The new “Quarterly Briefing for Q1 2024”, published by Cleantech for Europe, revealed that over the past quarter, two significant key trends emerged: an unprecedented surge in debt investments fueling the growth of cleantech ventures, enabling them to pioneer groundbreaking projects, and the closest margin ever recorded in cleantech investment disparities between Europe and North America.
As highlighted, in the first quarter of 2024, EU cleantech debt investment reached a record-setting €16.7 billion, which is more than double the cleantech debt raised during all of 2023. These numbers come as a result of megadeals from cleantech leaders such as Northvolt and H2 Green Steel, but also the large industrials which raised debts aimed at financing new manufacturing projects.
"Developing a first-of-its-kind project requires all types of cleantech financing mechanisms and they need to interact. In H2 Green Steel’s case, this meant securing €4.2 billion in project finance, €2.1 billion in equity and a €250 million grant from the EU Innovation Fund for the world’s first large-scale green steel plant in Northern Sweden." - Henrik Henriksson, CEO, H2 Green Steel
The average EU deal size increased by 15 per cent, to €18 million. The increase of 31 per cent in deal volume is evident in the late-stage investments (Series B and growth equity) with an increase of 13 per cent for the deal volume for the same stage. On the contrary, early-stage investment decreased by 45 per cent in the last quarter, while deal volume decreased by 19 per cent.
Geographically, cleantech venture capital deals took place in 17 out of 27 EU member states. The most active countries, by number of deals, were Germany, Sweden, France, Spain and the Netherlands. Germany took the leading position again, while a decrease from the last quarter is evident in France (falling from the first to third place). Sweden made the highest level since 2021, after two consecutive quarters of decline.
Continued efforts are imperative to ensure that the scaling up of cleantech becomes a growth opportunity for a growing array of EU nations.
A significant amount of debt financing with an affordable cost of capital was required for the building of the next generation of factories and plants. Thus, as mentioned before, Q1 2024 EU cleantech debt investment amounted to a record-setting €16.7 billion, an amount that is more than six times greater than the quarterly average of €2.5 billion over the 2022-2023 two-year period. Still, while deal sizes have increased, the number of innovators accessing debt financing has not fundamentally changed, states in the report.
“The rise of debt funding for EU cleantech is highly encouraging. But reaching our cleantech manufacturing objectives will mean going bigger, faster and giving access to debt to many more cleantech companies. In a tough fiscal environment, smart instruments like public guarantees can crowd in private capital and provide a bridge to bankability for cleantech innovators ready to manufacture at scale.” - Jules Besnainou, Executive Director, Cleantech for Europe
To ensure the EU’s long-term economic competitiveness, it is important to strengthen the business case for scaling cleantech manufacturing capacity. In a recent open letter, Cleantech for Europe, alongside 23 leading cleantech investors, innovators, NGOs and thinktanks, called for a Cleantech Competitiveness Deal based on the following pillars:
- A Cleantech Investment Plan that focuses on public guarantees, leverages institutional investors and unleashes the full potential of Europe’s Emissions Trading System (ETS) revenues.
- Action Plans to support the competitiveness of each strategic cleantech sector.
- A vision for the next generation of cleantech innovation, with safeguarded funding for innovation and scaleup.
Lead image: Freepik
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