AI’s Growing Energy Appetite Fuels Climate Tech Investments

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AI’s Growing Energy Appetite Fuels Climate Tech Investments

Energy startups have surpassed electric car and battery manufacturers to become the leading global climate tech investment focus for the first time since 2020. This shift is driven by the rising demand for artificial intelligence, which has spurred interest in technologies that can power data centers with reduced emissions.

According to a report released Tuesday by Sightline Climate, a market intelligence platform, venture funding for global energy startups reached $9.4 billion last year, marking a 12% increase from 2023. Among these, geothermal startups saw their funding nearly triple to $558 million, while nuclear investments almost doubled to $1.9 billion.

This surge comes amidst an overall decline in climate tech investments in 2024, as venture capitalists remain cautious due to political uncertainty in the US, challenging business conditions, and corporations scaling back carbon reduction commitments. Global climate tech startups collectively secured $30 billion in funding last year, a 14% decrease from 2023, which itself followed a 24% drop in 2023. Sightline anticipates that venture funding will stabilize at lower levels, potentially jeopardizing progress toward net-zero goals.

However, researchers noted that the sharp decline in funding seen in 2023 is unlikely to recur as the industry adjusts to a new equilibrium.

Investments in greener transportation, which led climate tech funding from 2020 to 2023, fell by more than a third year-over-year to $7.7 billion. Investor confidence was shaken by notable failures, such as the bankruptcy of battery manufacturer Northvolt.

Energy is expected to remain a key investment area in 2025, driven by AI-related demand. Tech companies have made significant commitments to sourcing power from geothermal and nuclear fission to supply energy for data centers. They are also investing in speculative technologies like nuclear fusion.

South Korea Commits $59.3 Million to Climate Tech Development in 2025

South Korea plans to invest 86.2 billion won ($59.3 million) this year to develop technologies aimed at combating climate change, the Ministry of Science and ICT announced on Wednesday. The funding will focus on technologies addressing global warming, carbon-free energy, and AI-driven climate prediction, as reported by Yonhap News Agency.

Specifically, the government will allocate 5.7 billion won to develop carbon-free energy technologies and 4.3 billion won to enhance carbon capture and utilization technologies. An additional 3.1 billion won will support the creation of an AI-based climate prediction model to forecast climate disasters and mitigate potential damage.

Furthermore, 4.02 billion won will fund two global projects focused on researching and developing carbon neutrality technologies. This investment aligns with the government's 10-year strategy to advance science and technology by 2032 to address global warming. South Korea has committed to reducing greenhouse gas emissions by 40% from 2018 levels by 2030 and achieving carbon neutrality by 2050.

Next year’s budget will prioritize developing renewable energy technologies, such as next-generation solar batteries and large-scale floating wind power systems. It will also focus on advancing carbon-neutral technologies, including next-generation nuclear power and hydrogen energy. Additionally, the government will analyze the vulnerability of forests, marine areas, and ecosystems to climate change and implement measures to ensure stable food production.

Earlier, the Ministry of Science and ICT announced the completion of a comprehensive roadmap for achieving carbon neutrality across various industries. The presidential special committee on carbon neutrality technologies has outlined strategies for achieving net-zero emissions in six key areas, including wind power, energy storage, and environmental sustainability.

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