The aim of the report - NTT explains - is to give an overview of current trends in the energy macro-sector, in terms of venture capital investments made in technology startups and new business models, thus being able to anticipate potential changes in the sector in view of the investments made. To this end, the study analyzes different trends and business cases, "providing an in-depth view of what response and solutions are being provided by the open innovation ecosystem". According to Energy Trends, in the energy sector there is a change in the business agenda, driven by various initiatives such as the Green New Deal, the European Climate Law, which aims to make the European Union the global leader in the fight against climate change, or the NextGen bonds. "This distribution," says the report, "reflects the great commitment to the change of energy paradigm, since, of all EU funds, 30% will be invested in energy and climate plans, and the Spanish National Integrated Energy and Climate Plan".
NTT Data has analyzed for the realization of this study the investments of the 33 largest companies in the energy sector by turnover between 2018 and 2020, a period in which 317 investments focused on 258 startups were made. And, following the analysis, it has detected that investments have recorded annual growth rates of 17% since 2008. "However," the authors of the report qualify, "the arrival of the pandemic in March 2020 caused a significant drop in the number of deals and investments. These operations, which the sector estimated could have reached 132 investments, fell during 2020 to 46 investment events. All of this, close to 6,000 million euros. In terms of the maximum amount invested during this time range analyzed, the average amount of the Top 5 new investments was $200 million.
The reaction of the oil companies
As a novelty with respect to the sector, the report prepared by NTT Data detects a substantial change in relation to the leadership of electricity companies over oil companies. A trend that has been reversed over the last three years, with the latter taking the lead by participating in 20% more investment events than the electric companies.
Héctor Pinar, Partner in charge of Gas & Power at NTT Data Europe & Latin America: "The innovative nature of the energy sector is being reflected in the commitment to electrification, decarbonization and decentralization of energy as an industrial driver, which is disrupting the sector itself, as well as other adjacent industries, such as the automotive industry, with the introduction, for example, of electric vehicles, which is boosting the use of renewable energies (...). From this report we have been able to extract, among other statements, that Oil&Gas startups represent 59% of the total number of investment events and Utilities host the other 41%. Even with a more or less even number of investments, Oil&Gas startups account for 77% of the total amount of money invested, with an average investment volume of 48 million dollars, compared to an average of 18 million dollars for Utilities startups".
Investment by geographic area
According to NTT, "the main investment poles, based on the headquarters of the startups invested, are in the United States and Europe, with California and Germany being the most prominent". The United States accounts for almost 50% of all investment events, while the Old Continent accounts for almost 40%. However, these main investment points are leaving room for emerging markets, with the Middle East standing out above all (8% of total investments made).
The report has also detected that Latin America, Asia, the Middle East and Africa "are beginning to grow their innovative ecosystems, thanks to the boost of their large corporations in startups of the same geography, betting on their own talent, which will lead in the coming years to the emergence of relevant hubs that increase the creation of new startups and innovative solutions for the sector, creating in turn a greater interest of investors in establishing headquarters near these geographical areas".
Alternatives to the classic models
According to Energy Trends, the global market situation, brought about by the current social situation, means that the different alternatives are rising strongly against the more classic energy generation models such as gas and oil. And among them, synthetic fuels or energy storage driven by renewables and digitalization, as well as hydrogen, continue to grow.
The authors of the report believe that synthetic fuels have "a long way to go in the coming years." e-Fuels (those produced using hydrogen generated from renewable electricity and incorporating either carbon to produce hydrocarbons or methanol, or nitrogen to synthesize an alternative fuel such as ammonia) are still little known, but are expected to play an important role in complementing electric mobility or being the main alternative when electrification is not viable.
In Europe and other advanced economies, light land transport is tending towards electric vehicles; in the rest of the modes of transport (heavy land, marine or aviation) and geographies, decarbonization will require solutions such as e-Fuels.
This field also includes the generation of low-emission hydrogen, one of the most talked-about technologies at present. This includes green hydrogen, produced from renewable sources, and blue hydrogen, produced from fossil fuels (natural gas) with CO2 capture and storage.
On the other hand, the growth of renewable generation together with the digitalization of the electricity system is accelerating the deployment of storage mainly in countries such as India, Italy, Australia, the United States, Chile, Germany, Japan and the United Kingdom.
NTT Data notes in its study that national policies in many of these countries are turning to storage to reduce dependence on energy imports, improve the resilience of their power grids and move towards the decarbonization goals of their economies.
Sector trends and vision 2030
In short, the report concludes, it is expected that these data (volume by investment, number of events, startups invested) will continue to increase year by year, due to the boost offered by government aid and measures, launched in favor of these new models.
Direct investment in renewable energies through Next Generation funds, or the commitment of the United States and Asia to less polluting production, storage and mobility models "make us foresee," explain the authors of the report, "an exponential growth in innovation in the sector in the coming years, applying disruptive models that increase the value of the energy sector and its possible applications".
This growth will also be driven by the consolidation of new models of collaboration between corporations and startups, models that are highly attractive to both parties, offering less risk and more independence for startups, without limiting their growth or agility.
NTT Data, part of the NTT Group, defines itself as "an innovative global IT and business services company headquartered in Tokyo". The company helps clients in their transformation process through consulting, industry solutions, business process services, digital and IT (Information Technology) modernization and managed services.
Energy Trends 2022