The Age of Adoption is Underway, Not a Moment Too Soon.
2023 brought with it alarming data. Record-breaking temperatures made the past year the hottest on record. Key climate metrics all trended in the wrong direction, and six of the nine planetary boundaries were beyond a safe operating space—with eight of nine under more pressure than in 2015. As for business, geopolitics, high interest rates, and continued inflation brought economic uncertainty and market instability.
While these truths are disheartening, 2023 also brought new hope. The labor market remained surprisingly stable, and multiple labor union deals were struck. The widespread recession that was predicted in many circles never came to fruition. Additionally, the year ended at COP28 with 200 countries signing on to reduce their consumption of fossil fuels – a massive step towards a net zero future. Global companies also signaled they were ready to lead the way into the sustainable future, including NextEra Energy, which has transformed from a utility company to a leader in decarbonization, Gradiant applies innovative technology solutions to reduce water usage and renew wastewater into freshwater, and innovators like Prometheus Materials, that is rethinking how to make building materials using biomaterials, with the potential to eliminate CO2 emissions associated with traditional concrete production.
The foundation set during the last few years will make 2024 a pivotal year for the progress, implementation, and adoption of climate solutions. Keep reading to learn more about the trends we will be watching this year.
1. Inflation Reduction Act Spending Goes Into High Gear
Watch for a 2024 flood of federal funds into clean energy. This past August marked the one-year anniversary of the Inflation Reduction Act which included more than $370 billion for energy and climate projects—potentially upwards of $1 trillion by FY2032 if politics doesn’t get in the way. Initial funds have targeted renewable energy infrastructure to boost domestic production of things like solar panels, batteries, and wind turbines, along with tax incentives for electric vehicle purchases and home efficiency improvements. The funds made available by the IRA, together with those appropriated for the 2021 Infrastructure Investment and Jobs Act (i.e., the “Bipartisan Infrastructure Law”), will continue to flow quickly, particularly as tax credit eligibility criteria and competitive grant programs get up and running. All told, the IRA and IIJA have triggered at least 40,000 projects. That trend will become a 2024 funding frenzy as more projects get the green light.
Be sure to follow along with the release of implementation guidance, as well as the final investment decisions (FIDs) attributable to public funds.
This comes just in time for the 2024 election cycle. In the House of Representatives, Republicans have sought to slash IRA funds, eliminate some programs outright, and even make due diligence claims against vetted funding recipients. The bitter irony here is the claim that Bidenomics generally and the IRA specifically are hurting America, all while red-leaning states receive the lion’s share of IRA-subsidized investments along with promises of jobs, tax revenues, and economic development. Congressional debate over the IRA has been put to rest in the Democrat-controlled Senate for the moment, but with an unpredictable national vote on the horizon, the pressure will be on to get as many dollars out the door as possible.
The impact will be felt across the clean tech and climate sectors with increasing economic benefits for everyone, no matter their political leanings, socio-economic status, or geography. In other words, the focus will be on green rather than red and blue. And don’t forget about the storytelling opportunities tied to new investments, innovation milestones, startup successes, and more. From advanced energy storage to hydrogen, carbon capture, geothermal, and smart grids, along with related materials and infrastructure – industry watchers will be on the edge of their seats looking for the next funding announcement.
– Hardy Spire, Senior Vice President, Public Affairs
2. Supply Chain Decarbonization Becomes a Strategic Necessity
We see the decarbonization of supply chains as not merely a choice but a strategic imperative. This trend will continue to be at the forefront of shifting industry priorities, propelled by heightened consumer awareness, stringent environmental regulations, and technological advancements.
Supply chain emissions make up more than half of greenhouse global emissions and are a leading contributor to a company’s total carbon footprint. Fortune 500 companies, from Amazon to Apple and Meta to Google, are leading innovative solutions to cut emissions, including adopting renewable energy sources, rethinking logistics using electric-powered vehicles and utilizing low-carbon materials. Collaborative efforts among these businesses and their stakeholders will continue to intensify, fostering transparency and accountability across supply chains.
We also anticipate that circular economy practices like prioritizing waste reduction and resource optimization will expand with the integration of data-driven technologies, like AI and predictive analytics, which is starting to revolutionize supply chain management. Companies will lean into leveraging these tools to optimize routes, minimize waste, and enhance energy efficiency, further driving down emissions. Regulatory pressures will also escalate and investors will increasingly channel investments towards sustainability ventures that address supply chain decarbonization.
– Marisa Long, Senior Vice President, Climate & Energy
3. Commercial Buildings Lean Into Their Role As Responsible Grid Citizens
Commercial buildings, accounting for a significant portion of global energy consumption and greenhouse gas emissions, are in a race to secure access to power. Facing an increasingly unreliable supply of electricity, utilities have been forced to limit new interconnection processes for energy-intensive facilities. To ensure demand does not surpass available power supply, some utilities have begun implementing interconnection queues to manage new requests, which result in substantial delays for data centers, manufacturing facilities, and other commercial buildings in getting connected to the grid.
While frustrating for many facility owners, this presents an opportunity for businesses that take a proactive, productive approach to their buildings’ relationship with the grid.
The incorporation of Distributed Energy Resources (DERs) such as microgrids and demand response systems is revolutionizing how commercial buildings interact with the grid. These resources enable buildings to generate, store, and manage their energy, making them active players in the energy market, and enhancing system decentralization, flexibility, and resilience.
When a utility’s supply of electricity is running low, facilities that are also DERs can activate their systems, which allows operations to continue with a reduced dependence on power from the grid. In some states and regions, this power can also be fed back to the grid, not only reducing demand but increasing supply. This also creates an additional revenue stream for the facility.
For facilities looking to build stronger relationships with their utilities, their roles as DERs can prove to be the difference between a successful interconnection and a frustrating delay. Utilities are eager to incorporate additional energy resources into their portfolios, and are keen to approve facilities that would contribute to the grid instead of creating additional strain.
Successful collaboration between commercial buildings and the electricity grid is vital for the clean energy transition. As active grid citizens, successful buildings in 2024 will support grid stability, reduce peak demand, and provide backup power. They will also pave the way for new business models, such as selling excess energy back to the grid. In essence, commercial buildings are transforming their energy management practices, leading the way for the integration of the built environment into our energy infrastructure.
– Carlos Villacis, Senior Director, Climate & Energy
4. Sustainable Aviation Takes Off
As the world has grown collectively more wealthy and interconnected, there has been a surge in the consumption of electricity, food, and other resources. A similar trajectory is anticipated in the aviation sector. Air travelers are set to double over the next twenty years, which, without significant change, will contribute considerably to increases in global emissions (amounting to about ⅕ of global oil demand growth through 2030.)
On November 28, 2023, a milestone was reached as the first transatlantic passenger commercial plane running on 100% Sustainable Aviation Fuel (SAF) completed its journey from JFK to Heathrow. While the inaugural flight was passenger-free, its successful transit has opened the door to the future of transcontinental sustainable air travel. The expectation set by airlines is that SAF will account for 10% of all jet fuel by 2030.
To achieve these goals, increased collaboration between airlines, regulators, and fuel producers and distributors will be required. Current hurdles include a regulatory limit that flights can only operate with a mix of 10% to 50% SAF, the availability of SAF itself, and – the constant caveat to new tech – cost. SAF is more expensive than regular jet fuel.
Without addressing these challenges through regulation, subsidization, or standardization, progress will be stymied. Luckily, governments around the world have already begun subsidizing production, like the DOE’s SAF Tax Credit in the United States. Another positive? The technology is already here – it’s just time to deploy and scale. Companies like Twelve, Dimensional Energy, and World Energy are all producing and distributing Sustainable Aviation Fuel and are already partnering with airlines to deploy millions of gallons of jet fuel. airlines are also taking other steps like leveraging carbon capture, with American Airlines signing a carbon removal purchase agreement for 10,000 tons of permanent carbon removal with Graphyte, backed by Breakthrough Energy Ventures, by early 2025.
Another area requiring regulatory attention is private air travel. Private jet sales are hitting record highs without consideration for their impact on the planet. Private jets emit between 10-20x the pollutants of commercial flights. Therefore, the U.S. government will need to examine regulations around individual carbon footprints from air travel (63% of the world’s private fleet is U.S.-based) should we keep in line with goals to lower emissions over the next few years.
– Reed Haeckel, Senior Director of Growth
5. Climate Tech Investing in 2024: Steering Private Capital for Climate Solutions in Key Hard-to-Abate Sectors is a Priority
In Antenna’s 6 Climate & Energy Trends To Watch in 2023 piece, we mentioned that the slowest days of venture investing in climate may be ahead of us. As we wrap up 2023 and head into the new year, this statement is deemed to be true. According to PWC data, equity investments in the private market declined for the second consecutive year due to geopolitical turmoil, shrinking valuations, and rising interest rates. In climate tech VC specifically, funding decreased back to the level of investment we saw five years ago.
While venture and PE climate investments declined 40% more in Q3 of 2023 compared to the year prior, the sector still performed better than the broader private market, which saw a 50% drop during the same timeframe. Additionally, the IEA projects the global transition to clean energy sources will accelerate in 2024 and beyond. Over the last couple years, global investments in solar, wind, hydropower, geothermal, and nuclear technologies have gained more traction than investments in fossil fuels. This is further supported by the fact that of the total 2.8 trillion investment expected in the energy sector in 2023, 1.7 trillion is expected to go towards renewables, grids, and other clean-energy technology.
Concerns remain around climate start-up funding as it relates to a lack of investment in industrials, grids, storage, power, and the solutions solely focused on solving the global emission crisis. Despite there being effective technologies starting to become available, substantial capital is needed to support its mass deployment. The type of capital that is needed historically comes from banks, governments, and larger institutions, as opposed to private equity and venture capital firms.
2024 looks to bring with it glimmers of hope. Climate tech’s share of private market equity and grant investment jumped to 11.4% in Q3 and had an annual rate of 10% for 2023, extending a decade-long upward trajectory. There has also been an investment shift towards companies with more emissions-reduction potential. The most significant change occurred within industry, manufacturing, and resource management which accounts for more emissions than any other sector. Additionally, some industrial sub-sectors such as cement and steel, which present complicated abatement challenges, have seen an uptick in investment. From Q4 of 2022 to Q3 of 2023, investors allocated 14% of start-up funding to industrials, a notable jump from the 8% of funds that were allocated from Q1 of 2013 to Q3 of 2022. While the need exists for these funds to scale at a faster rate to make the tangible impact the climate requires, we see 2024 as a year of continued focus and financing of climate tech solutions.
– JJ Zakheim, Business Development Analyst, Growth
6. Climate Innovators Changing How We Use Water
Water is the world’s most precious resource, and our conventional methods of managing it are not keeping up with us. A staggering report released at the UN Water Conference found that between two and three billion people worldwide (over 25% of the global population) experience water shortages, a number that will quickly worsen in the coming decades. Cities, where growing urban populations and aging infrastructure collide will be especially vulnerable — and, in the United States, we’ve already seen water shortages limit growth in cities from Phoenix to Tampa.
In 2024, we’ll see the expansion of water solutions that help buildings use our most precious resource more sustainably. Onsite water recycling systems are having a major ‘solar’ moment, with cities from San Francisco and Austin to New York and Seattle looking to encourage their use to protect overdrawn freshwater resources. Epic Cleantec, a national leader in onsite water reuse, works with real estate partners in many of these cities and is showcasing the untapped potential of recycled water with its OneWater Brew, a Kolsch-style beer produced with purified water from a San Francisco highrise.
Industry, which accounts for around 40% of total water withdrawn from the environment, also has a major role to play in protecting freshwater resources — and solutions are on the rise. Desalination, zero-liquid discharge, and ultrapure water technologies are helping global businesses use water more sustainably and efficiently, especially amid the rise of industries like semiconductor manufacturing in the US and EU.
Nature-based water solutions are also on the rise — a 2023 report by Boston Consulting Group and WWF sees a critical role for nature-based solutions to play in a more resilient water system. BlueGreen Water Technologies, which deploys water quality and availability solutions that also sequester carbon and restore aquatic ecosystems, is a great example of a company leading the charge to incorporate nature-based water solutions into broader climate efforts.
– Leo Traub, Account Supervisor, Climate & Energy
Conclusion
2024 will be a year when consumers, governments, and corporations have an appetite for climate solutions. Whether you are a multinational corporation taking steps to incorporate sustainability efforts or a start-up with an idea that has the potential to make a positive impact, this is the year for your business’s sustainable intentions to turn into action.
Let Antenna Group help your organization define and amplify its climate story. Get in touch.
Have our previous predictions come to fruition? Catch up on our Trends To Watch posts from the past three years to see:
Six Climate & Energy Trends To Watch in 2023