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Venture Capital’s Bet on GridTech for National Resilience
- As climate change and extreme weather events continue to take their toll on energy infrastructure, venture capitalists have flocked towards gridtech - companies focused on enhancing the resilience of the grid during times of crisis. The US has started disbursing its largest appropriation into the green economy, signalling a governmental commitment to the sector, with $2 tn allocated across the Inflation Reduction Act, Industrial Infrastructure and Jobs Act (IIJA) and Creating Helpful Incentives to Produce Semiconductors Act. These movements have injected private financing to the tune of $156bn in venture capital dollars since 2020.
- However, 2023 and 2024 are expected to see a decline in investment, with $33.3bn and $11.3bn respectively allocated to the sector. Some innovation pockets include renewable energy credits, grid infrastructure grants, connected devices & DERs, and software & analytics.
- When investing in gridtech, it is important to consider the domestic production premium that comes with each major legislative act, as well as the de-risking that occurs from customer purchasing power. As utilities operate in a more regulated environment, it is recommended to work with the most recognised players in the industry to gain credibility.
- Investment dollars should be allocated appropriately for the right returns, with a careful cost/benefit analysis of domestic content requirements. The value of different parts of the value chain should be considered, such as the growing operationalization of retail energy markets over plummeting costs on the battery side.
- Multi-billion dollar outcomes are likely to come from a redesign of the energy system itself, enabled by a transition from centralised to decentralised architecture. National resilience in the energy sector has never been more important. Now is the time to build.
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