Venture capital and corporate investments in the transport sector, but especially in EVs, is continuing to grow. This is something I have been researching and writing about for clients over the last year (see e.g., posts and reports July 30, 2018; Jan. 31, 2018), but new analysis from IEA confirms it. IEA notes that venture capital investment in energy technologies is flourishing, “with more money flowing in 2018 than in the first two quarters of any previous year. But whereas the previous highpoint in 2008 was led by renewables – notably solar – it is now transportation that is getting all the attention, mostly electric vehicles.” This is shown in the figure below, and note the increase that really started to take off in the third quarter of 2016 as the Paris Agreement entered into force post Dieselgate and right around the U.S. presidential election.
Corporate investment increased as well, though not as precipitously. IEA notes that in 2017, total investment in energy technology start-ups by corporations reached US$6.1 billion, shown in the figure below. The overall investment was a big increase compared to 2016, and was driven largely by investments by information and communication technologies companies alongside more traditional energy sector companies, including oil and gas and utilities and automakers.
Transport was just a small slice of this investment, but most of it is most likely going toward EVs. In another recent analysis, IEA put the total investment figure in EVs at US$43 billion. My own analyses, documenting automaker EV investment announcements just in the last year came out at more than US$200 billion. National government investments, just in subsidies in 2016 was about US$10 billion. To be sure, there are a lot of dollars flowing into this space at the venture capital, corporate and national government levels. However, I believe these figures, including my own, actually underestimate the level of investment in the EV space.
But what about the other major transport decarbonization option, biofuels? There was a notable comment on oil and gas investments from IEA. “Among oil and gas companies, a noticeable recent trend is a shift away from technology areas that complement their existing infrastructure – such as bioenergy, CCUS and fossil fuel supply technologies – and towards technologies that could complement their broader capabilities or let them explore new business areas.” (As an aside, I believe that carbon capture and storage (CCS) may revive with the recent tax credits enacted in the U.S. Clients can access a web conference on this topic here.)
A 2017 United Nations report found that just US$2.2 billion was spent on biofuels investments in 2016. The report went so far as to say that the biofuels sector is “retreating into insignificance.” That is not a true or fair statement. However, it’s clear from my own investigation that the level of investment is grossly undertracked and underreported, and that’s a big problem for the industry, as I have pointed out to clients. The larger issue is one of optics, especially for biofuels and oil companies that have invested in the sector and/or are seeking investment, and for the industry as a whole. The question is, what does the industry want to do about it? While the intra-industry squabbling continues over programs like the Renewable Fuel Standard (RFS2), EV market development charges ahead and momentum continues to grow. Note the following announcements just this week:
Finally, see the recent podcast with Electrify America, where we talk about the company’s ambitious EV infrastructure development plan.
Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.