En­ergy firms swoop on star­tups in tech­nol­ogy race

Kuwait Times - - BUSINESS -

Europe’s big­gest en­ergy com­pa­nies have ploughed more than 1 bil­lion eu­ros ($1.1 bil­lion) into star­tups, ac­cord­ing to Reuters cal­cu­la­tions, with sev­eral deals an­nounced in the past month as they ac­cel­er­ate a quest for new tech­nolo­gies to out­pace ri­vals.

Tak­ing a leaf out of Sil­i­con Val­ley’s play­book, com­pa­nies such as Ger­many’s Innogy, France’s EDF and Dutch Eneco, as well as oil ma­jors like To­tal, have set up their own ven­ture cap­i­tal funds to scour the globe for po­ten­tially dis­rup­tive tech­nolo­gies. The race is be­ing driven by the fastchang­ing na­ture of an in­dus­try that has seen tra­di­tional en­ergy providers scram­bling to keep up with re­new­able power and seek­ing any edge over com­peti­tors in an in­creas­ingly fierce and frag­mented mar­ket.

In­vest­ment tar­gets range from star­tups de­vel­op­ing bat­ter­ies to store so­lar power in mas­sive amounts to those cre­at­ing sys­tems to bet­ter man­age the use of house­hold ap­pli­ances like wash­ing ma­chines and ther­mostats. Com­pa­nies are cast­ing their nets wide and their funds each typ­i­cally scan around a thou­sand pitches from star­tups a year, but in­vest in only 1-2 per­cent of them. The rel­a­tively small in­vest­ment sizes, typ­i­cally a few mil­lion dol­lars, al­low cor­po­rates to build up a var­ied port­fo­lio of spec­u­la­tive in­vest­ments. Among deals an­nounced in the past month, Nor­we­gian power firm Statkraft’s fund, Statkraft Ven­tures, has in­vested in smart me­ter soft­ware com­pany Green­bird, while French util­ity Engie’s fund has bet on US home ser­vices startup Serviz and Cana­dian smart grid man­age­ment plat­form Opus One So­lu­tions. “No­body knows where it’s (the in­dus­try) head­ing, that’s what’s ex­cit­ing about it. Cor­po­ra­tions do not know, star­tups don’t know but ev­ery­one is try­ing to own this game,” said Petr Mikovec, man­ag­ing di­rec­tor of In­ven, the 180 mil­lion euro ven­ture cap­i­tal fund set up in 2014 by Czech util­ity CEZ.

The new in­dus­try land­scape, partly driven by an ex­plo­sive growth of re­new­able en­ergy over the past decade fu­elled by gov­ern­ment sub­si­dies, saw en­ergy firms take 26 bil­lion eu­ros worth of im­pair­ments on un­prof­itable power plants, ac­cord­ing to con­sul­tancy Capgem­ini. It has also changed the way some large cor­po­rates view ven­ture cap­i­tal. In the past, ven­ture cap­i­tal funds were of­ten re­garded as lux­u­ries and were among the first spend­ing ar­eas to be scrapped when fi­nances were squeezed. Over the past five years, how­ever, they have be­come a cen­tral part of busi­ness mod­els as com­pa­nies are forced in­no­vate to de­fend their mar­ket share and sur­vive.

The strat­egy has a some­what dif­fer­ent fo­cus than many other ven­ture cap­i­tal funds around the world. Rather than seek­ing sig­nif­i­cant or quick re­turns on their in­vest­ments, these en­ergy com­pany funds are look­ing for star­tups they can in­te­grate into their busi­nesses, al­low­ing them to trial and ben­e­fit from new tools and tech­niques. — Reuters

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