Public and corporate spending on energy research and development (R&D) is "trending upwards", with a focus on "low-emissions" technology, but venture capital investment in energy start-ups dropped last year, energy watchdog the IEA found.
Government and corporate energy R&D spending increased to $50bn and over $160bn, respectively, in 2023 — the latest year for which full data are available, the IEA said. There are "early indications of continued growth in 2024", although the pace of growth has "slowed slightly" since 2022, it added.
But "the momentum of investing in low-emissions energy technologies has been maintained", partly on the back of climate policy goals, the IEA noted. The share of "low-emissions" energy R&D spending has held at "roughly four-fifths of the global total" in recent years, the IEA said. It defines low-emissions energy as renewable power, grids and storage, energy efficiency, nuclear and "low-emissions fuels".
Venture capital investments in energy start-ups totalled around $27bn in 2024, 23pc lower on the year, the IEA found. This reflects the "cyclical nature" of venture capital, as well as a drop in funding owed to inflation, but the trend "could have long-term negative impacts as innovators struggle to scale up high-potential technologies without access to affordable capital", the watchdog noted.
The IEA also suggested that "the situation is compounded by uncertainties about political commitments to the climate policies that many start-ups depend on to drive demand". But venture capital financing rose in 2024 for start-ups focused on nuclear, synthetic fuels and carbon capture, use and storage (CCUS), it found.
CCUS and "novel CDR" — carbon removal — technologies have drawn more venture capital funding in recent years, and sector R&D "is being spurred on by private capital mobilised by carbon credits", the IEA said. There are multiple ways to capture and store CO2, but many are at very early stages, while most funding goes towards just two approaches — direct air capture and bioenergy with CCS, its report found.
