And if their cost structure is higher than alternatives, even mature companies might struggle when some challenges emerge (for example, high interest rate), the recent Orsted cost crisis is an example.
Sujatha: Both large enterprises and startups need to build value stream mapping, system modeling, scenario analysis, risk analysis, and transition planning for a holistic analysis and simulation before new climate tech adoptions. There is so much data involved – operational, financial, and carbon abatement data and metrics need to be integrated, also domain knowledge is needed to assist with decision-making. We help both sides to make economic sense for net zero decisions and have supported the most disruptive climate tech startups.
Amy: How startups can best engage large corporations and shorten the time to commercialization and cash generation? Many climate tech startups offer innovations in materials or chemical reactions out of labs, and there is a big gap between a proof-of-concept or prototype and a pilot. They need to be able to design a pilot to convince large enterprises and investors. To prove the business use case is economically sustainable, data and simulation are important. They will need industry veterans with experience in integrating products and services as well as with the relationships with adopters to help facilitate technology trials with process safety in mind and minimal disruption to ongoing operations. The capabilities of handling large capital projects and integration planning are required. So for investors evaluating climate tech startups, looking for qualified and experienced talents in the team or partnerships, and for due diligence, you need industry experts to get involved.
Jessie’s note:
ClimateTech might be hyped now, but the reality is complicated. This session only gives a peek into what is needed in building and evaluating climate tech ventures. On top of innovation funnels, there are too many startups that have some new breakthroughs in the labs, they need lots more resources, talents, partnerships, and ecosystem adoption readiness, besides funding, to succeed.
To get to deployment, a technology must be completely de-risked, and ecosystem economics established so that every player in the value chain has a viable economic model. This means that managing a technology portfolio solely through the well-understood and widely used Technology Readiness Levels (TRL) stage gates is not enough.
Often, commercialization fails not because of the technology’s fundamentals, but because ecosystem economics have not been addressed or critical ecosystem players have not come on board. The economic and business model requirements for deployment, as well as a technology’s societal license-to-operate, can and should shape the technical problem definition and development of solutions at all stages of the RDD&D (research, development, demonstration, and deployment) continuum.
To describe adoption risks, the Office of Technology Transitions (OTT) has developed the Adoption Readiness Level (ARL) framework to complement TRL, and provided an assessment tool on the U.S. Department of Energy’s (DOE) website. It’s a very thorough picture of new technology adoption.
Also, another great resource from DOE is the Liftoff Reports. DOE’s Pathways to Commercial Liftoff reports provide public and private sector capital allocators with a perspective as to how and when various technologies could reach full-scale commercial adoption– including a common analytical fact base and critical signposts for investment decisions. The first Liftoff Reports are focused on advanced nuclear, carbon management, clean hydrogen, and long duration energy storage, Virtual Power Plant, Industrial Decarbonization.
Recommended resources:
- Activate: Techonomics: Establishing best practices in early-stage technology modeling
- Department of Energy: Techno-economic, Energy & Carbon Heuristic Tool for Early-Stage Technologies
- National Renewable Energy Laboratory: Techno-economic analysis