Last week, Bill Gates, the co-founder of Microsoft and co-chair of the Bill & Melinda Gates Foundation, announced Breakthrough Energy Ventures, a $1 billion fund that will invest in clean energy innovation.
The investor-led fund is made up of members of the Breakthrough Energy Coalition, a group of investors working with countries that are increasing the size of their government research pipelines. Gates chairs the fund, and directors include Jack Ma, the China-based founder of Alibaba, and Vinod Khosla, the Silicon Valley-based founder of Khosla Ventures.
With 20 investors who have a high tolerance for risk, a combined net worth of $170 billion, and plans to work on a 20-year timeline, Breakthrough Energy Ventures may be in a position to invest in the commercialization of technologies in areas that might not be suited for traditional venture capital. This is one of a range of new funds to tackle climate change, and while most say it could fill gaps in climate change investment, others worry that by seeking out new energy technologies the investors might overlook the breakthroughs that exist today.
“The big questions are: How do you decarbonize while continuing our economic growth, how do you adapt to climate change, and how do you bring affordable modern electricity to several billion people who do not have access to energy today?” said Dr. Arun Majumdar, a Stanford University professor and energy expert who is advising Breakthrough Energy Ventures. “The goal of Breakthrough Energy Ventures is to really fundamentally change the direction of the global energy system in a way that will continue economic growth and save the planet.”
Taking the long-term view
According to its website, the fund aims to address emissions in five key areas: electricity, transportation, agriculture, manufacturing, and buildings. These five grand challenges, as the investor calls them, then branch out into 55 technical quests, with one example being eliminating spoilage across the food production and delivery chain.
“Breakthrough Energy Ventures will help inventors cross the “valley of death” by investing in innovative work at a critical time in its development to help transition an innovation from the lab to the market,” said Shane Ardo, an assistant professor of chemistry at the University of California, Irvine, who is working on a more efficient solar desalination technology.
The Breakthrough Energy Coalition initiative grew out of Mission Innovation, a global initiative launched at COP21, in which participating countries committed to double their research and development investments over the next five years, and participating investors committed to bring innovation from the laboratory to the marketplace.
Prior to launching Breakthrough Energy Ventures, the largest of its investment vehicles, the Breakthrough Energy Coalition published its investment principles, which it summarizes as: invest early, invest broadly, invest boldly, invest wisely, invest together. The $1 billion fund announced last week is likely just a starting point, and the investors behind the fund say they plan to partner with corporate entities and research institutions.
“Finding the next new technology is alright, but without financial and political support to deploy it at scale, it won’t do what it needs to,” said Barrett Raftery, executive director for GivePower, the nonprofit founded by SolarCity.
While the government plays a key role in funding basic fundamental research, the private sector is the primary actor producing, managing and distributing energy, and the investors behind Breakthrough Energy Ventures have emphasized that breakthrough innovations result from collaboration between the public and private sector.
Innovation cycles in the energy industry do not happen as quickly as they do in the software industry, as Gates would be the first to say. Breakthrough Energy Ventures is designed to account for the decades it will require to move the energy system away from fossil fuels. While the investors do aim to make a profit, they will measure their success through risk-adjusted returns, over a longer life span than other funds.
“In the energy business, taking a technology from a lab discovery to a full scale commercial business takes time,” Majumdar told Devex. “This is not your quick software app that you write and you’re off and running. This is capital intensive and human intensive business.”
Because Ardo believes his technology could have a big impact on access to clean water in developing countries, he is keeping an eye out for funding opportunity announcements from Breakthrough Energy Ventures, which could build on a fellowship he received last month from the Gordon and Betty Moore Foundation.
“Bean counting can hinder innovative development,” Ardo said. “Because this group of investors does not require that time-dependent metrics be met, they can fund important projects that may progress at a slower-than-desired rate to allow the technologies to fully develop and ultimately reach their potential.”
Taking a broader view than the technologies of tomorrow
While Gates has said current technologies will do little to address global warming in the near term, and that clean energy advances are needed to account for the economic trade-offs that will come from decarbonization, others warn that the search for the next great technology could redirect attention away from the solutions that exist today.
“The breakthrough for this initiative would be to discover that no major breakthrough is needed” Christian Breyer, professor of the Lappeenranta University of Technology in Finland, told Devex via email.
He provided a link to a visualization tool for a region by region simulation of a 100 percent renewable electricity system and explained that the Breakthrough Energy Ventures model seems to overlook the technological options that already exist today.
“Breakthrough Energy Ventures is founded on the premise that new technology will provide energy savings an order of magnitude greater than solar can provide,” said Michael Kuntz, president of Simusolar, a social enterprise focused on providing affordable solar in rural Africa.
Solar’s current advantage is off grid and microgrid, but the question is whether solar can deliver sufficient savings at the grid level. Breakthrough Energy Ventures might be a way to finance that technology from development to commercialization, but it should not be an either or proposition versus current energy solutions like photovoltaic solar, Kuntz said. He also emphasized the need to think beyond technology and consider issues like better grid management with modernized grids and distributed generation and storage.
As the investors behind Breakthrough Energy Ventures look for the technologies of tomorrow, they might also keep their eyes open for ways to support the near term deployment of current technology, experts told Devex. Technologies that exist but are nascent, such as flow batteries, autonomous vehicles technology, and offshore wind, have funding needs that differ from the early stage technology bets venture capitalists make but need support to take off.
One thing that is clear is that Breakthrough Energy Ventures is focused on big change — the fund’s website specifies its plans to invest in technologies with a scientific proof of concept that can be scaled to reduce greenhouse gas emissions “by at least half a gigaton.”
The fund will be a real breakthrough if its investors think beyond the commercialization of technology and consider energy access and equity in their investment decisions, said Stephanie Speirs, co-founder of the Solstice Initiative, which is working to expand access to clean energy in the United States.
“If we expect clean energy to be mainstream we need to invest in thinking about how to optimize customer adoption,” Speirs said. “If you look at the developing world, lack of clean energy adoption comes from two things: inability to finance the product or it is not distributed well and is inaccessible. Business model innovations solve these two problems and we need to be investing in them too.”
Breakthrough Energy Ventures is not considering unsolicited investment opportunities, but once the directors finish assembling their team, they will post more information on ways to submit ideas and proposals.
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