We have all heard it before: a crisis can be a chance. It can be a chance because some solutions might free us from a dilemma, while leading to long-term positive changes. As we are living in times of multiple crises – climate change, pandemic, war to name just a few – climate tech might be such a solution. Climate tech are technologies that are explicitly focused on reducing GHG emissions or addressing the impacts of global warming. But in our current crisis, climate tech can also make us independent from fossil resources from Russia that is responsible for terrible war crimes. Further, in times of high risks for economic recessions, climate tech is an impact-critical investment area with considerable growth rates and meaningful investing opportunity for the 2020s. That all sounds too good to be true, right? If this is the case, why aren´t there more firms like Tesla, Nikola, Beyond Meat and Nest, demonstrating how it is possible for climate tech startups to reach unicorn level (that is, valuations at or exceeding $1 billion)?
Signals of hope in local communities
In fact, there are millions of examples that most people are not aware of. Climate tech include all different kind of sectors, which tackle the challenge of decarbonising our global economy: from energy, built environment, mobility, heavy industry, across to food and land use, resource and waste management as well as carbon management. Many of the firms act locally and don´t reach the visibility and scale of global transformation like the unicorns. They are however important signals of hope that drive local changes. As with every solution, it is not only the technology but actually the people and the business model that unleash the disruption and inspires transformative changes.
One example is an energy cooperative in the North of Germany: BürgerEnergie Nord (BEN) translates into “Citizen Energy North”. The technology is nothing innovative or novel: BEN uses solar PV like millions of other initiatives. The innovation is the business model: the cooperative supplies renewable electricity to people in apartment buildings and local authorities in Northern Germany. It plans, installs, finances and operates solar PV installations for local renewable energy consumption in houses that have been excluded from the energy transition in Germany for decades. While people with an own rooftop were able to invest in their own solar PV installation for many years already and become prosumers, tenants only had the option to buy their electricity from a utility that offers renewable energies from the grid.
In 2017, a legal framework was introduced aiming at pushing the concept of ‘tenant electricity’ through better financial support. Bureaucratic hurdles and high costs have long made it difficult for property owners to provide this renewable electricity to tenants. For most energy utilities and suppliers, the business case has not been attractive enough. And for most individual landlords, housing cooperatives or residential property companies, the legal framework was far too complex and risky.
A group of six people took the chance to turn this new framework into real life impact and choses the legal form of a cooperative for this. They founded BEN. In fact, Germany already has more than 800 renewable energy cooperatives but almost all feed their electricity to the grid. With their business model, BEN is unique in Germany, offering tenants and everyone in a local community to co-own the PV installations. To sign up and become a member, people invest 250€ per share. Without major marketing budgets or advertising, BEN grew to over 80 members already, with new people joining every week.
For the members, it is a green investment with great opportunities for dividends. Tenants, using the electricity from their own rooftop by switching from their local energy provider to BEN, can reduce their power bills by at least 10%. In times of raising energy prices, this model is in fact a policy tool for social equality. And property owners can increase the value of their buildings without own investments. So why aren´t there more firms like BEN?
Every solution needs an enabling environment
As Pricewaterhouse Coopers (PwC) already stated in its report The State of Climate Tech 2020: The next frontier for venture capita last year: „Demand is not yet at a stampede but the market is heating up and it’s time for all stakeholders to help back the innovations the world really needs.“ This is definitely also the case for BEN. And the current war against the Ukraine is already the next catalyzer. Easily, more than 4 million flats across Germany could be supplied with tenant electricity, nearly ten percent of all flats in Germany. A study commissioned by the ministry of economy already 2017 states up to 14 terawatt hours (TWh) of additional renewable power annually could be generated with tenant electricity. This would occur in an ideal scenario in which solar arrays are installed in all 360,000 buildings suitable for the concept. This is slightly more than the annual output of one modern nuclear power plant.
Despite the significant growth and convincing drivers, there are non-financial barriers, from talent to regulations, which get in the way of firms like BEN having as much of an impact as needed. Especially the policy frameworks are insufficient to drive the pace and scale required for combating the crises we are in.
For BEN, it is still mainly bureaucratic hurdles and high costs to fulfill regulations for grid integration. Low-hanging fruits like using the big rooftop of a garage next to an apartment building to supply the tenants next door, cannot be harvested due to the regulations. The same goes for expanding a solar PV installation above 30 kilowatt even if the size of the rooftop allows it, as this requires BEN to install a specific meter that costs more than the revenues of the PV installation allows. Finally, putting up rooftop solar PV requires talents, skilled labor and the actual hardware. All is missing at a major scale across Germany for the whole industry. While the country is experiencing a major solar boom, supply chains are disrupted and skilled workers are rare.
Hope needs action
Hence, if one asks, whether climate tech is hype or hope, the response might be: it depends on what we want it to be. Crises can teach us innovation as we are forced to think out of the box. Crises can unveil innovation as it opens windows of opportunities that we haven’t seen before. And crises can lead to innovation, if we are ready for it. Therefore, we need to ask ourselves: are we ready for climate tech to be the hope, we urgently need, given the current crises we are in?!