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(Bloomberg) — Energy startups have overtaken the makers of electric cars and batteries as the top global climate tech investment for the first time since 2020. They’ve done so as the growing demand for artificial intelligence has driven interest in technologies that can power data centers with less emissions.
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Venture funding for global energy startups totaled $9.4 billion last year, representing an increase of 12% from 2023 levels, according to a report published Tuesday by Sightline Climate, a market intelligence platform. Among them, funding for geothermal startups nearly tripled to $558 million, while nuclear investment almost doubled to $1.9 billion.
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This comes as overall climate tech investment dipped in 2024, as venture capitalists remain cautious amid political uncertainty in the US, tough business environment and corporations weakening commitments to cut carbon. While global climate tech startups attracted a total of $30 billion in investment last year, that was 14% below 2023 levels. That follows a 24% drop in 2023. Sightline expects venture funding to remain at lower levels rather than increasing exponentially, which could endanger the world’s ability to reach net zero.
However, “the dramatic drop in funding in 2023 wonʼt be repeated as the industry settles into a new normal,” the researchers said.
Startups in greener transportation, a group that ranked first in climate tech investment from 2020 to 2023 saw investments drop more than one-third year over year to $7.7 billion, as high-profile failures such as the bankruptcy of battery maker Northvolt hampered investors’ confidence.
Meanwhile, energy is slated to be a continued hot investment area in 2025 thanks to AI. Tech companies have made major commitments to purchase power generated by geothermal and nuclear fission in a bid to provide energy data centers. They’ve also bet on more speculative technology, such as nuclear fusion.
Listen on Zero: Microsoft Wanted to be Carbon Negative. Then It Went Big on AI.
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