Cleantech is key to moving toward sustainability, although to continue growing it must overcome certain challenges, notably the €50 billion investment gap that currently exists in Europe until 2030, according to Cleantech for Europe. Public-private partnerships and the development of innovative solutions are essential to unlock its potential and ensure wider access to clean technologies.
Clean technologies, also known as cleantech, are transforming the way we address environmental problems, although their further growth and expansion faces several challenges. These challenges go beyond technical innovation and touch on crucial aspects such as financing, demand for sustainable solutions and the scalability of the technologies.
Overcoming these barriers is essential if we are to successfully transition to a more sustainable energy model. Cross-sector collaboration, investment in research and development, and the right kind of public policy support are some of the pillars needed to unlock the full potential of cleantech and enable its integration into key industries.
Securing funding for cleantech projects
According to Cleantech for Europe estimates, Europe is facing an investment gap of €50 billion by 2030 just to scale up solar and wind power, battery production, electrolyzers and heat pumps, and carbon capture.
“The challenges in terms of financing are considerable. We need to find a way to fund an unprecedented technological disruption, and we must do so quickly, in an uncertain market and amidst evolving regulations," explains Natalia Ruiz, partner at Suma Capital, a responsible investment manager specializing in waste management for biogas and biomethane production. "In general, cleantech requires long development periods and capital to mitigate technological risks. Once validated on a small scale, scaling up to commercial levels also demands high capital intensity, making it challenging to find suitable financial instruments.”
But these challenges are solvable, says Ruiz: “Public-private financing is crucial. Tax incentives and subsidies can make investments more attractive by lowering upfront costs and the expenses associated with scaling up," she emphasizes. "There is also a need to support specialized venture capital funds, which understand the unique challenges of the sector and can offer creative solutions to facilitate financing.”
Demand for and access to clean and affordable energy
For Sophia Karagianni, Senior Policy Officer at Cleantech for Europe, there are two other major challenges: one concerns demand and the other pertains to clean and affordable electricity. First of all, demand for cleantech solutions is not as strong as it should be, and there are no comprehensive measures in Europe to introduce green solutions on a large scale in sectors such as construction, the automotive industry, or aviation. Second, inconsistent access to, and the high cost of clean energy continue to pose significant economic barriers for businesses and consumers, diminishing incentives to invest in cleantech.
To these three major challenges, Bianca Dragomir adds a fourth: scalability. Unlike other startup segments, cleantech startups face high upfront costs and their solutions must compete directly with already well-established industries with well-developed economies of scale.
The environmental impact of clean or ‘cleantech’ technologies
Last but not least, there is a fifth major challenge related to resource use and the environmental impact of clean technologies. According to the International Energy Agency, the production of batteries and renewable energy technologies will increase the demand for lithium 43-fold, nickel 41-fold and cobalt 21-fold by 2040. This could lead to significant environmental impacts and create major bottlenecks for certain critical resources.
“The solution to this dilemma comes from the clean technologies themselves. Recycling and reuse of critical materials is a great opportunity for innovation in cleantech. We also have the opportunity to develop new clean technologies as alternatives to certain critical materials. For example, we can produce batteries for electric cars without cobalt or manufacture magnets for wind power generation without rare earth elements,” adds Dragomir.
The success of the cleantech ecosystem will therefore depend on our ability to balance innovation, investment and sustainability. While the challenges are significant, so are the opportunities for growth and transformation. Only through coordinated action between governments, businesses and civil society can we accelerate the adoption of clean technologies that will have the effect of reducing emissions, ensuring better use of resources and building a more resilient, fair and sustainable economy for future generations.