Supercharged Climate Positive® Investing in Europe
November 2020
Emmanuel DeSousa, Eric Kosmowski, Joaquin Rodriguez Torres, Melanie Nakagawa
Contributing Authors Jake Hansen, Scott Himmelberger, Martin Steinweg [email protected] Supercharged Climate Positive® Princeville Capital
I. Executive Summary —
As global technology investors we are constantly evaluating Based on our engagements with over 400 companies trends in capital markets and governmental policies that headquartered in Europe and around the world coupled shape technology development, adoption and growth with our analysis of Europe’s market and policy conditions, around the world. We have been particularly focused on we believe the following technologies and tech-enabled the extraordinary rise in climate technology companies business models are well positioned for accelerated – whose funding has grown five times faster than overall growth: venture capital, attracting approximately $16 billion in 2019.1 Several factors contribute to this growth - including 1. Residential clean energy solutions macroeconomic changes, expedited policy adoption, 2. Virtual power plants and distributed energy resources increasing demand, and access to focused capital. We 3. Digital utilities have taken a closer look at where these factors are likely 4. Electric vehicle charging network operators to have a prominent impact and believe that investment 5. Mobility data platforms opportunities in technology companies addressing climate 6. Mobility-as-a-service providers change are supercharged for delivering outsized returns 7. Intelligent building energy management in this decade – 2020 through 2030 – and particularly in 8. Energy efficiency-as-a-service providers Europe. We selected these technologies and models based on We conclude what makes this decade distinct from their high growth, capital efficiency, ability to deliver previous years are four macrotrends: positive unit economics, and the policy pull driving accelerated decarbonization. We also highlight green • Advancement in enabling technologies for climate hydrogen, microgrids, electric vehicle manufacturing solutions and improving economics for climate tech and batteries and certain ridesharing platforms that do • Healthy early-stage climate tech start-up and venture not meet all these exacting criteria, but are exciting high- ecosystem growth technologies and tech-enabled business models • Europe’s Green Deal and stimulus accelerates policy that should remain a focus for investors because of the and technology adoption macrotrends surrounding their adoption. • Increasing consumer preferences for climate solutions and climate leadership from corporations and financial Thanks to strong tailwinds blowing in Europe, including institutions unprecedented government stimulus targeting climate change, we offer our insights into why Europe’s climate- These macrotrends are accelerating the growth in many related technology companies are primed for accelerated leading companies at the forefront of the climate transition. growth and have become a market not to be missed by We identified eight leading technologies and tech-enabled technology investors. business models poised for outsized growth and returns in sectors that green the grid, decarbonize transportation and create a more energy efficient built environment – sectors that are responsible for nearly 60% of Europe’s carbon pollution.
1 PwC research. “The State of Climate Tech 2020.” Sept 2020, https://www.pwc.com/gx/en/services/sustainability/assets/pwc-the-state- of-climate-tech-2020.pdf.
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II. Europe’s Opportunistic Environment: Four Key Macrotrends —
There is growing momentum in Europe for scaling Macrotrend 3: technology companies addressing climate change. Europe’s Green Deal and stimulus accelerating policy and Europe has always been in a leading position on climate technology adoption action – whether being the first region to implement a cap on carbon pollution in 2005 or centering its economic Macrotrend 4: growth and recovery strategy around getting to climate neutrality. Europe is also home to numerous corporations, Increasing consumer preferences for climate solutions investors, and policymakers that have been at the forefront and climate leadership from corporations and financial of advancing climate commitments and new mechanisms institutions to achieve them. Despite these factors, Europe trails the United States and China in attracting venture capital These trends are making the European investment in climate-related technologies – attracting $7 billion environment for climate technology poised for outsized compared to the United States’ $29 billion and China’s performance. Indeed, publicly traded shares in climate $20 billion.2 We believe investors who are shying away technology companies have outperformed nearly all other from Europe are missing attractive opportunities to deploy categories of European public companies this year.3 Since capital in the region as climate technology, especially in the beginning of the year, the performance of the NASDAQ Europe, is benefitting from four key macrotrends: Clean Edge Green Energy Index, an index that tracks publicly traded clean-energy and low-carbon technology Macrotrend 1: companies, has been better than that of the S&P 500 or STOXX Europe 600. Even when looking specifically at Advancement in enabling technologies for climate the returns of technology companies, one of the best solutions and improving economics for climate tech performing sectors through the COVID crisis, these climate technology stocks have performed significantly better. Macrotrend 2: Healthy early-stage climate tech start-up and venture ecosystem
IndexIndex MarketMarket CapCap
220% 200% 180% 160% 140% 120% 100% 80% 60% 1-Jan-20 1-Feb-20 1-Mar-20 1-Apr-20 1-May-20 1-Jun-20 1-Jul-20 1-Aug-20 1-Sep-20 1-Oct-20
NASDAQ Clean Edge Index S&P 500 Tech STOXX Europe 600 Tech
S&P 500 STOXX Europe 600
2 Id. 3 S&P Capital IQ. Retrieved October 10, 2020, from S&P Capital IQ database.
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Macrotrend 1 Numer of IoT Connections in the UK 70.0 Advancement in enabling technologies for climate solutions and improving 60.0 economics for these technologies 50.0 The last decade is marked by significant advancements in digitally-enabled technologies that underpin many of 40.0 the most promising climate solutions. This technology 30.0 maturity coupled with new economic conditions have helped drive the significant gains in renewable energy 20.0 deployment and consumption in Europe. 10.0 Technology Maturity The widespread proliferation of low-cost sensors 0.0 connected to the internet known as the internet of things 2016 2017 2018 2019 2020 (IoT) has benefitted many applications related to climate technologies. The number of IoT devices has exploded, Automotive Consumer Electronics more than quadrupling in just the last four years with Utilities Other signs of continued acceleration.4 Many of these devices are being deployed in sectors highly relevant to climate technology including utility, automotive, and smart city applications. With the now near ubiquitous data collection Improved Economics for Renewable Energy from a huge number of distributed assets, climate-related Europe is a prime candidate for renewable adoption. Many technology companies are finding ways to optimize their analysts expect renewables to grow significantly in Europe operations and reduce emissions. in the future due to cost declines in solar, wind, and batteries. Bloomberg New Energy Finance estimates that “by 2040, The rapid and massive improvement in artificial renewables make up 90% of the electricity mix in Europe, intelligence (AI) is another key enabler of advancements with wind and solar accounting for 80%.” This growth is in climate technology. Complex systems that are difficult supported by reductions in capital costs, particularly steep to model in their entirety, (mobility systems, the electric declines in costs for solar photovoltaics (PV) and battery grid, climate models, etc.) are ideal candidates for the technologies, that is lowering the levelized costs of energy application of AI-based algorithms. In recent years, AI has (LCOEs) for renewables. These decreasing LCOEs, along made major strides as computing power has continued to with Europe’s high, and rising, electricity prices (compared increase and the algorithms used to train the models have to other countries like the US), accelerates adoption of become more sophisticated. The amount of compute used renewables and have contributed to new milestones in the for training AI models, a figure correlated with the power deployment of renewables. For the first time, renewables and accuracy of AI-based models, has been doubling every generated 40% of the 27 EU member states’ electricity 3.5 months for most of the last decade.5 This exponential in the first half of 2020, overtaking generation from coal, growth means modern AI tools leverage more than 1 million oil and gas.6 (chart on next page7). For many countries, times the computing power of models just 8 years ago. renewables are now the cheapest energy source. These improvements have unlocked more applications that AI-based models can address with respect to climate change.
4 Data and source for graphic: Cambridge Consultants. (2017). Gordon Davies, “The What and When of IoT Adoption.” Cisco UK & Ireland Blog, 19 May 2017, https://gblogs.cisco.com/uki/the-what-and-when-of-iot-adoption/. 5 Open AI. “AI Doubling Its Compute Every 3.5 Months.” Medium, 17 May 2018, https://medium.com/@Synced/ai-doubling-its-compute- every-3-5-months-596b1b60fab. 6 Farand, Chloe. “Renewables overtake fossil fuels in EU electricity generation.” Climate Change News, 22 July 2020, https://www. climatechangenews.com/2020/07/22/renewables-overtake-fossil-fuels-eu-electricity-generation/. 7 Chart source: Ember. https://ember-climate.org/data/global-electricity/.
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Renewables Beat Fossil Energy Macrotrend 2 Generation in Europe
60 Healthy early-stage climate tech start-up and venture ecosystem 50 As expected, the pandemic has delivered some contraction 40 in overall deal volume in Europe, with European venture 30 funding for the first half of 2020 declining 20% from 2019– when it was at an all-time high. At the same time, there are 20 important trends to look for that indicate a healthy and
27 electricity27 generation expanding early-stage European climate-tech start-up and - 10 VC ecosystem in this reset environment that are creating 0 opportunities for investors. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2020 Expanding Pipeline of Companies % of total EU Fossil Fuels Renewables We are seeing healthy growth in the early-stage climate technology company pipeline. Capital raised by so-called Coal Wind and Solar “purpose-driven” companies doubled from $1.9 billion 9 Source: Ember in 2018 to $4.4 billion in 2019. More importantly, an overwhelming majority of these purpose-driven companies - 410 out of 500 companies10 - identified in the “State of European Central Banks (ECB) have also set interest rates European Tech” report include climate action as part of the so low that the cost of borrowing for low-risk renewables company’s core mission. And not only is climate change projects remains at historically low levels. For renewables, the leading issue tackled by these companies, these because a greater portion of the total cost results from companies have also attracted the highest level of capital the upfront capex investment relative to fossil-fuel power investment,11 filling up the European climate tech pipeline plants, the economics of these projects is particularly with companies reaching growth-stage. sensitive to the interest rate. According to researchers from ETH Zurich, a full 25% of the reduction in the cost of Growing Investor Diversification wind power over the last 15 years has been because of the There is an evolution happening in the European ecosystem lower interest rates.8 There is little near-term expectation that is beginning to favor financially-motivated and of interest rates being raised again, thus paving a runway of globally-oriented investors to help companies scale. Two continued low-cost financing for renewable projects. factors are coming together.
First, strategic (e.g. corporate venture capital) investors ECBECB Interest Intrest Rate Rate have played an important role in many European deals – 7 nearly 25% of climate tech deals done included a strategic investor.12 However, we anticipate that some of these 6 European investors are likely going to pause in their capital 5 deployment while their main businesses recover from the 4 economic downturn. This will be particularly pronounced 3 for some corporate VCs, such as those from oil and gas or fossil fuel asset-heavy utilities, as they have undergone 2 fairly substantial cost-cutting over the last few months. 1 This pause is likely to create an opportunity for other 0 investors, especially those with strong corporate networks, to provide a differentiated value add to these companies. 1/1/1999 1/1/2011 1/1/2013 1/1/2015 1/1/2017 1/1/2019 1/1/2001 1/1/2003 1/1/2005 1/1/2007 1/1/2009
8 Adverse effects of rising interest rates on sustainable energy transitions, Nature Sustainability 9 “The State of European Tech 2019.” atomico in partnership with Slush and Orrick, https://2019.stateofeuropeantech.com/chapter/purpose/ article/purpose-driven-investment/. 10 Based on a set of 528 unique companies identified by Dealroom. The sum of all companies per SDG is greater than that number as some companies may be addressing more than one goal. Source: Id. 11 Id. 12 See PwC supra note 1.
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Second, the European venture ecosystem is beginning slowdown in overall venture funding (for all sectors, not to attract a more geographically diverse pool of just climate tech), investors in late stage and technology investors. Historically, while European tech companies growth (Series C and later) remain close to Q4 2019 levels.15 have developed strong technology, relatively few have successfully scaled across Europe and none so far has succeeded in becoming an international giant of Macrotrend 3 the likes of Google, Facebook, Microsoft, Apple, and Amazon. This may be in part due to Europe’s inherently Europe’s Green Deal and stimulus fragmented nature, but other elements include a weaker accelerates technology adoption growth equity environment and a historical lack of global expansion ambition among European startups.13 Notwithstanding an abrupt economic upheaval caused by However, there are now a growing number of European a global pandemic that could have derailed Europe from its start-ups looking to expand globally and seeking investors ambitious climate goals, Europe remains steadfast in its with a broader geographic footprint and larger pools of commitment to lead on climate action. Europe’s Green Deal growth capital. Last year, for rounds $20M and above, is the policy fulcrum and growth engine for the European 33% of investors were from North America while 60% were economy. The North Star to this package is Europe’s goal from Europe.14 We see even more opportunity for globally- to be the first climate neutral continent by 2050. To achieve minded investors to help European companies scale their this, Europe plans to raise its 2030 emissions-reduction ambitions. target from 40% to 55% (below 1990 levels). This level of ambition will mean nearly every sector of the European Europe, with its strong policy and consumer support for economy will have to ensure they are moving quickly to climate-related technologies, remains an ideal environment decarbonize – a pull for climate innovation at a scale never to scale climate related businesses. Given many of the seen before. same climate-related challenges are common around the world, there should also be ample opportunity for European climate technology companies to become major global However, there are now a growing number forces. Out of the roughly 25 climate-related technology of European start-ups looking to expand focused funds we know in Europe, there are only a few globally and seeking investors with a specifically targeting growth stage investments, with the broader geographic footprint and larger vast majority focused on early-stage tech companies. We believe that the European climate tech ecosystem pools of growth capital. is primed for growth equity investors, with a truly global mindset, to invest in promising technology companies and drive their expansion around the world. To date, despite a
European Venture Dollar Volume Through Q2’20Q2'20 12.0 10.0
8.0 6.6 6.4 4.4 4.7 6.0 4.4 4.0 3.6 4.0 3.6 2.0 3.4 3.1 0.0 0.9 0.9 1.0 0.8 0.7 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Total Invested Capital QuarterTotal Per Invested ($b) Angel-Seed Early Stage Late Stage + Technology Growth
Source: Crunchbase
13 Ghosh, Shona. “7 investors and founders reveal 6 reasons Europe has never produced its own Facebook, Google, or Amazon.” Business Insider, 30 May 2019, https://www.businessinsider.com/why-europe-has-never-produced-a-google-2019-5. 14 Teare, Gené. “European Venture Report Q2 2020: Funding Down to 2018 Levels After Record High in 2019.” Crunchbase, July 20, 2020, https://news.crunchbase.com/news/european-venture-report-q2-2020-funding-down-to-2018-levels-after-record-high-in-2019/. 15 Gené Teare and Sophia Kunthara. “European Venture Report: VC Dollars Rise in 2019. ” Crunchbase, January 14, 2020, https://news. crunchbase.com/news/european-venture-report-vc-dollars-rise-in-2019/.
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And despite the potential for a global pandemic to knock Europe off course, European governments used this moment to make climate change the centerpiece of its post-pandemic development plans for decades in the future. Consistent with this vision, the European Union introduced the world’s largest “green” stimulus and committed to direct 30% of the total recovery package toward climate protection from 2021-2027. This makes the EU’s green stimulus 10 times larger than any other country (see chart below).
Europe Outpaces Rest of World with Green Recovery Efforts
Green Stimulus Spending ($b) Green Share of Total Stimulus
300 25.0%
249 20.2% 250 20.0%
200 15.0%
150
10.0% 100
5.0% 50 26 1.9% 2.4% 1.1% 1.4 0.8 0 0.0% US EU China India US EU China India
Source: Rhodium Group16
While specific details and allocations remain under discussion, current estimates indicate that total green stimulus spending from the Next Generation EU package will likely represent 20% of total EU and member state stimulus spending. This unprecedented influx of new investment into climate policies and projects to decarbonize the power sector (e.g. renewables/hydrogen), and programs to increase energy efficiency is likely to be an important accelerant for climate technology solutions in Europe. Related sectors such as low-carbon transport, energy storage and batteries, infrastructure and green buildings will also benefit from Europe’s stimulus.
The EU package, for example, includes a two-year €20 billion boost for “clean” vehicles, a target of 2 million electric & hydrogen vehicle charging stations installed by 2025 and €10B in European Investment Bank project loans for renewable energy and hydrogen. From this we anticipate rapid growth in demand for the companies in our pipeline that provide advanced mobility software solutions and technology solutions to support and integrate additional distributed energy resources into a smart grid. Relatedly, energy efficiency solutions are also well-positioned to benefit from Europe’s “Renovation Wave Strategy” – a plan to stimulate faster building renovation and efficiency deployments in Europe.
We are optimistic regarding how these stimulus measures can serve as an accelerant to many Climate Positive® sectors. We also recognize that political leadership and policy measures are important achievements that do not happen in a vacuum. They require the support and investment by other stakeholders (e.g. consumers, corporations, banks) to overcome challenges such as those created by inertia (e.g. incumbents slow to adopt new technologies) or complex and highly fragmented sectors (e.g. energy systems).
16 Source: Kate Larsen, Pramit Pal Chaudhuri, Jacob Funk Kirkegaard, John Larsen, Logan Wright, Alfredo Rivera, and Hannah Pitt. “It’s Not Easy Being Green: Stimulus Spending in the World’s Major Economies”, sourcing from IMF Fiscal Tracker, official government announcements, Rhodium Group.
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Macrotrend 4 Changing consumer preferences and climate leadership from corporations and financial institutions
Rounding out the key macrotrends In Inwhat what areas areas do do you you see see the the biggest biggest need need for for driving adoption of climate changechange in inEurope’s Europe's economies? economies? technology in Europe are changing consumer preferences on Environmental sustainability 54 environmental sustainability and the Fairness of pay and wealth 51 growth in climate-specific leadership Training and qualification for future jobs 39 from European corporations and Competitiveness to US and China on tech and… 35 financial institutions announcing Gende r equality 25 ambitious commitments to address Speed of innovation 23 climate change. Protection of personal data 18 Immigration of skilled workers 17 Europeans Prioritize Others 2 Sustainability 0 10 20 30 40 50 60 In a recent McKinsey survey of Europeans, 54% of respondents Source: McKinsey and Company indicated that environmental sustainability is the area with the biggest need for change in Europe’s 17 #European Company society (chart at top right). Initiative Description Relatedly, increasing concerns Companies Examples around climate change are driving GHG emission changes in consumer preferences reduction targets towards more sustainable (either well-below consumption. In a poll from October 2°C or 1.5°C 494 trajectory) 2019 of nearly 20,000 people across 28 countries, more than two-thirds say they changed their behavior in 100% renewable electricity the past few years out of concern for commitment 113 climate change.18
European Corporations Commitment to Commit to Climate Action use energy more productively to lower 49 GHG emissions This consumer shift in behavior is contributing to the dramatic increase we have seen in the Commitment to accelerating number of European corporations transition to EVs 51 announcing climate commitments. More than 1,500 companies with a combined revenue of more than $11.4 trillion announced in just science suggest that in order to meet These commitments and other the last year their pledges to be “net the Paris Agreement temperature declarations have now positioned zero” in emissions by 2050, including goals, the world must get to net zero corporations as major investors in large European headquartered carbon in global carbon dioxide emissions by breakthrough climate technologies, emitters such as BP and Shell. “Net mid-century, an effort that involves attractive potential acquirers for zero by 2050” goals are important unprecedented changes across all the growing ecosystem of startups commitments because the latest sectors of the economy. focused on climate solutions, and
17 McKinsey & Company. “How purpose-led missions can help Europe innovate at scale.” McKinsey & Company, 10 December 2019, https:// www.mckinsey.com/featured-insights/europe/how-purpose-led-missions-can-help-europe-innovate-at-scale. 18 Are you doing anything different in your life to combat climate change?” Ipsos, Energy & Environment, 10 March 2020, https://www.ipsos. com/en/are-you-doing-anything-different-your-life-combat-climate-change.
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as some of the largest buyers and March of this year, one of Sweden’s change. Storebrand also set a policy developers of clean power (see chart national pension funds announced it that bans holdings in companies that below). For a country like Ireland who was divesting from holding fossil-fuel get more than 5% of their revenue from houses the data centers for tech giants companies as a way to manage the coal. In total, Storebrand divested such as Google and Facebook (who financial risk posed by the low carbon $47 million from these companies– have committed to 24/7 clean power energy transition – a move that is admittedly a mere fraction of their and net zero by 2030, respectively), we estimated to affect approximately total assets under management – expect a surge in renewable energy $400 million in investments.19 but sending an important signal that deployment and advanced software divestment is reaching companies not control solutions to manage their We anticipate that divestment efforts just because of their physical carbon power grid. will create significant opportunities footprint, but extending to their policy to redirect this capital into climate- and lobbying activities. Financial Institutions aligned investments. For example, Decarbonizing Portfolios at the end of 2019 the European We believe these macrotrends drive In addition to European corporations Investment Bank launched a new accelerated growth for specific driving demand for climate climate strategy that included an end European climate technologies and technologies to meet their own to financing of fossil energy projects tech-enabled business models in this commitments, we are encouraged by by 2021 and increasing the share of coming decade (2020-2030). a growing set of financial stakeholders financing dedicated to climate action focused on decarbonizing their and environmental sustainability to 20 We anticipate that own portfolios. From life insurers reach 50% of its operations in 2025. to financial institutions, European We are also seeing other motivations divestment efforts will investors’ appreciation of climate risk for divestment and restrictions create significant is growing, spurred by initiatives such on investing that translates into opportunities to redirect more capital seeking sustainable as voluntary commitments to disclose this capital into climate risk, the introduction of investments. In August, Norwegian climate stress tests, and desire to limit life insurer Storebrand with about $91 climate-aligned financial risk exposure from holding billion under management, divested investments. stranded assets (made even more real from oil and chemical companies during this summer’s wave of write- citing these companies’ lobbying and downs by nearly every oil major). In advocacy positions against climate
Corporate RenewableRenewable Energy Purchased Globally (MW)
Google 1683 1023 Facebook 671 440 Amazon 501 424 Microsoft 402 360 BHP Group 607 QTS Realty Trust 544 Wal-Mart 541 Ball Corp 227 161 Anheuser-Busch 310 Starbucks 242 50
Solar Wind
Source: BNEF NEF (2020), IEA
19 “AP1 divests from fossil fuels.” AP1, 16 March 2020, https://www.ap1.se/en/news/ap1-divests-from-fossil-fuels/; Pielichata, Paulina. “AP1 cuts fossil fuels from portfolios” Pensions & Investments, 16 March 2020, https://www.pionline.com/esg/ap1-cuts-fossil-fuels- portfolios. 20 “EU Bank launches ambitious new climate strategy and Energy Lending Policy.” European Investment Bank, 14 November 2019, https:// www.eib.org/en/press/all/2019-313-eu-bank-launches-ambitious-new-climate-strategy-and-energy-lending-policy.
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III. Spotlight on Europe’s Climate Technology Sector-Specific Opportunities —
1. Greening the Energy Grid With strong tailwinds Europe’s energy grid is undergoing According to the International Energy significant transformation. Europe’s Agency, “utilities and grid companies blowing in Europe to green expected new climate target of 55% in Europe (Iberdrola, Enel, Rte, and e.On) the grid, decarbonize reduction in emissions from 1990 and in the United States (Exelon, Duke transportation and levels by 2030 will require renewables and Edison International) reported to reach 38-40% of total energy supply record spending on software.”22 At the support an energy by 2030 (compared to ~19% in 2018)21 same time, Europe is experiencing a efficient built This is creating a pivotal moment rise in customers seeking technologies environment, this section for smarter and more resilient grids. to help them manage their energy offers our insights into The region’s decarbonization of its supply and even become producers energy systems and grid through themselves (e.g. residential and C&I which technologies and the deployment of more flexible, solar solutions, batteries and energy business models are renewable, and distributed energy storage options). well-positioned to take assets are driving market expansion flight. for innovative climate technology We have identified unique trends in companies. Through our engagement the funding environment for resilient with many leading businesses in the grid technology companies that region, we are seeing an increase in will have an impact on the kinds of investment and demand by utilities for exits we will see. Historically, this intelligent solutions to manage a grid sector has been prone to M&A with with higher volumes of intermittent corporates in the European energy and distributed renewable power. sector actively acquiring disruptors often fairly early in their growth cycle (see chart below). But we anticipate a
Company European Energy-Related Acquisitions
21 Parnell, John. “EU’s New 2030 Climate Target Accelerates Renewable Deployment.” GTM, 17 September 2020, https://www. greentechmedia.com/articles/read/eus-new-2030-climate-target-signals-accelerated-renewable-deployment. 22 Munuera, Luis (lead author) and Pablo Gonzalez (contributors), “Smart Grids.” International Energy Agency. June 2020, https://www.iea. org/reports/smart-grids.
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pause in corporate-led M&A as many of these corporates (especially energy majors) are focusing on conserving cash EUEU 28 Annual Solar PV Installed and the economic recovery for their core businesses. We Capacity 20002000-2019-2019 expect this will create opportunities for growth investors to 25.0 scale-up companies who are able to stay private longer and 22.2 create more value for investors. 20.0 17.2 16.6 We believe Europe will rapidly scale their renewable deployment, transforming their grid permanently. This new 15.0 13.4 5.9 grid will shift from centralized fossil-fueled generation 10.0 towards decentralized renewable generation with an 10.0 6.5 8.2 8.2 6.8 increasing need for diverse types of distributed energy 5.7 5.8 0.8 1.1 resources (DERs). In this transformation, residential 5.0 0.2 2.1 clean energy solutions, along with large-scale solar, 1.1 0.10.2 0.3 wind, and storage will be the key asset types driving grid 0.0 decarbonization. The growing number of DERs across the continent is already beginning to give rise to innovative business models such as virtual power plants (VPPs) that aggregate thousands of these resources to provide Source: Sunpower Europe23 services to the grid. As the grid becomes more complex and distributed, traditional utility monopoly business government subsidies (as shown in the chart below). models are being disrupted unlike ever before, giving rise We see this growth as a continuing trend going forward, to a new class of digital utility competitors. We describe as the economics for solar have become attractive in these trends and the innovative models emerging in more multiple European countries. detail below. In terms of future solar deployment, we see residential A. Residential Clean Energy Solutions solar as one of the keys to unlock Europe’s energy decarbonization goals. The potential for solar rooftops Climate Positive® Insights: Europe is poised for strong in Europe is large, with 90% of EU rooftops unused for growth in rooftop solar and other residential clean energy solar, representing at least 600 GW of rooftop capacity solutions due to improved solar economics that now across the EU.24 The primary drivers being high and avoid heavy reliance on subsidies, electricity prices that rising household electricity prices (prices in Europe are are among the highest in the world, strong consumer higher than in the US), continued decline in costs of PV demand for clean energy solutions, and aggressive systems and batteries, and favorable policy stimulus European decarbonization targets and associated policies. (such as policies that unlock increase distributed Winners in this market will be those with the best unit energy resources and grid integration). When combined, economics, a scalable and digitized business model, and research from analysis firm Wood Mackenzie finds that a comprehensive product offering that can address a residential solar-plus-storage in Germany, Italy and customer’s complete clean energy needs. Spain, is close to reaching grid parity (where costs per kWh of grid power is the same or more than the cost per kWh of the solar-plus-storage system).25 We see Europe’s Solar installations in Europe experienced quick growth residential solar market rapidly developing and following during the 2007-2011 timeframe driven by strong a path similar to the US (which has created multiple policy stimulus, including high feed-in-tariffs. As solar large players like Sunrun, Vivint, Sunnova and Tesla/ installations scaled during this period, many countries SolarCity), as now all the conditions are in place for this realized that their incentives were unsustainable (several model to flourish. countries faced steep increases in household electricity prices due to surcharges coming from feed-in tariffs). As a result, countries pulled back on their incentives, leading to a drop in the market. In the last two years, however, with prices of solar systems already in steep decline, solar installations as a whole have experienced notable growth acceleration, this time with relatively minor reliance on
23 Solar Power Europe. “EU Market Outlook for Solar Power 2019-2023.” Solar Power Europe, https://www.solarpowereurope.org/ wp-content/uploads/2019/12/SolarPower-Europe_EU-Market-Outlook-for-Solar-Power-2019-2023_.pdf?cf_id=7181. 24 Id. 25 McCarthy, Rory. “Europe Residential Energy Storage Outlook 2019-2024.” Wood Mackenzie, 24 July 2019.
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Improving Customer Experience with Digital that residential solar companies can extract significant Tools value and scale by creating a business model attached to new homes that offers hybrid electric heat pumps, storage, Following the growth of the residential solar market, we smart devices, etc, This way they can deliver a more have seen multiple startups entering this market in recent comprehensive electrification package to the customer years. Many of these startups are disrupting traditional while also acquiring customers efficiently, traditionally a residential solar business models by improving customers’ challenge in the rooftop solar industry. While we have not experience for acquiring and owning solar systems in their seen this business model emerge in Europe, we can expect homes. They are offering financial innovations to offset it will be arriving soon as residential solar penetration the purchasing barriers created by high upfront costs. continues to expand. Companies like Solease (Netherlands) and Zolar (Germany) are offering customers access to PV systems by paying a low monthly fee that is lower or similar to what customers B. Virtual Power Plants (VPPs) and Distributed are currently paying for their electricity, enabling customers Energy Resources (DERs) to capture savings from the beginning. Climate Positive® Insights: As countries across Europe are moving to higher renewable penetration, Startups like Enpal (Germany) similarly offer customers the increased reliance on intermittent resources the value of solar installed without the burden from a is driving the need for, and increasing the value of, substantial initial cost and instead offer customers fixed flexible resources to balance the intermittent supply. monthly payments less than or equal to their energy savings. They have innovated on a proven business Opportunities are arising for distributed assets and the model by moving away from a traditional door-to-door software that controls them to provide services to the sales business model and taking an all-digital and virtual electric grid. The market has historically featured many approach to sales and marketing. According to Enpal’s companies with good technology, but not enough assets Founder and Chief Executive Officer Mario Kohle, “our long- to control and a lackluster total available market to scale. term vision is to be a complete clean energy provider to our With renewables and DERs coming on to the grid faster customers. Our digital tools are not only the foundation than ever, there is now more need and opportunity for these of this vision, but have made us more resilient throughout companies to capitalize on these distributed resources. the pandemic. By using digital marketing to generate leads The winners in this market will be those businesses and closing sales virtually, we were able to maintain strong who can cost effectively gain operational control of a sales through Q2 and Q3 this year.” Through Princeville significant base of assets, aggregate them in ways to be Capital’s investment in Enpal, we have seen how software able to participate effectively in energy markets, and drive tools like their automated roof evaluation and PV system the most value so as to incentivize more asset owners to design (leveraging satellite imagery, lidar and customer participate. photos) have helped drive down customer acquisition costs, traditionally a major portion of the total cost to serve and scale these businesses. These companies are As Europe moves toward a greater use of renewables for also creating and deploying customer facing apps to track energy generation, we are already seeing the underlying energy consumption and energy production of the installed weaknesses in Europe’s grid. This is reflected by the fact PV systems. that many countries have sporadically experienced negative energy prices (due to renewables generating too much Expansion into Smart Home Ecosystem electricity at times of low demand), which create complex challenges for operators trying to balance their grids. As the European market matures, we predict growth for Additional wind and solar power expected to be connected these players as they move to other verticals related to to the grid in future years will only worsen the situation the customer’s home energy ecosystem, much like the US and put unprecedented stress on the infrastructure. The players have done in recent years. Players like Sunrun and intermittent nature of renewables will create a mismatch Tesla have leveraged their relationship with the customer between supply of energy and demand, which the grid’s to expand their product offering. All of the major players infrastructure - designed for centralized fossil fueled in the US now offer solar plus storage, access to smart generation - is not prepared for. Further, without major home devices that control energy use (EV chargers, smart advances in grid flexibility, costly infrastructure upgrades thermostats, etc) and many are thinking of the broader and major amounts of new transmission lines will be possibilities that arise from having a large installed base required in order to accommodate very high levels of of solar plus battery assets (e.g. companies are starting to renewables. develop and test out VPP and demand response offerings). Beyond these service and device extensions, there is also exciting opportunities for untapped market growth European countries will need to find new ways to balance in Europe for those residential solar companies that can the grid with the additional wind and solar power expected successfully attach to the new homes business. Through to be connected. As a global innovation leader, we discussion with leading experts in this sector we learned asked Emmanuel Lagarrigue, Chief Innovation Officer
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EuropeanEuropean VPPVPP MarketMarket GrowthGrowth
16,000 3,500 14,000 3,000 12,000 2,500 10,000 2,000 MW 8,000 1,500 6,000 1,000 $Millions 4,000 500 2,000
- - 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Capacity Market Revenue Implementation Spending
Source: Guidehouse Insights for Schneider Electric, where he real-time, aggregated control of the • KiwiPower’s (Germany) white thought Europe has a competitive available energy resources to meet label DER management platform advantage in scaling distributed the ever-changing supply needs. has 1GW of energy assets under energy resources and management? Europe’s DER capacity will outpace management and a 60MW “Among the most uniquely positioned centralized generation capacity portfolio of battery storage in 10 opportunities are those enabling driving the growth of the VPP market, countries. the proliferation of decentralized with analysts forecasting that the • tiko Energy’s (Switzerland) electricity generation and storage market size will reach $3 billion platform allows for the aggregation assets. And that will be achieved annually by 2028.26 and ramping up or down of small mostly with software, platform residential loads such as heating business models and smart ESG With the growth of the DER market, we systems, coolers, PV systems, financing.” Expanding on Lagarrigue’s expect to see an increasing number batteries or EV charging stations. response, we expect energy storage of new startups entering the space, to become a key flexible asset due and existing players scaling and But VPP endeavors are not limited to to the plummeting technology costs. cementing their market position. We startups. Traditional utilities are also Batteries will enable the storage of believe that there will be a greater entering this market. Earlier this year, surplus wind and solar energy for use need for startups that leverage digital Centrica (UK) and sonnen (Germany) at a later time. As battery storage and tools to track real time data from aggregated a network of batteries to other distributed energy resources energy assets to optimize energy sell storage capacity when the grid (DERs) are added to the grid, they will use. There are multiple examples is overloaded and discharge energy drive demand for smart grid solutions of startups offering sophisticated back to the grid during periods of peak to balance these DERs. The potential software platforms with quickly demand.27 and value of virtual power plants scalable business models. These (VPPs) – networks of decentralized include: Similarly, in Italy, Enel X has begun power generating, consuming, or aggregating residential energy storing assets which can be flexibly • Moixa (UK) developed a cloud- storage systems to help balance ramped up or down – will significantly based software platform that the grid.28 With utilities beginning to increase. VPPs maximize the value of connects storage devices to the pilot their VPP programs, we expect DERs and sophisticated management grid and applies AI to optimize to see significant M&A activities as platforms are needed to provide power distribution. incumbent utilities see the threat to
26 Asmus, Peter. “The European Take on Virtual Power Plants.” Guidehouse Insights, 11 December 2019, https://guidehouseinsights.com/ news-and-views/the-european-take-on-virtual-power-plants. 27 “UK’s most advanced Virtual Power Plan announced.” Smart Energy International. 21 January 2020, https://www.smart-energy.com/ industry-sectors/storage/uks-most-advanced-virtual-power-plant-announced/. 28 Colthorpe, Andy. “Virtual power plants: Enel X’s aggregated home storage goes into action in Italy.” Energy Storage News, 16 January 2020, https://www.energy-storage.news/news/virtual-power-plants-enel-xs-aggregated-home-storage-goes-into-action-in-it.
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their existing business model and seek to protect their Frictionless Customer Onboarding Experience positions. We anticipate, however, that with growth and Better Rates: capital, some of these companies will be poised to compete and win if they can control enough assets. • Customers can quickly switch to the new utility online in only a few minutes (these utilities will C. Digital “Challenger” Utilities manage the transition with the old supplier).
• Digital utilities allow easy access to a 100% Climate Positive® Insights: The traditional utility renewable energy & gas offering at lower rates than business model is under threat from all sides. The rise “traditional” utilities – often because the digital of wind, solar, and other distributed resources is putting utilities are nimble, carry less overhead, and have no pressure on the traditional utility revenue model and a hard asset costs that need to be recovered. continuation of a global move towards deregulation is loosening the grip that once dominant monopolies had Direct Access to Energy Consumption and on their respective markets. Customer expectations Ability to Optimize All Energy Assets: are also changing with consumers demanding better customer service, digital tools, access to clean energy • Leverage smart meters to give customers direct options, and the ability to monetize their own distributed access into their energy consumption and insights energy resources. All of these factors are allowing a into their electricity bill. new crop of challenger utilities to enter the market. • Provide apps and web-based sites to help customers We have seen success with different models around the easily manage their accounts and energy bills. world, but the common denominator across all of them is a digitally enabled, engaging customer experience • Moving to other verticals like the electric vehicle (EV) that gives consumers access to clean energy options. charging space. An example is OVO’s (UK) Vehicle- The companies that are most disruptive are those that to-grid (V2G) trial where the company offers a V2G are able to offer all of this while leveraging digital tools charger that optimizes EV charging costs by selling themselves to reduce their operating costs below those of energy back to the grid in periods of high demand the traditional utilities. We expect the winners to be those and charging the car when electricity is cheaper. This that can continue to expand on their offering, adding company has also implemented an EV tariff program additional services like home energy management and and signed a partnership with Polar’s EV charging EV charging management, to give customers a simple and network to offer charging-as-a-service plans with optimized clean-energy experience. 100% renewable energy.
“Utilities-in-a-Box”: Europe is experiencing interesting developments in the utility market, with new innovative business models • Technology platforms that enable distributed energy arising that challenge incumbent utilities’ grip on the optimization for local and residential assets. For market. It is not a coincidence that Tesla is showing example, Germany-based GreenCom’s white label renewed interest in the European energy market: Tesla energy IoT platform connects residential distributed has acquired a license to trade electricity in Western assets and enables providers to launch digital energy Europe and has recently conducted a survey in Germany services that can turn these distributed energy to gauge potential customer’s interest in a range of Tesla assets into revenue streams, aggregated storage energy products and services. Experts speculate that capacity, and additional grid flexibility. with the right partner in Europe, Tesla could launch a material challenge to Germany’s incumbent utilities. But • Trading networks for solar and battery storage. For Tesla is by no means the only company looking to do this. example, Social Energy’s utility model is delivering renewable energy through a network of homeowners In recent years, Europe has seen a rise in the number of with solar across the UK. Their smart energy platform so-called “challenger” utilities such as OVO (UK), Bulb allows customers to generate, store and trade 100% (UK), and Tibber (Norway). This is particularly pronounced renewable energy and get paid a market leading in deregulated energy markets with fully open competition price for doing so. With their trading tariff, customers among retail energy suppliers. These digitally enabled get access to lower cost green electricity. players have challenged traditional business models by offering customers a hassle-free way of accessing green energy and gaining more visibility and control of their energy consumption. Specifically, the business models we see gaining the most traction offer some combination of these services:
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UK’sUK's ElectricityElectricity Supply Market Shares byby CompanyCompany (%)(%)
30%
25%
20%
15%
10%
5%
0% Q1'11 Q3'11 Q1'12 Q3'12 Q1'13 Q3'13 Q1'14 Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17 Q1'18 Q3'18 Q1'19 Q3'19 Q1'04 Q3'04 Q1'05 Q3'05 Q1'06 Q3'06 Q1'07 Q3'07 Q1'08 Q3'08 Q1'09 Q3'09 Q1'10 Q3'10 Q1'20
British Gas EDF E.ON
npower Scotish Power SSE
Shell Energy OVO Energy Utilita
Utility Warehouse Bulb Octopus
Avro Energy Green Energy Network Small Supliers
Source: Ofgem
A prime example of the disruption “challenger” utilities have caused can be seen in the UK where the market was dominated by its so-called “Big Six” suppliers (British Gas, EDF Energy, npower, E.ON UK, Scottish Power and SSE). New challenger utilities like OVO (now the second largest in the UK after acquiring SSE), Bulb and Octopus have taken considerable market share from the established utilities.
But the story playing out in the UK is happening in markets across Europe to one degree or another. We expect many opportunities to arise in the coming years from new utilities that can best capitalize on all of these emerging trends in the energy market.
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2. Decarbonizing Transport
As global climate technology investors, we have closely followed emerging regional trends that support decarbonization in Europe’s transport sector, estimated to be approximately 24% of total greenhouse gas emissions in Europe. But more specifically, we are focused on the trends, technologies and tech-enabled business models that reduce emissions from road transport which is responsible for an overwhelming majority (72%) of Europe’s transport sector emissions.29
A key regional trend is the transition from carbon emitting internal combustion engine (ICE) vehicles to more Climate Positive® electric vehicles (EVs). This is because the pace at which EVs are deployed has a direct impact on the opportunities for associated technologies, such as EV charging, to scale faster. We believe that the pace of EV growth in Europe in the next decade will be transformative for companies in these subsectors.
While other key EV markets in the US and China have seen dips in EV sales, Europe has experienced significant growth in EV sales. In 2019, EV sales in Europe increased by 44%, the highest growth rate since 2016. This growth led the European EV market to command 26% share of the global EV market as the charts below illustrate.30
Global Electric-Light-VehicleElectric-Light-Vehicle Sales Global Electric-Light-VehicleElectric-Light-Vehicle Sales by Region by Region
100% 2.5
90%
80% 2
70%
60% 1.5
50%
% Share % 40% 1 MillionUnits 30%
20% 0.5
10%
0% 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
China Europe United States Rest of World China Europe United States Rest of World
Source: McKinsey and Company
Additionally, in contrast to a slowdown in EV sales globally in the first quarter of 2020, nearly all core markets in Europe saw significant increases in EV penetration. In the first quarter of 2020, with the exception of Hong Kong, all of the top 10 markets for EV penetration were in Europe. Overall, the EV penetration rate in Europe increased to an industry-best 7.5% in early 2020.31
29 European Academies Science Advisory Council, “Decarbonisation of transport: options and challenges.” European Academies Science Advisory Council. March 2019, https://easac.eu/fileadmin/PDF_s/reports_statements/Decarbonisation_of_Tansport/EASAC_ Decarbonisation_of_Transport_FINAL_March_2019.pdf. 30 McKinsey & Company Automotive & Assembly Practice. “McKinsey Electric Vehicle Index: Europe cushions a global plunge in EV sales.” McKinsey & Company, 17 July 2020, https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/mckinsey-electric-vehicle-index-europe-cushions-a- global-plunge-in-ev-sales. 31 Id.
Page 15 Nine of the top 10 EV penetration rates are in Europe Princeville Capital Supercharged Climate Positive®
EVEV Penetration Penetration RateRate (%)(%)
60
50
40
30
20
10
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Europe Q4’19 Q1’20 Rest of the world Q4’19 Q1’20
Source: McKinsey and Company
Europe benefits from the same macro conditions that the goal of 1 million public chargers by 2030. are driving the acceleration of EV adoption around the This is to be accomplished by offering local world – factors including total cost of ownership (TCO) authorities and municipal enterprises a 50-60% of EVs becoming competitive with and even surpassing subsidy on charging stations from any provider. the TCO of ICE vehicles, maturing technologies in the EV This program has created a surge in consumer ecosystem, and a larger influx of capital both among EV confidence in EVs, leading to a record breaking startups and incumbent automakers that are shifting 11% EV penetration in July auto sales in Germany. development dollars to electric models, all leading to – In France, President Macron announced an €8 greater EV deployment. However, it is Europe’s policy billion rescue plan for the local auto industry and environment that makes its market particularly unique and set a goal of having over 100k public charging supports EV outperformance relative to the US or China. points next year, producing 1 million EVs annually Here are a few key policy developments (not exhaustive) by 2025, and boosting EV adoption rates. This will that we have built into our analysis. be accomplished through a combination of EV tax benefits to drivers (up to €5,000 for the purchase • The European Commission’s 2020/21 emissions of used or new EV upon scraping ICE vehicle), standard – 95g of CO2/km – went into effect on and subsidies to condominiums, workplaces, and January 1, 2020 and is unsurprisingly boosting EV municipalities on installing charging points via sales as it requires that 95% of the new passenger any private supplier. vehicle fleet must meet this standard in 2020 and 100% in 2021. Two additional key trends are adoption and growth in • Many European cities and member states are pushing the digitalization (e.g. Information and Communication for even more ambitious emissions reductions goals Technology) that will benefit market segments such as independent of EU policy: the mobility sector and new policy tailwinds for these – 19 cities have announced plans to reach zero technology-enabled mobility solutions. For example, emissions ahead of the Green Deal’s 2050 the automotive industry is one of the most digitalized in deadline, with Norway being the most ambitious Europe and an overwhelming majority (81%) of respondents – resolving to have 100% of new vehicle sales be from the European automotive sector believe the digital carbon free by 2025. economy will bring the most positive opportunities for – In Germany, Chancellor Merkel announced a €50 growth.32 ICT applications in mobility are already on the billion COVID recovery program, which included rise and we expect this to be accelerated due to new policy €2.5 billion investment into EV chargers, with momentum generated by the Green Deal which explicitly
32 European Commission, “Objectives of Digital Transformation Scoreboard 2017: Evidence of positive outcomes and current opportunities for EU businesses.” January 2017.
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states “[a]utomated and connected multimodal mobility As EV adoption across Europe accelerates, the need for will play an increasing role, together with smart traffic widespread charging availability becomes even more management systems enabled by digitalization...The evident. Europe is a successful case study in the outsized Commission will develop smart traffic management and impact policy and incentives can have in the deployment ‘Mobility-as-a-Service’ solutions..”33 and adoption of EVs and charging infrastructure. Europe has been able to scale these sectors because of effective Driven by EU-wide and country-specific policies that policies, and investors looking to deploy capital in this incentivize mass adoption of EVs and secular growth space must closely track any emerging policies that drivers for accelerated deployment of mobility services, will further accelerate this growth. One only has to look these three technology-enabled businesses and models at Norway, the world leader in EV adoption driven by a are primed for growth: (a) EV charging network operators, robust “polluter pays” taxation program, or Amsterdam, (b) mobility data platforms, and (c) mobility-as-a-service with the fastest growing charging network thanks to a providers. comprehensive suite of policies and incentives at the local level,34 to realize how large a role policy can play in Collectively, they create an ecosystem of sustainable technology adoption. transport that is optimized at scale and positions Europe to be the world leader in clean, efficient, and affordable transportation. The future we envision for Europe will be EV charging infrastructure growth (%), one that allows quick access to shared transportation, EV charging2017-2020 infrastructure growth connected by a network of highways and smart parking (%), 2017-2020 162% lots dotted with fast charging stations, and empowered 158% by consistent consumer demand. But to achieve this, there is a clear need for capital investment into these 125% technologies and tech-enabled business models, and with 114% the assistance of private investors, we believe Europe will 100% become the standard for modern mobility. 92%
65% A. EV Charging Infrastructure Network Operators 30% Climate Positive® Insights: The EV charging market 12% is dominated by activity among corporates given the strategic importance and disruption to their existing business. There is also a growing number of network operators and software integrators that are creating a better overall consumer experience, thereby increasing the network’s utilization and Climate Positive® impact. Europe Rest of World
Source: BNEF So far, there is still no clear winner in Europe. Among the EV charging companies currently in the market, many of the business models are not highly differentiated and unit With the total number of EVs in Europe expected to economics are still marginal given the low penetration of reach 14 million by 2025 (up from just 1.5 million today), EVs and underutilization of chargers. However, as new the number of public chargers will have to expand policies such as bans on internal combustion engines from roughly 200,000 today to over 1 million in just five in city centers throughout Europe and new stimulus years’ time to meet charging demand.35 As the chart36 investments in charging infrastructure take root, the below shows, the numbers look even more extreme market is poised to grow massively, delivering outsized on the 10-year horizon, as total EVs on the road are returns to those operators best positioned to capitalize. expected to grow to a potential 44 million by 2030, which Winners will include the network operators with the best would require roughly 3 million public charging points. charging locations, most customer-friendly charging Transport & Environment, a leading European NGO in the experience, and best per-station unit economics.
33 European Commission, Green Deal, https://ec.europa.eu/info/sites/info/files/european-green-deal-communication_en.pdf. 34 Beedham, Matthew. “The Netherlands has the fastest-growing electric vehicle charging network in the world.” TNW, 13 August 2020, https://thenextweb.com/shift/2020/08/13/the-netherlands-fastest-growing-electric-vehicle-charging-network-in-the-world/. 35 Transport & Environment (2020). “Recharge EU: How many charge points will Europe and its Member States need in the 2020s.” January 2020, https://www.transportenvironment.org/sites/te/files/publications/01%202020%20Draft%20TE%20Infrastructure%20Report%20 Final.pdf. 36 Id.
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NumberNumber ofof ElectricElectric Cars and Public Chargers in the EU
3500000 50 45 3000000 40 2500000 35 30 2000000 25 1500000 20
1000000 15 10 500000 5
0 0 EVsNumber(Millions) of 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Number of publicNumberchargeof points
Road Zero - # of public chargers Current Policies - # of public chargers
RoadZero - # EVs Current Policies - # EVs
Source: Transport & Environment sustainable transportation industry, making Shell’s EV charging offerings space, primarily led by EDF and suggests this level of infrastructure even more attractive when paired with Engie (see chart below). expansion will require around €20 storage. billion of investment capital over • Total acquired G2mobility (France), Despite this significant investment the next 10 years – and that is just a charging network operator with from energy majors, we see the for public charging stations. Total more than 10,000 charging points, and need and an opportunity for more investment requirement increases Source London (UK) with its nearly financial investors to participate to approximately €80 billion when 2,000 charging points. in the EV charging ecosystem. We including private charging stations. • BP acquired Chargemaster (UK) anticipate a shortfall in the pace and its 7,000 charging points, of investment activity by many of The beginnings of this massive which will likely benefit from BP’s these energy majors and automotive investment are already underway, investments outside the EU in OEMs as they focus on their own mainly sustained by large capital adjacent technologies including economic recovery. Further, many injections from major oil and gas FreeWire (USA), StoreDot (Israel), of the EV charging business models companies, utilities, and automotive and PowerShare (China). today based purely on the selling of OEMs. 79% of the public charging • European utility companies have electricity are not sustainable. With infrastructure in Europe is operated also entered the EV charging demand for EV charging infrastructure by utilities and oil companies. There is a clear land-grab underway as these corporates seek to establish an # of charging Utility Subsidiaries/partners international network of alternative stations fueling systems:
• Shell has committed to invest > 50,000 $1 billion annually in renewable energy and EV charging. This will help accelerate and complement Shell’s current footprint in EV charging operations that includes > 50,000 Shell’s acquisitions of: NewMotion (Netherlands) with its over 100,000 public charging points in 28 countries, US-based EV charging software company Greenlots deployed in 13 > 10,000 countries, and residential energy storage company sonnen (Germany)
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and network operators only expected to increase, this retail, healthcare, education) or to industry creates tremendous opportunities for investors deploying stakeholders (grid operators, energy majors, capital in truly scalable business models that leverage and auto OEMs) aiming to have greater visibility multiple revenue streams to generate self-sustaining unit and control over their assets. economics. – The software provides the ability to wrap multiple and diverse hardware types into a unified, To better understand the innovation needed in EV simple platform with powerful data insights on charging, we spoke to Scott Mercer, the CEO of Volta utilization and corresponding petroleum free Charging, a leading US EV charging company and a “fueling” delivered to customers. Princeville Climate Technology Fund portfolio company. – Internationally, companies such as Driivz in He highlighted the importance of why network operators Israel and EV Connect in the US have built cloud- need to rethink their core business model. As Scott put based solutions that integrate operators with it, “Similar to the classical gas-station business, the utility grids, fleet operators, and customers. margins on electricity for EV charging networks are thin, Though less prevalent in Europe today, there making it difficult for charging networks to turn a profit are a few companies building similar solutions on monetizing kilowatt-hours alone. We’ve designed our such as Hubject out of Berlin, whose eRoaming business to focus on behavior and commerce, leveraging a platform connects thousands of operators to better understanding of EV driver behavior so that we can customers throughout the continent. work with our partners to drive revenue by understanding and capitalizing on what the shift in mobility habits While many European companies pursuing the business can mean for their own business. Whether it be driving models discussed above are still of limited scale, we customers to retail and essential services locations, expect the rapid market growth in the coming few years to collecting and supplying partners with localized charging give rise to several new, growing and successful players. data, or providing advertising and content opportunities to brands both on-site and off, each of our stations is a key asset to a variety of stakeholders in the electric B. Mobility Data Platforms mobility ecosystem, allowing our network to monetize in multiple ways and find a quicker path to profit.” This is Climate Positive® Insights: As urban populations reflective of the need for charging network operators to expand and more vehicles come onto our roads, traffic establish services that allow them to extract additional congestion becomes an even greater problem in cities revenue streams from their network. It has become clear around the world, particularly in densely populated that simply selling electrons to drivers does not work at regions such as Europe, leading to more car idling and scale but requires coupling with other features such as corresponding increases in levels of carbon emissions. software services, data analytics, or revenue generation This problem is amplified due to the world’s aging enhancement that have proven to benefit property infrastructure, unsophisticated traffic signal timing, and owners, drivers, and fleet operators alike. lack of real-time vehicle data. Connected car data and advanced traffic management systems are enabling cities There are dozens of EV charging network operators to better manage this growing vehicle population, are across the European landscape, which makes trying to creating new use cases for businesses and consumers, pick the long-term winner a bit complicated. However, and are contributing a clear Climate Positive® impact. there are several business models emerging that we have observed drive higher utilization and diverse revenue Winners will be companies that can get access (ideally streams to create market leaders: exclusive) to the most comprehensive mobility data and develop meaningful ROI-driving use cases for their • Charge point operators (CPOs) with premium charger customers. locations and user-friendly interfaces. – Key business model features includes consumer- Traffic congestion is a contributor to climate change by facing software applications that simplify increasing emissions from ICE cars that idle in traffic or payment processing across standardized by lengthening overall travel trip time and contributing to charging hardware. a rise in associated emissions. There are also significant • B2B electric mobility service providers with software financial ramifications – estimated to cost Europeans tools supporting EV charging infrastructure. billions a year (i.e. in wasted fuel and lost productivity) – 37 – The models provide a managed service offering as well as health challenges from air pollution. to businesses looking to integrate charging with their core business (e.g. hospitality, workplace,
37 European Court of Auditors. “Special Report – Sustainable Urban Mobility in the EU: No substantial improvement is possible without Member States’ commitment.” 2020, https://www.eca.europa.eu/Lists/ECADocuments/SR20_06/SR_Sustainable_Urban_Mobility_ EN.pdf
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This is a major issue that is bringing together both the – JustPark (UK) is among a few app developers to public and private sector to implement solutions. The have built out a real-time parking availability and latest tailwind to these efforts comes from the Green pricing map across Europe. Analytics platforms Deal which includes explicit reference to “automated and that utilize imagery from numerous cameras to connected multimodal mobility” and “new sustainable detect vehicles and provide real-time results on mobility services that can reduce congestion and pollution, both parking availability and duration. 38 especially in urban areas.” Increasing data availability and • Analytics platforms that utilize imagery from numerous efficacy is an important contributor to meeting the Green cameras to detect vehicles and provide real-time Deal’s commitment to accelerate the shift to sustainable results on both parking availability and duration. and smart mobility. Reductions in the cost of sensors, connectivity hardware, and wireless data transfer are Vehicle-to-Infrastructure and vehicle-to-network (V2I and allowing for vehicles to be increasingly connected. Almost V2N): every new vehicle made today is “smart” and enabling communication with its environment which will give rise to • Platforms that aggregate traffic data and provide a variety of Climate Positive® use cases. connected “floating car data” visualization to municipalities for real-time signal control via the cloud. These business models leverage in-vehicle Many of Europe’s top mobility startups are focused on cloud-connected technologies that enable information leveraging vehicle data to optimize traffic flow and improve sharing between vehicles and their surrounding the consumer experience. The most promising solutions infrastructure (such as traffic lights). we have observed in the market are vehicle-to-everything • Advanced systems that leverage data connectivity to (V2X) communications, traffic data/sensor platforms, and offer advanced fleet management, maintenance, and smart parking. These technologies will each play a role new digital services. in transforming aging metropolitan areas into smart, less • A great example of is Otonomo (Israel), which is a V2N congested and less polluting cities. platform that connects car data to 1) smart cities’ traffic/ parking infrastructure, 2) EV owners / fleet managers, Below are emerging business models with strong, and and 3) numerous stakeholders in the services industry accelerating, growth potential: (insurance, construction, media, etc.) to improve real- time traffic flow, route optimization, asset utilization, Mapping & Smart Navigation: and location intelligence, and planning solutions. • Companies focused on enhancing current global navigation satellite systems (GNSS) based navigation These mobility data platform businesses are attractive with computer vision approaches. for investors because they are capital efficient, software- • B2B SaaS platforms that offer intelligent predictive based business models that are highly scalable. By routing for electric mobility. leveraging sensors and connectivity that are already being • High tech startups using AI to build out machine- built into vehicles and smartphones, new pools of value are readable HD maps for autonomous driving. being created. The companies that are already emerging as • A number of companies are working to index a vast winners around the world are those that can gain access network of real-time transportation data within to the most comprehensive data sets, and often do so localized geographies to support traffic optimization with exclusive agreements to avoid commoditization of and more efficient routing that often results in less the data. Further, the most successful companies are not emissions. For example: merely data providers, but rather they are able to package – Citymapper (UK) has built a public transport the data into use cases with clear ROIs for customers application that provides optimal route who often need help understanding the value the data suggestions based on current bus/metro can provide them. We foresee tremendous opportunity schedules. as this market grows rapidly in coming years driven by – Teralytics (Switzerland) has built a ML-powered increases in the number of connected vehicles and as operating system for city planners and mobility nascent data-enabled use cases gain more traction with service providers leveraging real-time human cities needing to decarbonize their transportation sector behavior data to optimize systems designs. emissions by reducing road congestion and improving traffic management for both city planners and drivers. Smart parking: • Cloud-based software that organizes global parking data and transforms it into actionable information to enable better mobility decisions and a faster trip time (with less emissions) for drivers to find parking.
38 European Commission, Green Deal, https://ec.europa.eu/info/sites/info/files/european-green-deal-communication_en.pdf.
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C. Mobility-as-a-Service: Vehicle Subscription & Leasing Models, and Micromobility Total VC $$ investedinvested in European MaaS startups ($bn)
Climate Positive® Insights: There is a newer generation $3.8 $3.7 of consumers increasingly comfortable with sharing the assets they use with others, giving rise to a wave of as-a- service business models. They appreciate the flexibility and convenience of subscriptions or shared transportation $2.5 options, leading to operators springing up all around the $2.1 world with different vehicle types and business models. We have seen operators without the scale or skillset to $1.3 develop their own software or technology, providing $0.9 an opportunity for third parties to step in who can serve multiple types of assets and give large operators an advantage over their less capable competitors.
Across mobility asset types we believe there will be 2015 2016 2017 2018 2019 YTD 2020 significant consolidation among the number of providers Source: Pitchbook as cities move to limit the number of licensed operators Source: Pitchbook and companies with unsustainable unit economics starve that are encountered by the ride-hailing operators. Many of for capital. This will lead to the emergence of a couple the companies funded in this space have been supported dominant players on each continent. Winning business by early-stage investors but now need new partners models are those that can out-innovate their competitors that can help them scale and capital markets expertise with better unit economics and offer their customers as they approach follow-on rounds and exits. These a comprehensive and seamless set of transportation MaaS business models discussed below are interesting options. opportunities for climate-conscious growth investors and we believe there are several emerging trends that could Despite the global pandemic, we are in the midst of a lead to healthy financial returns. global macrotrend towards an economy where consumers do not feel the need to own assets themselves, but rather Subscription & short-term leasing appreciate the efficiency and simplicity of paying for • Platforms that offer flexible car subscriptions and assets when they need them in a service-based model. allow for month-to-month car rental/leasing. This is as true in mobility as any other sector with many mobility-as-a-service (MaaS) business models emerging • Popular features include bundling insurance, and the sector becoming an attractive target for VC maintenance, and taxes into one monthly payment. money in Europe. We view this as an innovation in vehicle ownership, as well as a proven method to reduce waste by Given the high volume of new technology startups promoting a sharing economy. emerging in the MaaS subsector, it has been an attractive • Many consumers still value a sense of car ownership, market for venture capital firms around the globe. MaaS and this type of offering allows individuals to solutions have attracted upwards of $15 billion from VCs maintain that independence without the long-term over the last five years, with 2020 on track to pass 2019 financial constraints. This is especially important record of nearly $4 billion. Certain ride-hailing platforms amidst COVID-19 as appetite for carpooling and ride- around the world such as Uber, Didi, and Grab have hailing services have decreased. captured the focus and a significant share of investment from the VC community. However, these businesses have Diversified micromobility: marginal unit economics owing to a large labor component as well as deliver a moderate, or even negative, impact on • Micromobility operators that are driving climate change. Therefore, these types of companies are improvements in unit economics through innovations out of scope for this paper. such as battery swapping, subscription options, and marketplaces for end-of-life scooters.
Rather, we see better unit economics and greater Climate • Software providers for mobility operators are ® Positive impact opportunity in business models that rely generating high-margin recurring revenue and on the efficient monetization of assets among multiple providing smaller operators access to tools users such as short-term car leasing and diversified previously only accessible to larger operators who micromobility. These business models have a much lower built them internally. labor component and do not suffer from many of the challenges inherent in running a two-sided marketplace
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Micromobility is a vertical within advanced mobility that Europe is well positioned to be a growth market for MaaS we have spent a significant amount of time evaluating. businesses due to the dense urban environment as well as We recognize a handful of challenges this subsector faces consumer sentiment around climate change. Consumers as it seeks to establish its place in society. For starters, already rely heavily on public transit and are open to many cities are cracking down on the number of operators other shared mobility alternatives. It is also no secret that are allowed to conduct business in their jurisdiction that Europeans, perhaps above all other geographies, and are rolling out regulation that specifies the traffic are collectively more aware of and vocal about the need codes relevant to scooters. Paris, for example, has ruled to protect the planet from greenhouse gases. As such, that only three providers may operate within city limits, cultural norms and societal pressures motivate people to instigating a strict 15,000 scooter limit on a combined consider electric, pedal, and shared modes of transport in basis. Additionally, many micromobility companies have an effort to reduce their carbon footprint. struggled to define a path to profitability given high costs to maintain and operate physical assets that have historically had a short useful life. All of these issues are exacerbated 3. Achieving Europe’s by a global health crisis that has kept people home for an Ambitions for an Energy extended period of time. Efficient Built Environment Taking all of this into consideration, we do see a place for a handful of winners in this space amidst all the As climate-focused investors, we recognize the consolidation. In the post-COVID recovery, we have spoken overwhelming opportunity delivering energy efficiency to many operators that have seen their trips recover plays in achieving Paris Agreement goals. The IEA finds that quickly. They are seeing more people staying away from by 2035, investments in energy efficiency need to be nearly public transit and ride-hailing and instead opting for 50% of all global energy investments for the world to stay socially-distanced, individually controlled micromobility under the 2-degree limit. For Europe to meet their proposed solutions to move within cities. Further, micromobility more ambitious climate target of reducing emissions by vehicle lifetimes are improving rapidly as design improves 55% by 2030 from 1990 levels, driving emission reductions and the stricter regulatory environment is, in fact, helpful from the built environment will have to be a top priority – to larger operators who win licenses as it reduces price the building sector accounts for nearly 40% of Europe’s competition. We believe the winners that emerge will total energy consumed and 36% of its total greenhouse gas be those companies that can continue to drive down emissions. Europe is well-positioned to lead in attracting operating costs and consolidate the industry as well as investment and scaling companies in this sector. Last year, those companies that enable operators to improve their the global building sector was the largest destination for efficiency (i.e., software and technology providers) but do efficiency spending, reaching $150 billion globally in 2019, 39 not own a large base of assets themselves. with two-fifths of this spent in Europe.
BuildingsBuildings energy energy efficiency efficiency investments investments in selected in selected regions regions and countries, and countries, 20142014-2019-2019 40
160.0 40 40 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2014 2015 2016 2017 2018 2019
Europe United States China Other
39 International Energy Agency. “World Energy Investment 2020.” IEA, https://www.iea.org/reports/world-energy-investment-2020. 40 International Energy Agency. “Buildings energy efficiency investments in selected regions and countries, 2014-2019.”IEA , https://www. iea.org/data-and-statistics/charts/buildings-energy-efficiency-investments-in-selected-regions-and-countries-2014-2019.
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Scaling energy efficient building solutions has, however, We expect many of these programs to be focused on historically faced challenges, leaving nearly 75% of efficiency improvements to the built environment the EU building stock energy inefficient. These include because they are one of the most cost-efficient reduction very low building renovation rates (1% annually), split measures. We have strong confidence in the enduring incentives for commercial buildings between landlords political resilience of these programs because they are and tenants (where tenants typically pay the electricity framed as job creators – on average it is estimated that for bills, so landlords/owners have little incentive to invest every €1 million invested in energy renovation of buildings, in efficiency upgrades), solutions relying on behavior an average of 18 jobs are created in the EU.42 change (e.g. manually adjusting a thermostat), and efficiency decisions in commercial buildings involving New Business Models multiple entities creating a sales cycle that was hard to While major industrial equipment suppliers and energy scale. But 2020 has ushered in new conditions that make service companies (ESCOs) still dominate the market, Europe well-positioned for attractive growth in technology the rise of inexpensive sensors, artificial intelligence, solutions and technology-enabled business models that advanced control systems, and novel financing methods deliver greater building efficiency, as this sector has the have allowed a number of new players to compete. To 41 most unrealized energy efficient potential (see chart). win in this space, companies must be able to stand out in a crowded market by providing a simple offering that appropriately aligns financial incentives of all parties LongLong-Term-Term Energy Efficiency involved and offers significant enough savings to entice Economic Potential by Sector conservative building operators to act. Companies utilizing machine-learning based optimization software 120% (often supplemented with data from the installation of 100% sensors) to understand and optimize building energy use 80% are best positioned to grow rapidly and take market share 60% from the established players. 40% 20% 0% These new factors are pulling efficiency technologies and Industry Transport Power Buildings tech-enabled business models into the market, generating Generation a “renovation wave” that will sweep across Europe with companies that deliver (1) digital and intelligent building Unrealised Energy Efficiency Potential energy management and (2) energy efficiency as a service poised for rapid growth. Realised Energy Efficiency Potential
Source: Deloitte, Energy Efficiency in Europe: The levers to deliver A. Digitized and Intelligent Building Energy the potential; ; IEA (2012) World Energy Outlook Management
Climate Positive® Insights: Building efficiency is one We are optimistic because (1) Europe’s climate-centered of the largest opportunities for energy savings and policies (climate target, stimulus and green budget) are one of the lowest-cost areas to address. We are seeing accelerating efficiency in the built environment and (2) business models that leverage low-cost sensors, the combination of maturing technologies, new business artificial intelligence, and advanced analytics to diagnose models, and a healthy investment ecosystem are efficiency opportunities in homes and buildings and supporting the commercialization of energy efficiency make interventions in real time. The key to scaling focused technologies. these businesses are capturing strategic partnerships with energy equipment providers, utility companies, or Europe’s Stimulus and Budget are Unique technology companies that are part of the smart home. Technology Accelerants The stimulus and green budget create direct and indirect The winners that are emerging are those that can develop pressure on member states to invest in building retrofits solutions that are easy to integrate and manage, save and energy efficiency upgrades. In order for EU member energy without disrupting operations, and minimize states to receive funding from the newly created Next up-front costs for the asset owner. Generation EU recovery fund, the member states will have to submit plans with 30% of it allocated to green programs.
41 Deloitte. “Energy Efficiency in Europe: The levers to deliver the potential.” 2016, https://www2.deloitte.com/global/en/pages/energy- and-resources/articles/energy-efficiency-in-europe.html. 42 Wade, Faye. “Retrofitting Buildings to Support the Recovery.” Buildings & Cities. 8 July 2020, https://www.buildingsandcities.org/ insights/commentaries/retrofit-buildings-recovery.html.
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The deployment of smart meters and connected devices is delivers an emissions savings to each household by up essential in delivering commercial and residential energy to 30% compared to a home’s old heating system and is efficiency targets – especially in Europe with its ambitious also catching a policy tailwind from a German law that climate goals. These smart devices provide the necessary incentivizes the replacement of heating systems as part data transparency on energy use to enable improved of meeting Germany’s energy transition.45 Space heating management and efficiency through energy management is responsible for 67% of total European household energy platforms and related technologies. According to latest consumption and has been a technology and policy focus estimates that assume Member States will proceed for efficiency gains.46 Looking ahead, we expect this market with smart meter rollouts plans, there will be 223 million to continue to be attractive for potential investments. smart meters installed in Europe by 2024.43 With these Analysis for the European Commission suggests that strong growth targets for meters in place, Europe is well- deployment of electrical space heating in the residential positioned to lead on scaling businesses that couple this sector could grow from around 5% in 2015 to between 22 data with intelligent energy management systems and to 44% in 2050, depending on the deployment of different platforms. technologies.47
The other entry point into delivering digital and optimized These new factors are pulling efficiency building performance is through platform technologies technologies and tech-enabled business that control and monitor energy consumption. The growing models into the market, generating a number of intelligent appliances populating homes and buildings supports the growth of companies providing “renovation wave” that will sweep across disaggregation software for smart meters and similar Europe with companies that deliver (1) solutions (see chart).48 This includes thermostats that digital and intelligent building energy control HVAC, lighting and related energy-consuming management and (2) energy efficiency as systems, devices that attach to the circuit breaker panel, those that use individual outlets to gather energy use data, a service poised for rapid growth. and more recently technologies that promote integrations for these platforms with smart home devices. There are several different entry points into the building and home envelope to optimize and reduce energy The US has been an early market for intelligent energy consumption which can be summarized as solutions (1) management solutions with companies like Nest, a smart by asset type (e.g. singular energy-consuming devices and appliance categories such as space heating and cooling, water heaters, LED lights) and (2) by a platform that AnnualAnnual Household Expenditure forfor controls or monitors energy consumption from energy- ConnectedConnected Heating Heating Controls Controls in Europe in consuming devices/appliances (e.g. fuse box integrations, Europe (Euros) smart thermostats, home assistants). They both focus on (Euros) delivering measurable energy savings, energy optimization, 800,000,000 have programmable options, and are typically plug & play. 600,000,000 Asset-specific technologies tend to focus on the most 400,000,000 energy consuming appliances. In Europe, space heating and cooling in buildings account for half of the EU’s 200,000,000 energy consumption.44 We are already seeing growth in technology companies benefitting from the favorable - European environment for solutions that increase 2015 2016 2017 2018 2019 2020 2021 efficiency in the largest energy-consuming devices. Connected electric heating control For example, Thermondo (Germany) quickly become Germany’s leading provider of heating installation and Smart radiator thermostats services with their fully digitized customer experience from Smart thermostats an online sales portal to a customer app. This company
43 Tounquet, Frédéric and Clément Alaton. “Benchmarking smart metering deployment in the EU-28.” Final Report for the European Commission. 2020, https://www.buildup.eu/sites/default/files/content/mj0220176enn.en_.pdf. 44 European Commission. “Facts and Figures on Energy Efficiency.” https://ec.europa.eu/energy/topics/energy-efficiency/ 45 Amelang, Sören. “Heating start-up Thermondo aims to be leading energy supplier.” Clean Energy Wire. 27 March 2019, https://www. cleanenergywire.org/news/heating-start-thermondo-aims-be-leading-energy-supplier. 46 Deloitte. “Energy Efficiency in Europe: The levers to deliver the potential.” 2016, https://www2.deloitte.com/global/en/pages/energy- and-resources/articles/energy-efficiency-in-europe.html. 47 European Commission (2018), In-depth Analysis in Support of the Commission Communication. 48 Chart Source: Delta Energy & Environment Ltd 2020.
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thermostat company acquired by Google and Sense, a But depending on how the market and investors react to home energy monitor that raised a $30M Series B in 2019 Ecobee, we anticipate an opening for investors to target bringing total raised to a healthy $50M. But we are starting those remaining private companies with access to growth to see platform solutions emerge in Europe. capital to help take these companies public.
• Tado° (Germany) is a leading European smart There are two key newer innovations that will further thermostat company that provides commercial differentiate leaders in this sector: (1) those that can and residential thermostats for heating and cooling participate in demand response markets and (2) those that optimization. The company has become one of the can offer remote or autonomous controls. It is still early most successful players in the European market and days for these features but the value they can deliver has is widely acclaimed for their product design and smart the potential to be significant, adding not only additional software controls. revenue streams for the company (demand response), but • Smapee (Belgium) is an energy monitor that attaches also the customer (sharing in the demand response upside to the fuse box and receives unique electronic or achieving greater efficiency with AI and autonomous signatures from all devices plugged into an outlet to controls). These tech-enabled innovations are still evolving deliver insights on energy usage, but can also handle and a key differentiator in this crowded field will go to the specialized programming to optimize the home’s device that will ultimately serve as the “lead” controller of energy use, saving money and emissions. all energy systems (e.g., smart thermostat versus smart • Dabbel (Germany) which is backed by the European electric panel versus smart home speaker). This matters Institute of Innovation & Technology, an EU body, has most in energy markets that limit market participation to developed technology that uses artificial intelligence just one entity in the home. This contributes to the growth to take control of building systems related to heating, in companies seeking to integrate AI and autonomous ventilation, air conditioning and shading. According to features to make market participation and energy the company, its tech can help to cut a building’s HVAC optimization seamless for the customer. energy consumption and carbon dioxide emissions by up to 40%. COVID-19 and the dramatic change to energy • Logical Buildings (UK) deploys AI to reduce building consumption patterns has accelerated the additional energy consumption and won this year’s Consumer value software solutions provide to building owners if Technology Association’s “Integrator of the Year” at they can autonomously deliver higher efficiencies. We CES 2020 in recognition of their fully integrated smart are particularly excited about these innovations as we building mobile platform. have seen several businesses rolling out new recurring revenue software products that are expected to make their As with most hardware solutions, the key to scaling these product significantly “stickier” for customers and provide businesses is winning strategic partnerships. We are substantially higher margin and predictable revenue if seeing that for smart building sensor technologies these successful. This leads us to conclude that the winner in the partnerships are falling into generally two categories: market where demand response becomes a key part to the (1) B2B relationship with energy and utility companies overall unit economics of a business will be the device that or large global energy equipment providers (such as ultimately controls the smart home energy consumption. Tado° partnership E.ON and Enel), or (2) B2C relationship with technology companies that can offer a wide range B. Enablers of Energy Efficiency as a Service of energy management integrations that simplify this process for consumers (such as Smappee’s integration Climate Positive® Insights: We have seen innovative with IoT service Stringify and Nest). companies disrupting traditional appliance manufacturers and installers by offering digitally-enabled and enhanced These partnerships are increasingly important for efficiency appliances and increasingly moving to leasing- investors who are contemplating the value they can type models (e.g., energy efficiency as a service, heating as create in helping these businesses stay private longer. In a service, electricity as a service). This trend is providing North America, smart thermostat company Ecobee has opportunities for companies to change the traditional differentiated itself from its competitors with its voice one-and-done model to an ongoing customer relationship enabled solutions, integrations with Amazon, and initial where the disrupting businesses can offer additional stages of automation. And all eyes are on Ecobee’s exit products and cross sell to capture greater upside. multiple as they are rumored to be considering a SPAC (at the time of this writing). A strong showing by Ecobee will We see opportunities for platforms to emerge that offer certainly boost the prospects for growth investors eyeing comprehensive offerings for all energy-related services. similar companies in Europe because up until now, many Eventually these offerings will converge with challenger of them have already been acquired by strategics in Europe utilities and companies offering solar and storage, EV (e.g. Legrand acquired Netatmo, British Gas acquired Hive) charging, etc. before these businesses reached a scale and deployment that met certain exacting criteria for growth investors.
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Building on the maturing market for sensors and hardware Companies are now providing high-margin service offerings management that delivers insights and autonomous such as EEaaS to simplify, streamline and optimize energy controls, there is a significant digital disruption underway management for C&I buildings. While energy costs are in how building operators and real estate owners manage often an important budget item for large corporations, their large energy-consuming assets. While the asset- it is often an area that is highly fragmented and least specific or platform technologies discussed in the previous focused on. This has created a large market for providers section often work well for residential homes, a newer of simple, easy to implement solutions. These providers model has emerged for delivering efficiency in commercial take an often ballooning cost asset due to maintenance and industrial (C&I) buildings. This model takes advantage (e.g. HVAC and lighting systems) off a company’s balance of key trends specific to the built environment sector: sheet and off their mind. In general, the leading business models providing “energy-efficiency-as-a-service” deliver • Technology advantages to electrifying the heating end-to-end control of the transaction from the customer sector – electric-driven heat pumps are 3-5 times more relationship at lead generation to sales, engineering, efficient than a traditional boiler.49 finance, and through fulfillment, installation and • New policy mandates and access to new incentives maintenance. These leaders combine proprietary metering (e.g. recovery stimulus money) to transition to smarter, technology and can offer customers an off-balance-sheet intelligent and efficient buildings. The European solution for financing their energy efficiency projects at Commission’s new Renovation Wave initiative (specific little to no upfront cost through a multi-year efficiency-as- elements to be released in 2021) is likely to include a-service contract which the customer pays for via energy policy mandates coupled with government incentives cost savings. The building owner shares in the savings with for large scale energy efficient retrofits. Already this the company while also seeing energy savings across their year, we are seeing incentives announced such as portfolio of buildings of at least 20-30%. Germany’s €2 billion for energy efficient building retrofits and green building retrofit incentives from The EEaaS business model is experiencing rapid growth Denmark ($4.6 billion) and the United Kingdom (£2 due to improvements in the technologies used to measure billion). Several countries passed limitations on the and verify energy savings as well as innovations in the installation of oil-fired heating systems including in models used to finance these projects. Given the large Germany Norway, and the Netherlands. amount of low hanging fruit in energy efficiency projects, • A rise in new business models (such as Energy we have seen EEaaS players in the US consistently Efficiency as a Service, EEaaS) and lower cost solutions completing projects with over 15% unlevered IRR. Given the that are contributing to a rise in deployment of efficient extremely low risk profile of these efficiency projects, they energy control technologies following a period of are able to finance more than 100% of the upfront capital relatively low penetration of electric-powered heating costs with debt at ~5-8% interest. and cooling solutions in the C&I segment due to large upfront capital requirements, execution risk, and poor visibility into actual savings.
Cost Before CostCost Before After $
1 2 3 4 1 2 3 4 5 6 7 Years Energy Costs Financing Payments Savings
49 European Commission, “Decarbonising EU heating sector” (2019).
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In Europe, where interest rates are even lower than in the This said, we remain vigilant and optimistic that there US, we see similarly attractive opportunities for EEaaS might be the right business model to meet our exacting players. For example, UrbanVolt (Ireland) is disrupting the criteria because the truth is, the hype is not without merit. LED light bulb market by offering lighting by subscription We are already seeing a ramp-up in the project pipeline for to large scale businesses (e.g. Heineken, Pfizer) where hydrogen power – rapidly rising from a project pipeline of customers do not pay for the equipment up front and 3.5 GW in 2019 to a ballooning pipeline of more than 15 the system is owned and maintained by UrbanVolt. They GW of projects announced this year.51 Other hype factors are also driving value through a frictionless customer include: experience through their digitally-enabled online platform that remotely assesses and determines the upgrades • Green hydrogen could be a key fuel to reduce needed. This greatly reduces the cost and time previously greenhouse gases in hard to decarbonize sectors of spent on on-site assessments. Looking ahead at possible industry (steel, chemicals) and transport. exit opportunities for EEaaS companies, we continue to • Hydrogen is featured prominently in Europe’s Green closely follow eEnergy, a UK and Ireland-based EEaaS Deal, including a broader EU hydrogen strategy with a business that went public through a reverse takeover goal of 40 GW of green hydrogen capacity installed by in January 2020. eEnergy has reported a 500% uplift in 2030. revenue and 250% organic growth compared to the relevant • Germany has announced €9 billion to create green quarter in 2019 despite COVID-19 induced delays in hydrogen production with goal of 5GW of hydrogen installations which indicates a strong and resilient demand capacity by 2030 and 10GW by 2040. for efficiency technology solution providers.50 • France has dedicated €7 billion for development of hydrogen industry and other green technologies.
4. Technologies to Watch: However, some of our concerns about this sector stem Maturing Markets & Improved from the caution flags we waive when see investment opportunities that share many of the same elements Risk/Reward that we saw negatively impact the biofuel market in the early 2000s and left investors with material losses. This Our previous sections describe technologies we believe includes no current policies that directly support sustained will deliver superior returns and growth in the coming technology scale-up. Specifically, this asset heavy and decade (2020-2030) based on specific criteria: positive capital-intensive technology will likely require government unit economics, high growth, capital efficiency, and the subsidies and policies not yet in place such as quotas for policy pull driving accelerated decarbonization. In this green hydrogen use in the industrial sector. It is also not section we discuss the high-growth technologies that cost competitive. In the EU it costs €1.5 per kilogram to are catching significant tailwinds from climate policy and produce the cheapest grey hydrogen (from natural gas), macroeconomic trends, but do not yet meet all the specific blue hydrogen (from natural gas with carbon capture) is exacting criteria. Nevertheless, should be on the radar of €2/kg and green (from renewable energy) is €5.5/kg.52 We investors. expect as renewable costs decline, green hydrogen will get cheaper since at least two-thirds of the cost of hydrogen A. The Great Green Hydrogen Hype production is the energy used to make it. Not a week seems to go by without a headline from an energy media outlet touting the exciting “market But there are also technology limitations to factor into the opportunity” in hydrogen produced from renewable pace of growth in green hydrogen. This includes bespoke sources, so-called “green hydrogen”. There is a lot of hype manufacturing, limits to how much hydrogen can be put for green hydrogen, recently accelerated by an injection of in existing infrastructure (7-20% in most existing pipeline stimulus into the sector. But this type of hydrogen, which networks), and the need for massive transmission and could significantly deliver a Climate Positive® impact is zero-carbon electricity networks to be built out to feed still too early for growth-stage investors and bears many the green hydrogen processes. We have yet to see the similar features to what plagued the biofuel market in the economics working as this technology is still too early for early 2000s. For these reasons, we believe it is unlikely we these proof points and best forecasts have green hydrogen will see sufficiently mature opportunities in this market competing with fossil fuels by 2040 in most markets.53 before 2030.
50 Morgan, Francesca. “eEnergy reports ‘a strong start’ to the year.” Vox Markets. 18 September 2020. https://www.voxmarkets.co.uk/ articles/eenergy-reports-a-strong-start-to-the-year-a85106f/. 51 Wood Mackenzie Analysis. “Green hydrogen costs to fall by 64% by 2040.” Wood Mackenzie. 25 August 2020. https://www.woodmac. com/press-releases/green-hydrogen-costs-to-fall-by-up-to-64-by-2040/. 52 Reuters. “Europe faces tall hurdles to make ‘green hydrogen hype reality.” 30 August 2020. https://www.autoblog.com/2020/08/30/ europe-green-hydrogen-challenges/. 53 Note: Wood Mackenize analysis suggests that green hydrogen could reach parity in Australia, Germany and Japan by 2030. “Green hydrogen to reach cost parity by 2030.” PV Magazine, 15 November 2019. https://www.pv-magazine.com/2019/11/15/green-hydrogen-to- reach-cost-parity-by-2030/.
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Looking ahead, we do see potential for this technology the next 5 years. On the other hand, regions like North and three important distinctions in the green hydrogen America and Asia are expected to experience significant market from the early 2000s biofuel market that could growth. Factors for this regional-specific growth include make the green hydrogen sector a great investment. heightened demand for resilient back-up power in the First, we are starting to see a pull in the market for US during worsening wildfire seasons and the growth in component technologies used in hydrogen expansion, off-grid energy systems in remote parts of Asia. Navigant most notably, electrolyzer companies which could make Research estimates that these two regions together will for strong investments before 2030. Second, we expect account for about 76% of spend over the next 5 years.54 there to be substantially more capital available to scale green hydrogen that was not available for biofuels which needed large capital injections. For example, the growth ForecastedForecasted Global Global Annual Annual Spend Spend on on in ESG mandates (especially focused on lower carbon MicrogridMicrogrid Implementation Implementation investments), is likely to deliver an outflow of capital being 25 from oil and gas and we anticipate that green hydrogen could be a likely destination for capital that is used to 20 investing in asset heavy, capital intensive opportunities. Third, we are also starting to see massive investments 15 into scaling the infrastructure that would support green hydrogen expansion, most notably the growth in renewable 10 energy. For example, Denmark’s aggressive growth in offshore wind is a good example of the overcapacity being 5 created that can and will likely underpin green hydrogen in Denmark. Relatedly, oil majors and utilities have launched 0 gigawatt scale initiatives on hydrogen (e.g. Shell, NextEra, 2019 2020 2021 2022 2023 2024 2025 Iberdrola, Uniper). Lastly, unlike the biofuel market in the early 2000s, there is more promise today of new policies Middle East & Africa Latin America being passed and implemented that focus on large-scale industrial decarbonization that will give hydrogen the Asia Pacific Europe necessary sustained policy uplift to succeed. North America
55 Climate Positive® Takeaway: The subsidy dollars going Source:Source: Navigant Navigant Research Research into green hydrogen are significant, but we have not seen technologies that are cost competitive on their own and the infrastructure challenges are significant. Similar to what Europe, meanwhile, lacks the same accelerants for happened with biofuels in the late 2000’s, there remains a microgrids that we see in North America and Asia. risk of a subsidy-driven boom that is not sustainable once Europe has among the best performing and most reliable the subsidies inevitably end and while green hydrogen electricity grids in the world and thus the value of avoided has an unproven pathway to profitability in their absence. downtime is much lower than it is in other geographies. However, momentum behind this technology continues to Europe also has barriers to growth that include tightly be amplified by the growing number of ambitious climate connected energy markets designed for cross-border targets set by governments and industries (e.g. net zero trading and infrastructure that deter self-sufficiency and commitments) where green hydrogen is considered a key grid islanding (e.g. microgrids). solution to achieve these massive emission reductions. However, taking a global view, the microgrid market B. Locking in the Business Model for Scalable is seeing significant growth in innovative company Low Carbon Microgrids creation that explores various business models to scale microgrid development and deployment. In 2020 we are Although we view microgrids as a sector with a lot of seeing everything from local players to large corporates potential, its adoption will probably lag compared to participating in the microgrid market. For example, IP other countries due to some unique characteristics of Innovative Power GmbH, a Berlin-based energy project the European market. Currently, Europe does not have development company has partnered with Aroundtown a significant share of the global microgrid market; it (the largest commercial real estate company in Germany) represents approximately 9% of the global market and to “build, own and operate hundreds of energy microgrid there is no evidence of relevant growth projections in systems over the coming years.”56
54 ABB. “Leading the energy revolution, together.” ABB. 2 September 2020. https://library.e.abb.com/public/ bd25ca271072420e80d25089c2343fad/9AKK107991A0901%20Smart%20Power%20Microgrids_External_v02.pdf. 55 Navigant Research. “Microgrid Deployment Tracker.” 56 Other Sources Energy Group (OSEG) website, http://www.oseg.co.il/.
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At the regional and global scale we are seeing the C. Risky Business: Crowded Landscape for EV emergence of global and regional players including: Manufacturing and Battery Technologies The transportation world of the last couple years has In January, Scale Microgrid Solutions secured $300 • been focused heavily on producing new electric vehicle million equity commitment from Warburg Pincus to models and advancing battery technologies to support expand their distributed clean energy and microgrid them. Unlike the early 2010s when Tesla seemed to be platform for C&I customers in North America. the only player making any noise, in more recent years, In August, GreenStruxure was formed by Schneider • each of the major auto OEMs have awoken, having Electric and Huck Capital to deliver energy-as-a- recognized that EVs are the future. We have witnessed service microgrids. strategic investment initiatives from large corporations In October, Calibrant Energy was launched as a joint • based in the EU and abroad. Given the unprecedented venture by Macquarie Capital and Siemens to finance opportunity, many players have emerged on the scene – and build distributed energy projects. It will offer a both incumbent and newcomers – in an effort to establish range of energy solutions including microgrids, solar dominance in this relatively nascent market. and storage.
In addition to recognizing market demand, automotive Given the limited commercial proof points and established OEMs in Europe have been quite literally forced to invest business models for rapidly deploying clean energy in zero-emission technologies in order to comply with supported microgrid technologies, this is a high-growth rules phased in at the start of 2020. Volkswagen – as a market that is too early, but must be watched closely result of its 2015 emissions scandal – has been leading given the number of leading technical and financial firms the charge, pledging to invest €33 billion into electric staking their ground on microgrids. While we think Europe technology over the next four years, aiming to have will not develop as fast as other regions, we believe there 75 battery-powered models on the road by 2029. VW will be growth-stage companies deploying innovative has invested a good portion of this cash into battery financing models that will drive Europe’s nascent low technologies. They have put more than €900 million into carbon microgrid market. joint projects with Northvolt, the Sweden-based battery designer and have invested hundreds of millions into Climate Positive® Takeaway: The microgrid market US-based solid state battery developer QuantumScape is still nascent with limited commercial proof points as well. The Czech Republic, home to VW-backed Škoda, as companies test out different business models for will also benefit from these ambitions, with potential €6.6 growth. Further, the regulatory environment still needs billion of investment capital if VW distributes its battery to be formalized to provide developers with greater technology investments evenly. Additionally, Europe’s clarity. Without this, microgrid projects will not be highly inbound investments have been boosted by Tesla, which standardized and will take longer to develop with more is plowing €4 billion into a factory just outside Berlin. Italy inherent risk. We have already seen microgrid developers secured €1.75 billion in EV investments last year from take longer than expected to develop their pipeline and Fiat, while France, Sweden and the UK each got around to secure financing for projects. Nevertheless, microgrids €1 billion from car manufacturers. Spain received close to are definitely part of the future energy system because of €300 million from Opel, and Croatia got €80 million from their unique ability to deliver grid stability and resilience. Hyundai and Kia.
SPAC IPO Deal Count
140
120
100
80
60
Deal Count Deal 40
20
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year
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The EV manufacturing market has matured to the point where there are a large number of new and established companies in a flat overall auto market with well-capitalized incumbents now moving into their own EV manufacturing and production. This results in a highly competitive market environment with many challenges in building a profitable company of scale, and as such may be less attractive to most growth investors.
There is also a new trend emerging that is injecting additional complexities for investors assessing the risk-reward profile of EV manufacturing and advanced battery companies – this is the growing prevalence of Special Purpose Acquisition Companies (SPACs) as a popular means to take EV and battery companies public. As such, this has become a very crowded space with little visibility into who the ultimate winners will be. Many companies are going public with no
Climate Positive® SPAC Key Metrics
Announcement SPAC Merger Est. 2020 Est. 2024 Company SPAC Date EV ($b) Revenue ($m) Revenue ($b)
CIIC 20-Nov 5.40 0 14.1
VTIQ 20-Mar 3.30 0 3.3
KCAC 20-Sep 3.30 0 0
GMHI 20-Aug 2.90 20 0.4
SBE 20-Sep 2.40 135 1
SPAQ 20-Jul 1.90 0 10.6
HCAC 20-Aug 1.80 0 1.4
TRNE 20-Aug 1.80 15 0.6
GRAF 20-Jul 1.60 102 1
SHLL 20-Jun 1.10 1 2.1
PIC 20-Sep 1.10 21 1.4
DPHC 20-Aug 1.00 0 5.8
RMG 20-Oct 1.00 11 1.2
NOVS 20-Sep 0.50 0 0.2
LOAK 20-Oct 0.50 51 0.5
BMRG 20-Sep 0.40 3 1
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commercial product, no revenue, and significant remaining technology and manufacturing challenges to overcome on the pathway to scaling.
SPACs have become an increasingly common route for companies to go public as they are viewed as a faster and easier alternative to the traditional IPO. The number of SPACs raising funds through an IPO this year has reached an all-time high and there are currently 148 SPACs actively searching for a target, many of which have a sustainability or climate focus. As of this writing, fourteen SPACs have already either completed a merger or have announced plans to merge with companies that we would consider Climate Positive®. Twelve of these are in the EV manufacturing, battery, or a closely related sector which is notable because, aside from Tesla, we have not seen a publicly traded automaker in decades, but in one year we may see several. This makes it more difficult for investors to get confident in the risk/reward profile of these opportunities and who the winners will be. While it remains to be seen if these companies can execute well enough to justify their lofty valuations and whether the recent uptick in SPAC activity is temporary or here to stay, what is clear is that there is significant amount of investor interest and capital available for these companies.Given the large amount of uncertainty and competition created by the uptick in companies going public through SPACs and huge investment from incumbent OEMs, growth-stage investors are likely to have a difficult time finding risk-adjusted investments that would meet their return profile.
Climate Positive® Takeaway: There is tremendous capital coming in and many companies going public in a very short period of time. While there is rapidly increasing demand for EVs, the market is still relatively small and will take several years to develop. It is unlikely the market can support all of these new entrants along with all the major existing auto OEMs who have finally started to aggressively move to EVs. We have seen valuations that are not remotely justified by the fundamentals and very volatile valuations for companies that have already gone public. Therefore, there are few opportunities with attractive return profiles.
D. Uncertain Risk and Reward Dynamic: Certain Ridesharing Platforms Too Close for Comfort We have factored into our analysis the dynamic environment created by unprecedented market uncertainties as countries emerge from the global pandemic at different rates and healthy valuations. One of the most noticeable impacts of the pandemic’s “black swan” nature, was the impact it had on the ridesharing sector. This sector took a massive hit from COVID with most companies reporting up to 75% ridership declines. To underscore the uncertainty that marks this sector, companies such as Lyft, without a diversified business, saw its shares drop by 23.3% in the first half of 2020 and laid off 17% of its employees. Meanwhile, Uber’s stock price has managed to recover after falling by 50% in March, underscoring the value created by the company’s diversification into food delivery through UberEats. Revenue from its food delivery platform rose 103% in Q257As countries begin to emerge from the pandemic with varying levels of social distancing guidelines, we are seeing signs of both a return to “business as usual” and an emergence of a “new normal” that dampens our outlook for certain ridesharing platforms.
Lyft, Inc (Nasdaq: LYFT) Share Price Over Time Lyft, Inc. (NasdaqGS:LYFT) - Share Pricing
79.00
69.00
59.00
49.00
39.00
29.00
19.00
9.00
Lyft, Inc. (NasdaqGS:LYFT) - Share Pricing Lyft, Inc Share Price
57 El Fay, Imad. “Chart: It costs Uber Eats $43.5 to deliver a $40 food order.” Menabytes. 8 May 2020. https://www.menabytes.com/chart- uber-eats-unit-economics/.
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One of the most noticeable impacts of the There are however some bright spots for certain pandemic’s “black swan” nature, was the ridesharing platforms. This includes micromobilty providers discussed in an earlier section that are impact it had on the ridesharing sector. experiencing post-pandemic rebounds and companies This sector took a massive hit from like Zeelo, which provides smart bus services for COVID with most companies reporting up companies and their commuters. Zeelo made headlines this year by successfully pivoting their business model to to 75% ridership declines. launch a critical-worker platform to help hospital staff and essential employees get to and from work. As a digitized “Business as usual” includes how countries such as China, business, they were able to also establish contact tracing are already seeing traffic congestion return to previous for their customers and riders. It is profitable unexpected year’s levels and some ridesharing returning as customers pivots like these or unique policy conditions that keep have confidence and trust in the new hygiene solutions technologies like ridesharing, green hydrogen, microgrids, rolled out. We anticipate some ridesharing coming back and EV manufacturing still a high-growth opportunity, which could be accelerated if companies that can help even if not immediately actionable. riders feel safe by implementing advanced technologies such as personal air purifiers or mask detection software. Climate Positive® Takeaway: Overall, as countries emerge However, the “new normal” that negatively affects certain from the pandemic there is a high level of uncertainty ridesharing platforms by further exacerbating their surrounding how people begin to return to their daily lives profitability challenges include: and what becomes a “new normal.” We have seen certain ridesharing platforms report an acute drop in ridership at Overall reduction in volume of workers commuting, the height of the pandemic, but some of these platforms including some permanent shifts are beginning to see customers return. Yet, it remains • In a Gartner Study of over 300 finance leaders in March unclear how quickly these businesses will rebound, if 2020, including more than 200 CFOs, from companies completely at all, as commute patterns and personal that ranged between about $500M and $50B in annual car travel preferences might permanently shift. At the revenue, with as many as 100,000 employees found same time, some of these ridesharing platforms have that nearly 3 out of 4 finance leaders plan to move at managed to quickly pivot their businesses to meet the least 5% of their workforce to a remote schedule. needs of essential workers and maintain key sources of • In the same study, 25% of survey respondents said revenue, while differentiating themselves as a preferred they would leave 10% of their workforce as remote.58 transportation option. And in some cases, we have seen announcement from technology companies such as Twitter saying employees can continue to work from home permanently.
Expectations that personal car travel, but not shared, will actually increase • A McKinsey global study found an overwhelming majority of survey respondents (80%) considered private car travel safe for health (from a risk of COVID- 19 infection) versus 6% who considered either car sharing or ride sharing safe; additionally nearly a third of respondents identified an increase in importance of direct access to a vehicle, contributing to our expectation of overall increased private car travel in the wake of the pandemic recovery.59 • In Europe, according to a BCG survey, 63% of European survey respondents said they would only travel alone in their own car instead of trying to take public transit.60
58 Gartner. “Gartner CFO Survey Reveals 74% Intend to Shift Some Employees to Remote Work Permanently.” 3 April 2020. https:// www.gartner.com/en/newsroom/press-releases/2020-04-03-gartner-cfo-surey-reveals-74-percent-of-organizations-to-shift-some- employees-to-remote-work-permanently2. 59 Furcher, Thomas, Bastian Grühn, Isabel Huber, and Andreas Tschiesner. “How consumers’ behavior in car buying and mobility is changing amid COVID-19.” McKinsey and Company. 22 September 2020, https://www.mckinsey.com/business-functions/marketing-and- sales/our-insights/how-consumers-behavior-in-car-buying-and-mobility-changes-amid-covid-19. 60 Bert, Julien, Daniel Schellong, Markus Hagenmaier, David Hornstein, Augustin K. Wegscheider, and Thomas Palme. “How COVID-19 will shape urban mobility.” BCG. 16 June 2020. https://www.bcg.com/en-us/publications/2020/how-covid-19-will-shape-urban-mobility.
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IV. Conclusion —
This white paper offers our unique perspective on the technology companies and tech-enabled business models addressing climate change that are supercharged for delivering outsized returns in this decade – 2020 through 2030 – and particularly in Europe. Based on several megatrends discussed in this paper, everything from governmental policies to corporate commitments, we expect that this next decade will usher in a wave of exciting European tech companies that are contributing to meeting Europe’s ambitious climate goals. We highlighted specific opportunities that are poised for growth and how investors with a global and growth mindset are well positioned to help these mid-sized businesses break out of their regional cluster and reach a more dominant and profitable scale in the years to come.
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