Innovations are central to Breakthrough Energy. What is your strategy for their development?
Innovation is not a one-off event, it’s a process – often non-linear and complex – that goes from R&D to large-scale commercialization and can last up to 20 years. There are a lot of hurdles on the way that can mean an innovation that does well at one stage gets stuck at another. That’s why we focus on the whole cycle, especially the “in-between” stages or “valleys of death” as they are sometimes called, to make sure a promising technology gets scaled.
At the early stage, we support brilliant scientists in taking their promising ideas out of the lab and into an environment where they can be validated through our Fellows program. We then continue company building via our venture arm. And, finally, we help accelerate the adoption and increase the bankability of proven, first-of-a-kind climate technology projects that remain too expensive for full-scale application through our Catalyst program. This “whole-of-innovation-cycle” approach is really what’s needed to bring down the Green Premium - or the extra cost of a clean technology compared to its dirty competitor - which in turn is necessary for widespread adoption and diffusion.
When these innovations come out of the lab into the real world, policy starts playing a central role in the game. How important is policy in the EU market today?
In the energy sector everything is regulated, so policy is critical. Nothing can be done without requesting a permit or a due diligence impact assessment. This is true for all stages of the innovation cycle.
Europe is strong at the early stages of innovation and technology development – and we put our money where our mouths are. The Horizon Research Framework Programme for 2023 deployed US$ 13.6 billion - just for public sector research! That lays a fantastic foundation for real breakthroughs and economic leadership, but, unfortunately, a lot of the research doesn’t go any further. That means a lot of promising nascent technologies and successful startups get bought by non-EU companies. In effect, we’re often an incubator for technologies, companies, and markets that scale in other geographies. Just look at the case of solar, where we were an early leader, invested huge amounts into R&D, and then lost the market – and economic rewards – to China.
Is finding skilled workers one of these issues when it comes to scaling up climate technologies?
There is certainly a skills shortage. That being said, Europe has many talented engineers and scientists, so it’s by no means the main issue with scaling. The challenges have more to do with the fragmentation of the single energy market that makes it hard to create Europe-wide champions and a lack of growth capital. There is a lot to consider when it comes to scaling up new technologies and industries – we need all the actors involved, from policy, industry, scientists to connect the dots and work together towards systemic change.
When it comes to mobilising funding, what is your investment thesis?
We look at four main criteria. First, climate impact. We only invest in technologies that have the potential to reduce greenhouse gases by at least half a gigaton per year, or 1% of global annual emissions. Second, the scientific underpinning. Whatever the technology is, it needs to be viable and able to scale. Third, partners. We can’t get the job done alone – we need partners, including private stakeholders and governments, to help us get these technologies out there. Fourth, we look for niches. A lot of technologies are already out there, so we look at the gaps and the areas where we need solutions that don’t exist yet.
Is the grid one of these undeveloped niches?
The grid is what underpins the entire energy transition. We need an upgrade if we are going to electrify the economy.
Unfortunately, the grid hasn’t received the attention it deserves, both from investors and governments, who see it as a technical side issue when really it’s at the core of everything. We urgently need a smart and digitized grid, and while the EU has started to look at it more seriously in relation to redesigning the electricity market, we still don’t have a Europe-wide plan yet.
Some suggest that the best way to tackle climate change is by investing in clean energy technologies in developed economies to help bring down their costs and make them affordable for everyone, especially lower income countries. Do you agree?
Yes. If we make progress on bringing down Green Premiums and bring these technologies to market in places like the US and Europe, we’ll be helping make them affordable for everyone. That’s really important, especially for lower income countries that need more access to energy to advance their economic development and improve the welfare of their citizens. And to do it by bypassing the traditional fossil-intensive path, like we’ve seen most recently in China where development came at the cost of major pollution.
But it’s not only that. These technologies will also be critical for bolstering countries’ energy security. In the wake of the war in the Ukraine, we’re seeing intense competition for fossil-fuel energy among countries, in particular around liquified natural gas – with the result that some countries are getting priced out of the market. So, in my view, energy innovation is crucial for economic and sustainable development, everywhere. This is going to be the mother of all transitions and the biggest thing any of us will have to live through. It’s happening now and technology is going to be what enables us to make positive systemic change a reality.
