WORKWEEK

Beyond decarbonization: Water, waste, and more

Despite how expansive the terms ‘climate’ or ‘climate tech’ are, sometimes investors, founders, and analysts (like me) alike get a one track mind. So much attention in climate and energy gets paid to ‘decarbonization,’ which only focuses on emissions (and one specific greenhouse gas at that). 

Yet the Earth’s climate is an incredibly complex system that consists and depends on much more than the atmosphere. While I singled methane emissions reductions out as one major opportunity area out at the end of 2022, it’s worth stepping outside the bounds of the greenhouse gases altogether too.

For instance? Even as some states in the Western U.S. get inundated with rain, droughts continue to be one of the most prevalent climate challenges.

Even still, outside of opportunities to use water to generate or store energy, you don’t always hear as much about tech to preserve or expand water access. 

Which isn’t to say there aren’t any. Next week, we’ll publish a podcast with ZwitterCo. ZwitterCo creates advanced membranes for water filtration in industrial applications. Water reuse in industry is a significant opportunity; whether in agriculture or semiconductors, water is a crucial input. 

ZwitterCo helps firms reuse up to 85-90% of their water, significantly reducing costs (bringing down inflation elsewhere in the supply chain, too). Their tech is even as a lifeline for businesses that operate in areas where aquifers are running low at times. In the process, they also help firms valorize their waste streams by re-capturing valuable materials from them.

Incidentally, that’s another exciting area outside of decarbonization. Whether in recycling battery materials or other waste streams, it should be a good decade for “trash-to-cash” businesses (difficulties finding VC’s willing to cut checks for unproven hardware and manufacture processes be damned.) 

Back on the water front, last year, we also covered Epic Cleantec, which builds water reuse systems for buildings. Many cities do an abysmal job of recycling wastewater. Epic’s systems can recycle 95% of a building’s wastewater, making them a key addition to new builds as cities roll out water recycling mandates. 

Industrial or building-based water reuse are only two of the countless opportunities in water in general. You could look at storage, desalination, water rights, or creating it out of thin air (Source has raised $350M+ on that front). 

And water is just one area outside greenhouse gas emissions. You could focus on biodiversity. You could focus on metals and commodities needed to make climate technologies. You could focus on food security. You get the idea!

The data layer

AI is all the rage these days. Excitement about opportunities in AI and data extends to climate, too. In fact, for me, better data and platforms built on top of it are among the most exciting areas in climate tech right now (whether they integrate / use AI or not).

For one, the end markets for better climate risk data — for instance — are abundant. Climate-fueled natural disasters are increasingly expensive, so there’s a lot of value in better prediction and preparedness. Better data is valuable to insurance firms. Or to real estate investors. Or to consumers (e.g., homebuyers) down the line. And so on.

Examples include firms like CAPE Analytics, which quantifies climate and weather-related risks down to the level of individual buildings, and Cloud to Street, which does flood modeling utilizing AI and Earth observation data.

One lever driving the climate data renaissance is what I call the new ‘space race.’ Many firms are launching satellites to collect more satellite imagery of Earth. As Mike McCormick, Product Manager, Wildfire Risk at CAPE Analytics, noted in a recent convo, the name of the game on the imagery side is higher resolution. As resolution improves, so does the imagery’s predictive value and the applications it’s useful for.

For another example built on better satellite imagery, Vibrant Planet’s platform for forestry management integrates tree-level data to help with conservation.

Nor is it all about satellite imagery, either. There’s a wave of companies scaling access to on-the-ground data sourced in novel ways. Pachama uses other increasingly accessible tech, like LiDAR, for forestry data. GLOBHE is building a ‘cloud-droning’ platform to connect sophisticated drone operators with projects that need data, whether for flood modeling, monitoring plant or forest health, or mosquito-breeding / malaria risk.

Elsewhere in data, considering the stellar year carbon removal companies had in 2022, 2023 and beyond should see strong demand for companies that help measure and quantify carbon removal efforts.

Carbon removal techniques range from highly engineered systems to soil carbon and reforestation. As a result, measurement and quantification technologies are diverse, of necessity. Yard Stick PBC, which builds tech to measure soil carbon, is one firm that comes to mind.

The demand side

I’ll keep this one shorter because I wrote a piece on it recently, which you can check out here. There are ample opportunities to increase efficiency across the entire economy. But most climate tech firms focus on switching fuel sources. Look no further than the gap in growth between EVs and plug-in hybrids:

Both are great climate technologies and reduce the use of gas significantly. But the one that’s entirely focused on the supply side – the fully electric drivetrain – gets more love than the one more focused on overall fuel economy.

I guess the supply side is just sexier than the demand side. You hear more about building solar panels and integrating heat pumps into homes than you do about better insulation. But efficiency-focused opportunities are well worth attention, whether in transportation, the built environment, or any category. 

Coordinating distributed resources

In a podcast with Kyle Cherrick last year, we discussed how in the future most buildings will have many forms of energy storage at their disposal. Stationary batteries are one example. EVs with vehicle-to-grid capabilities is another. Even a hot water heater offers a form of energy storage. As distributed storage options scale, so will distributed energy generation resources, like rooftop solar.

Moving from an old model, in which power plants are big, centralized, and operate around the clock, to one in which power generation is more distributed (and variable), will require a lot of innovation to coordinate assets effectively. 

Virtual power plants are one example. A ‘virtual’ power plant refers to a network of buildings or homes that share data to coordinate demand response (reducing demand) or to send energy back to the grid when demand is high.

A whole lot of data and software will be necessary to do all this coordination better at scale. Early virtual power plants in the U.S. feature ~5,000 participating homes. Imagine coordinating 500,000+ while integrating larger commercial buildings, parking lots, and more.

Of course, a lot has to happen on the hardware side for this to materialize. Most EVs can’t send energy back from their battery to the grid. That will change, but goes to show there’s no shortage of opportunities on the hardware front, either. 

A stands for adaptation

Finally, it’s worth closing with a nod to climate adaptation and everything that ladders up to it. While mitigating climate change remains the top priority, climate change is already here. And in force, as we increasingly saw in 2022. Solutions that help communities adapt to climate change are vital.

Again, adaptation can look like many things and overlaps with other categories outlined in this newsletter. Better data on climate risks helps drive adaptation. Technologies focused on something other than decarbonization feature. And water access and affordability will be important for climate adaptation (we’re already seeing international deals brokered that trade clean energy for water).

Beyond those examples, I’m confident human ingenuity will have a lot of novel ideas up its sleeves to help negotiate a changing climate in coming decades. Bonus points for solutions that mitigate climate change and help adapt to it, like Sesame Solar’s solar-powered nanogrids, decarbonizing disaster response.

The net-net

The world needs to build a lot of new infrastructure and clean power plants in our lifetimes. Those aren’t venture-backable business models. And that’s okay; government incentives, project finance, and tax equity exist for that.

On the other hand, many great, venture-backable businesses will be built in the areas we explored today. As will businesses that scale-up without venture funding. All will help fight climate change and I’m excited to cover more of them in 2023. If you’ve got an idea you want to workshop, I’m just an email away!