Cleantech, or new clean technologies, are all those technologies that will allow us, or at least should allow us, to achieve the EU’s overarching goal of becoming net zero in emissions by 2050. They are innovative solutions, in many cases disruptive and predicated on innovation and technology. Many of them are still in an embryonic stage. Other more mature proposals need funding to grow and, above all, to make them profitable and scalable for industrial applications.
We’re here to talk about all this with Alberto Toril Castro, energy sector manager at Breakthrough Energy, a platform featuring various climate funds and founded by Bill Gates. As an advocate of affordable green energy, he firmly believes that “electrification is the future of the economy.” He calls for more public-private partnerships in the cleantech ecosystem and proclaims that “financial institutions play a key role when it comes to decarbonization.”
Question (Q): What is Breakthrough Energy?
Answer (A): It’s an initiative that brings together climate researchers, innovators, investors, policy thinkers and those responsible for energy policy and regulation, all of whom are focused on accelerating the energy transition.
We aim to make green technologies at least as cheap, if not cheaper, than brown technologies. We focus on technologies that need to mature in the market, are crucial in achieving net zero emissions and also help to neutralize the green premium, meaning the extra cost these technologies carry today compared with other technologies on the market that still emit CO2.
Q: In this transition, which sectors will be key? What are you focusing on?
A: We are looking to decarbonize five main sectors, essentially comprising those activities we as humans carry out and which therefore have a big environmental impact. All those materials and tools that we produce through our industrial sector, which accounts for 31 percent of global CO2 emissions. Also how we generate the electricity we consume, how we transport it and how we use it, as the electricity sector accounts for roughly another third of total CO2 emissions worldwide.
We are also targeting the agricultural sector, affecting how we farm and how we eat, which accounts for a further 20 percent or so of total emissions. And naturally, the transportation sector (i.e. how we move) is another big contributor, as is the construction sector (i.e. how we live), from how we make our buildings to how we use them.
Q: You work very hard to promote cleantech education, having produced various outstanding reports of your own, and through working on initiatives such as Cleantech for Europe and Cleantech for Iberia. What trends do you foresee in the cleantech world?
A: We see big changes in the economy that are shaping the way these investments are being made and the way companies will operate over the coming decades. Notably, we are seeing a lot of electrification. It is now clear that there is no going back on our electrification goals and there is a general consensus that electricity is the most efficient and economically viable energy vector that we must champion if we are to start decarbonizing our economy.
We have an immense opportunity to capitalize and be the region where these new technologies are manufactured, produced and exported. For the past ten or twenty years, China has been leading the way when it comes to technologies such as solar photovoltaics, lithium batteries and electric vehicles, even though they are also manufactured in other parts of the world. There is an immense opportunity to manufacture new technologies that will be needed to decarbonize the economy and that will become much cheaper down the line. We can now see how countries and regions are attempting to capitalize on this. We see this with energy policies such as the Inflation Reduction Act in the United States or the EU Green Deal—the green industrialization plan in Europe—, which will provide an impetus for countries to go further.
Q: You were talking about these trends and where the market is heading and about the investors who are eying up these technologies. What are they exactly and what is the role played by Cleantech for Europe and Cleantech for Iberia?
A: Cleantech for Europe is a platform that we helped to launch in 2021. It serves as a nexus or hub between energy policy and regulation, and investors and innovators. It works as the voice of these scale-ups focused on clean technologies and of investors who are looking to promote investments in these technologies when liaising with policy makers.
We have launched a series of Cleantech for Europe satellites in each region of Europe. We started out with Tech for Net Zero Alliance, in Germany. We also have Cleantech for Nordics and Cleantech for Baltics, which unite these other two key regions. We also launched Cleantech for France and early last year Cleantech for UK.
Last year we launched Cleantech for Iberia, which works as a bridge at regional level—both in Spain and Portugal—between investors and between the innovators out there and those tasked with drafting the energy policies that are ultimately needed to help bring about greater investment and greater capitalization of entrepreneurs and businesses.
Q: We continue to educate. Perhaps it’s just a terminology issue, but for some time now we have been seeing more and more literature on ‘cleantech.’ What’s the difference, if any, between ‘cleantech’ and ‘climatech’?
A: For us it is pretty much the same thing. I believe that there is no approach to sustainability that does not include a tangible reduction in CO2 emissions, which is what ‘climatech’ sets out to achieve, whereas ‘cleantech’ includes other vectors such as water treatment and potability, circular economy and recycling. All of this is interconnected and there needs to be a balance so that the world becomes sustainable and we can reduce emissions.
So at a purely theoretical level, climatech means all those technologies that are purely related to CO2 reduction, while cleantech widens the playing field to encompass these other sectors. We always talk about cleantech because in the end we realize that this link or connection between one and the other is inevitable.
It’s impossible to talk about energy policies without factoring in industrial policies
Q: From a business perspective, what does decarbonization in general and, more specifically, cleantech entail?
A: It’s impossible to talk about energy policies without factoring in industrial policies. Many technologies are now economically viable due to the scalability and cost reductions achieved and notably they are beginning to catch the eye of private sector private equity investors. We can now see examples of technologies that are already mature in the market or are further off on the horizon, yet somehow they are coming in waves and are here to stay. In the electricity sector, for instance, which is perhaps the one we are most familiar with, everyone would agree that technologies such as solar and wind power are the most economically viable as things currently stand. Others, such as nuclear power or geothermal energy, are on the horizon and we believe that they will also have a role to play.
Q: You were telling us about electrification, and then of course there are technologies such as hydrogen, biomethane, biogas, and perhaps others yet to be fully developed. What do you think the future holds in terms of this technology race we are witnessing, which is a healthy thing when we consider the ultimate goal?
A: For us, the future is clear. Electrification is the future of the economy. It is crucial. To make this happen, fostering technologies that can use these electrons directly is the cheapest and most efficient way of decarbonizing. A clear example of this is the electrification targets we have in Europe. While the electrification of final energy is currently at around 20 percent, Europe aims to push it up to 30 percent by 2030 and to 50 percent by 2050. And we are seeing this in different sectors, including the road transport sector with electric vehicles, or residential heating with heat pumps. Yet we are also seeing new technologies such as thermal storage, which will allow us to decarbonize thermal processes that we previously thought were impossible.
Secondly, for all those processes where we cannot use electricity, our minds turn to hydrogen, which will be incredibly useful in decarbonizing processes such as the manufacture of cement, steel, fertilizers, the fuels we will need for aviation and shipping, and also electro-fuels.
And of course, let’s not forget the whole bit about circular economy and the hugely important aspect relating to our use of resources, especially biogas and biomethane.
Electrification is the future of the economy
Q: Are these technologies cost-effective for decarbonization?
A: Twenty years ago no one was talking about solar PV, or wind power for that matter. Today it just so happens that these are the cheapest technologies when it comes to producing electricity. Similarly, we have all witnessed the success of the electric vehicle, which three or four years ago nobody thought would work out. Today we can see a lot of electric cars on our roads. While they will soon catch up with internal combustion vehicles, there is a clear trend toward cheaper technologies. Some of the elements that we see as key to this maturity and in successfully bringing technologies to market is not the coverage of the different valleys of death. By that I mean the gap that exists between the laboratory and the market. I’m talking about technologies that are disconnected from reality. While they may well have been properly investigated and substantiated at an academic or theoretical level, entrepreneurs and their early-stage companies still encounter large gaps. It is important to make that leap from the laboratory to become a viable company.
Alberto Toril, energy sector manager at Breakthrough Energy, during his speech at the Energy Tech Summit held in Bilbao in April 2024.
Q: Let’s now talk about another topic that comes up a lot: financing. You were just talking about that valley of death that startups have to pass through and where many of them unfortunately end up staying. What role do financial institutions have to play in decarbonization and how important are they?
A: Financial institutions play a key role when it comes to decarbonization. Financial institutions of different types, both private and concessional, philanthropic and public, play an essential role in reducing the risks of these investments and in helping to scale up projects. In this way, we see how, at both a financial and structural level, it really helps to have a contract or an ‘offtaker’ for many of these projects and to secure the supply of all the raw materials needed to ensure the project’s success. It is equally essential to get end customers and developers to get closer and learn more about these projects to help them mature. And in that sense, venture capital funds or infrastructure funds have a hugely important role to play in making projects bankable.
Q: There is also talk of a gap between private investment and public investment in this whole cleantech universe. What role does the public sector play in this ecosystem?
A: It is essential for the public sector to attract private sector investors. We need the public sector to build close ties with the private sector through public-private partnerships. The public sector must continue to create green funds and green banks that are focused on this type of investment, on minimizing the risks and on bringing in more private capital.
We need the public sector to work on stable regulatory areas, including carbon pricing and ensuring a level playing field so that the private sector has clearer guidelines on how and where to invest. And above all, we need the public sector to work on ‘blended’ finance mechanisms, meaning mixed investment mechanisms to reduce the risk associated with these projects and pave the way for other private players to come onboard.
We need the public sector to work on stable regulatory areas
Q: We have talked about the different statuses of these projects and of the various kinds of cleantech startups that currently exist. Is scalability the main concern in this cleantech universe?
A: Absolutely. We focus heavily on scalability, because it’s there we see huge investment potential, yet also enormous barriers due to the risks that these projects entail. And our alliance with the European Investment Bank is not just about reducing risks in this area. We work hard to provide this blended finance, where we combine equity with public debt to reduce risks, though also through various programs to help make these projects replicable and ensure their ongoing maturity. We don’t want this to be a one-hit wonder; we want it to spark a whole chain of projects that these infrastructure funds will ultimately invest in.
We help to attract new investors because with our flexible equity we can reduce the risks and provide all the knowledge and education that this wave entails. More precisely, we are working to build five legs. First, we are targeting green hydrogen projects, which are hugely important and where we see that once scaled up, they will require greater investment and further risk reduction. Second, we are focusing on long-term energy storage projects, because we reckon that more storage capacity will be needed as renewable energies become more pervasive within the energy sector (in technologies that encompass mechanical storage, electrochemical storage beyond lithium ion, thermal storage, and chemical storage), in energy carriers such as ammonia or hydrogen.
We are also focusing on the aviation sector and on electrofuels, commonly known as SAF, and on direct carbon capture, both fields that we must seek to promote; and last but not least we are working toward industrial decarbonization projects and everything to do with green steel, green cement and plastics.
Scalability is the main concern with cleantech
Q: Looking at labor-intensive sectors and new profiles, how will this affect jobs?
A: The energy sector will create around 2,650,000 new jobs across the Iberian Peninsula by 2030. This will require an investment of around 150 billion euros. Energy policy and reindustrialization are a crucial aspect when it comes to creating new jobs, and not only in allowing new knowledge to thrive, but also in updating many of the industries that we have today.
Many of these factories that will produce these new technologies and which, happily for us, will be located on the Iberian Peninsula, will be key vectors for recruiting new personnel and creating quality jobs, which is all set to become one of the cornerstones of the world economy over the coming decades.