First coined in the early 2000s, following a surge in venture capital interest, the term “cleantech” refers to technologies and related business models that aid the global energy transition. By improving performance and lowering costs, they can serve a double benefit: improving investor returns while reducing negative ecological impact.
While the industry fell into decline between 2007 and 2015 following the global financial crisis, it has witnessed a resurgence in recent years as demand for climate change solutions intensifies.
Current state of the global market
Globally, investment in clean technology manufacturing rose by 50 percent in 2023 to reach US$235 billion. This increase equates to nearly 10 percent of investment growth across the entire world economy, according to the International Energy Agency.
This impressive increase has mainly been driven by investment in the solar and battery sectors, which accounted for 80 percent of investment in global clean technology in 2023, while EV plants attracted a further 15 percent. Manufacturing capacity has been racing ahead to meet demand. Investment in clean technology manufacturing facilities is projected at around US$200 billion in 2024, close to record levels.
The global cleantech market is tipped for further growth in 2024 and beyond. According to a recently published IEA report, the global market for the top six mass-manufactured cleantech technologies—solar panels, wind turbines, electric vehicles, batteries, electrolyzers and heat pumps—is set to grow from US$700 billion in 2023 to more than US$2 trillion in 2035. Significantly, this 2035 figure sits close to the value of the global crude oil market in recent years.
Current state of the APAC market
The Asia-Pacific market stands to be a major player in the cleantech investment boom as companies across the region look to play their part in the new energy economy. The International Monetary Fund predicts that Asia will represent 60 percent of global GDP growth in 2024 and account for half of the world’s electricity consumption by 2025, making it a prime target for future investment.
China currently has the lion’s share of solar panel and many other “hard” cleantech exports. Powered by low manufacturing costs, the value of China’s clean technology exports is set to exceed US$340 billion by 2035. To put this in perspective, this figure is roughly equivalent to the projected oil export revenue of both Saudi Arabia and the United Arab Emirates combined in 2024.
China’s clean energy sector has been a key driver of GDP growth, contributing around 40 percent of its economic expansion in 2023. Substantial investment in the solar sector, in particular, is driving growth. Investment in photovoltaic supply capacity over the last ten years exceeded US$50 billion—ten times more than in Europe. High levels of investment have resulted in China producing four of the world’s new cleantech and alternative energy-focused “unicorns” in the first quarter of 2024: Sungrow NewEnergy, Guangxi CNGR New Energy, Zhizi Auto and Qiyuan Green Power.
While China has so far commanded the majority of investment, businesses across the region are looking to stake their place in the growing cleantech movement. Japanese power-generation company JERA aims to invest US$300 million in cleantech and energy-related startups as it looks to reach net zero by 2050. In Indonesia, whose major nickel production could supply key components for EV batteries, businesses are also in need of investment to develop their manufacturing capabilities.
M&A and deals
Dealmaking in APAC’s energy sector has delivered consistently high deal volumes over recent years, with levels rising even higher post pandemic. Activity in the renewables sector is taking up a significant proportion of M&A volume within the wider sector. A total of 193 renewables deals saw assets change hands during the first three quarters of the year, accounting for 78 percent of total deal activity by volume within APAC’s overall energy sector.
Both corporate and private investors have been actively seeking out opportunities in the region’s cleantech market. In August, UK-based investor SVL Financial teamed up with Hong-Kong based energy firm Green Power International to inject US$223 million into Gangneng Investment. The China-based R&D and production company specializes in graphite and superconducting materials.
Earlier in the summer, Singaporean sovereign wealth fund Temasek Holdings and Australian deep tech investment fund Main Sequence co-led a US$65 million funding round in Samsara Eco, an Australia-based plastic recycling technology firm. The startup is looking to replace plastic packaging through the production of fossil fuel-free polymer resins.
India’s startup scene is also attracting international attention. In May last year, US PE firm KKR invested US$250 million in Serentica Renewables, a decarbonization platform focused on providing clean energy solutions to energy-intensive industries. The investment will help the startup reach its goal of 4,000 MW of installed renewable energy capacity as it seeks to deliver clean energy to large-scale industrial customers. Energy consumption within India’s commercial and industrial industries—estimated to consume more than 50 percent of total electricity generated within the country—poses a clear challenge to India’s decarbonization goals.
Outlook
Looking ahead, investment in APAC’s burgeoning cleantech industry is set to increase even further. While the drive of various governments to improve energy security and reduce emissions will continue to be a major growth factor, pressure from consumers and businesses striving for a low-carbon future will also play an important role.
As a relatively immature market, the cleantech industry remains fragmented. As such, consolidation is on the cards, with M&A acting as an important tool for corporate players and sponsors alike, each seeking growth and international expansion. Significant cleantech players in the APAC region include Yingli Green Energy Holdings, Suzlon Energy, Toyota Motors and Panasonic.
As shown through the active VC interest over the past year, there is significant demand from investors for startup-led innovation in the market. Demand for electric vehicles, energy-efficient solutions and sustainable infrastructure will ensure that investment in cleantech startups continues to gather pace. A steady pipeline of businesses coming to market will offer solid dealmaking opportunities within this exciting and rapidly evolving industry.
