On July 8th, Cleantech Group delivered a webinar, Readability By means of Chaos, revisiting the predictions we made initially of the 12 months relating to what is anticipated to develop, circulate (progress at a common tempo with nuance), and sluggish (face headwinds) in 2025. We took inventory of how the barometer has shifted in simply six brief months, and the place we see the needle shifting over the subsequent six, and past.
Opposite to expectations of a serious drop-off, investments within the first half of this 12 months are usually commensurate with the development seen final 12 months, notably by way of know-how space breakdown, with a focus in Power & Energy. The U.S. has not skilled a serious drop-off in investments both.
Nevertheless, the high-level view doesn’t inform the entire story, and there are vital variations between 2025 and former years taking place below the floor.
Within the U.S., the highest 15 funding areas present a robust focus round themes of power safety and the AI revolution. These two areas very-much-so dovetail into one another, for instance, fusion and fission applied sciences assist the event of information facilities and tackle issues round power safety and independence. There may be additionally vital exercise in information heart and compute effectivity.
In Europe, there’s some give attention to information facilities and future power sources; the focus is just not as pronounced as within the U.S., with Europe’s funding panorama being extra widespread. The slight drop in European numbers is just not a shock, and one thing we’re describing as “transatlantic ache.” Europe is clearly going through macroeconomic uncertainty, rate of interest volatility, and commerce tariffs, that are impacting the funding temper. Buyers and corporations are largely adopting a “wait and see” method, holding off on funding selections till there’s extra readability on rates of interest, commerce flows, and tariffs.
Each the U.S. and Europe have seen a drop-off in investments in electrical mobility and hydrogen from 2024 to 2025, a minimum of for now.
Challenges in Elevating New Cash
It’s at the moment a problem to boost new cash for varied causes, together with institutional traders (LPs) retaining money liquid as a consequence of uncertainty, making them unwilling to decide to new funds. Uncertainty round exit alternatives or doable IPOs implies that funds can’t liquidate, and in consequence, LPs are extra reticent to reallocate capital.
Nevertheless, investments solely ever inform a part of the story. Actual initiatives and manufacturing are sometimes the strongest bellwethers of market readiness and receptivity towards clear applied sciences. It’s actual initiatives and manufacturing which can be presenting the strongest challenges proper now.
Challenge Cancellations and Bankruptcies
The previous 6-8 months have seen a spate of venture cancellations and bankruptcies, notably within the U.S. This development is just not confined to 1 house however is seen throughout hydrogen, photo voltaic, battery manufacturing, and inexperienced metal. Within the U.S., large-scale manufacturing and initiatives started to face financial realities initially of the 12 months, notably because it’s tougher to execute a industrial facility for the primary time in comparison with merely elevating funds for demonstrations and pilots. That was even earlier than coverage indicators turned adverse for a lot of of those areas. And, whereas there’s a wholesome quantity of first-of-a-kind initiatives being stood up, these had been possible in movement a 12 months or extra in the past, suggesting a possible lagging impact to come back.
Whereas Europe doesn’t have the identical stage of coverage uncertainty because the U.S., it continues to face very excessive power costs in comparison with the U.S. For some European venture cancellations, excessive power prices are a key explanatory issue, notably for first-of-a-kind initiatives the place it’s arduous to make industrial sense. That is particularly crucial for sectors like inexperienced metal and hydrogen, the place it’s merely tough for Europe to compete as a consequence of these very excessive prices.
The Northvolt venture cancellations and subsequent chapter despatched “chilly indicators” and “rippling results” to the European finance sector relating to the prospects of scaling new manufacturing mega-projects. There’s a palpable threat averseness amongst traders in comparison with a 12 months or two in the past. The market is extra discerning towards metrics round industrial viability and know-how readiness ranges (TRL) of initiatives in the present day. On account of budgetary constraints, there’ll possible be fewer European grants as properly, with a larger give attention to de-risking instruments comparable to public ensures, counter-guarantees, and blended finance to maximise the effectivity of each Euro spent.
Non-Fairness Financing
When non-equity financing, the U.S. drop-off from 2024 to 2025 doesn’t appear as vital, nevertheless it’s essential to notice that over $11B of those figures are attributable to 1 main deal: Crusoe Power’s $11.6B cope with OpenAI’s Stargate venture.
Within the U.S., bankable themes on this house are largely centered round AI, which has a transparent demand pull no matter coverage, whereas Europe’s focus areas are extra widespread, although the information facilities development can be current, e.g., GreenScale’s late ’24 mortgage to add 300MW of a deliberate 1GW information heart capability throughout Europe.
Past completely different sectoral focuses, Europe has a barely much less various capital stack for non-dilutive finance in comparison with the U.S. with roughly 80% of non-dilutive finance in Europe nonetheless offered by banks, that are extremely regulated by way of the danger they will undertake. Banks usually have a distinct, probably extra conservative, urge for food for know-how threat, making them extra reticent to lend in an atmosphere of excessive uncertainty. That’s compounded by a studying curve on the monetary aspect relating to supporting newer, much less acquainted applied sciences.
Again in January, I delivered our expectations for 2025 with Cleantech Group’s CEO, Richard Youngman, by 3 lenses: Develop, Circulation, and Gradual.
The Develop Class: What’s Nonetheless Accelerating
We Count on Continued Acceleration Alongside the AI Infrastructure Continuum
Of little shock is the demand for cleantech innovation stimulated by the AI revolution. This isn’t nearly information facilities; it’s a profound pull-through impact throughout your complete cleantech panorama. From new sources of baseload energy to superior supplies and semiconductors, and infrastructure improvement round energy collocation, AI is driving demand.
We’re seeing intense exercise in areas like cooling and energy administration inside information facilities, in addition to companies designed to make compute much less power intensive. Whereas we predicted extra exits alongside this continuum, the sheer exercise and underlying demand are simple. However, holding ourselves accountable for predictions: we have now solely seen one exit alongside this continuum this 12 months, that of Terrestrial Power, within the type of a Might ’25 SPAC announcement.
Fusion has gone from feeling distant to surprisingly near-term, with investments remaining vital and geographically various, extending past the U.S. and Europe to Asia-Pacific. Extra impressively, we’re seeing industrial traction, such because the June ’25 500MW PPA between Commonwealth Fusion and Google, and an earlier one between Helion and Microsoft. The sheer quantity of technical breakthroughs up to now 5 years or so, exemplified by TAE Applied sciences’ April plasma breakthrough, has elevated consolation with the know-how as industrial offtakers and traders turn out to be extra accustomed to fusion milestones. The range of reactor sorts (over a dozen) receiving consideration and funding additionally signifies rising familiarity and luxury with the longer improvement timelines.
Nuclear fission had a really robust Q2, considerably boosted by the TerraPower deal which noticed participation from Nvidia and Invoice Gates. This house enjoys a uncommon lively exit atmosphere (e.g., Terrestrial Power’s SPAC submitting) and robust administrative assist within the U.S. We anticipate to see extra localized laws and tailor-made approaches to reactor sorts to ease improvement. Whereas market forces are intensifying the urgency, lingering questions stay about who will finance building, as conventional PPAs are unlikely to account for all variables in allowing and establishing a fission reactor.
Compute effectivity is, in our opinion, one of the crucial neglected vivid spots in cleantech proper now. The range of innovation throughout the worth chain is fascinating, from semiconductor manufacturing (e.g., Forge Nano) to {hardware} (e.g., Intensivate, Lightmatter, Celestial AI) and even warmth switch supplies on the nanotech stage (e.g., NovoLinc, Boston Supplies, and 3D Architech).
Given the growing power depth of chips, the whole lot alongside this worth chain will likely be crucial. Pace to manufacturing and scale is paramount right here – demand for these merchandise is near-term, and winners will want to have the ability to work with typical manufacturing approaches and tools. That is additionally a fiercely contested world house, with vital innovation coming from Asia-Pacific, China (e.g., Semi-Tech), South Korea (e.g., DeepX), and Singapore (e.g., Silicon Field).
Crucial Minerals
Crucial supplies are foundational to all clear applied sciences, and the demand-supply hole is extremely intense. The IEA reported in Might on vital future demand, projecting lithium demand to be virtually 5 instances what’s at the moment wanted by 2040, and a 30% improve in copper demand. The mining sector alone requires $500-$800B in funding to satisfy these targets. The present provide chain dynamics are advanced, with mines holding energy, processors going through shortages, and smelters shutting down globally.
Whereas navigating China is an element, it’s not solely a commerce downside, nor will it’s solely a commerce resolution. Innovators like Summit Nanotech (direct lithium extraction), Maverick Metals (copper, uncommon earths, lithium), and Phoenix Tailings (uncommon earth provide) are making vital progress.
Provide Chain Dynamics: Presently, mining holds energy, as processors face shortages of concentrates from mines and are even buying and selling at zero or adverse charges, keen to pay for provide. This can be a world difficulty, not only a China commerce downside, with smelters worldwide shutting down as a consequence of brief provide. Crucially, with mining permits taking 5-10 years, it’s “now or by no means” for brand new improvements and mines. The just lately handed One Massive Stunning Invoice (OBBB) removes the everlasting 45X superior manufacturing tax credit score for crucial minerals manufacturing, as an alternative phasing it out after 2033.
Whereas the Overseas Entity of Concern (FEOC) restrictions put ahead within the OBBB will nudge producers to interact onshore extraction and refining, the shorter timeline on tax credit score availability probably dulls this nudge. This can undoubtedly elevate prices for U.S. home producers of crucial minerals, who possible modeled mine lifetime with these credit in thoughts.
Even so, there’s observable drive by demand house owners to safe supplies domestically (see the current MP Supplies offers with The Pentagon and Apple), indicating a willingness to pay value premiums for onshore supplies – a vital window of alternative for innovators. We additionally imagine that, given the brand new FEOC restrictions, there’s a potential second wind coming for e-waste recycling as a crucial supply of supplies within the U.S.
Enhanced Geothermal
Whereas investments inform a constructive story, the actual pleasure lies within the industrial traction and technical breakthroughs. We’ve seen extra promising industrial agreements together with Fervo Power securing off-take financing for a half-gigawatt facility in Utah and XGS partnering with Meta. Additional, the pull-through impact from the AI revolution and information heart energy wants has put know-how into the sphere sooner than anticipated, producing technical breakthroughs at a speedy fee.
Take Fervo’s outcomes over the previous 12 months or so, just lately demonstrating drilling depths over 15,000 and accessing temperatures of 520°F, the Cape Station venture has reported a number of holes >8,000 ft. vertical, linked by way of a 5,000 ft. lateral gap to create a big “wine rack” formation. These developments are essential, as a result of they validate some key hypotheses round know-how switch from different industries – in Fervo’s case, horizontal drilling from pure gasoline fracking.
Wildfire Resilience
Sadly, this “develop” class is pushed by necessity. Investments are on monitor to outstrip final 12 months’s figures, and extra importantly, applied sciences are demonstrating real-world impression. Corporations like Pano AI and OroraTech are publishing case research of fires they’ve helped mitigate – now capable of level to demonstrable outcomes of harm averted. Curiously, giant tech gamers like Google are getting into the house with initiatives like Google Firesat, a 50-satellite constellation (the primary of which launched in March) for early wildfire identification – aggressive strain on innovators is more likely to improve as AI incumbents proceed to start to see a receptive market.
We anticipate the proliferation of early identification applied sciences, boosted by current jumps in AI capabilities to cut back prices of early response. However, the danger imposed by wildfires (already estimated by MunichRe to have totaled $136B in 2015-2024, with solely $80B insured) is sufficient to require extra adoption of tech, and tech that performs at completely different phases of fires. We predict this to clean adoption prices for demand house owners and supply a lift for direct intervention applied sciences like prescribed burns (e.g., Burnbot) and autonomous suppression (e.g., Rain).
The Circulation Class – What Do We Count on to Proceed at Tempo?
Energy Resilience
Doubtless with some controversy, we’ve moved this from “develop” to “circulate”, principally as a consequence of a blunted pull-through impact on long-duration power storage (LDES) from renewables within the U.S. and extra modest expectations for industrial decarbonization initiatives off a spate of Workplace of Clear Power Demonstration venture cancellations. Whereas the LDES drop-off is well noticed within the fairness funding figures, there’s certainly some regional nuance.
Not like the U.S., Europe doesn’t have the native entry to grease and gasoline required to realize power independence with fossil fuels, and in consequence, power safety and renewables deployment are synonymous in some European circles, and conversations round sensible modifications comparable to allowing reforms for renewables are seen as power safety measures. In consequence, we anticipate LDES to proceed deployment in Europe to increase the effectiveness of renewables. Certainly, industrial developments (like Power Dome’s with Engie in Italy) and FOAK financing preparations (like Malta’s with BBVA for 14MWhe in Spain) are indicators that LDES is slowly edging into the mainstream in Europe.
The nuances are completely different round grid applied sciences, that are experiencing what’s more likely to be their strongest funding 12 months but in 2025. Generational electrical energy demand from the AI revolution, the necessity to handle unseen capability on grids, and surgically handle energy flows at websites of excessive financial worth (information facilities), is spurning curiosity throughout the grid tech spectrum. Applied sciences which have remained comparatively static for many years are rapidly being re-invented and attracting quick curiosity.
Prior to now 12 months, we’ve seen a wave of Seed and Sequence A rounds towards new varieties of transformers: DG Matrix ($20M), Heron Energy ($38M), and Ionate ($17M). There may be additionally palpable enthusiasm round high-temperature superconductors (HTS), each of their wiring incarnations (e.g., Veir) and in HTS elements (e.g., Suprema Tape). Watch the HTS elements house intently – HTS has promise not just for grid tech, but additionally for fusion reactors and energy-efficient chips. In a future the place fusion turns into doable at a industrial scale, a element manufacturing race will ensue, with HTS elements changing into a linchpin know-how for growing price benefits.
Non-Lithium Storage
This class stays in “circulate.” Whereas investments inform a usually constructive story, there are ups and downs, exemplified by Bedrock Supplies returning cash to traders once they foresaw a probability that their sodium-ion batteries wouldn’t compete with lithium-ion at present lithium costs. A much-circulated paper in Nature earlier this 12 months highlighted the power density beneficial properties that sodium-ion would wish to make with a view to compete with lithium-ion.
Nevertheless, the OBBB’s vital international entity of concern content material thresholds (60% non-FEOC in 2026, 85% by 2029) might present a second wind for sodium-ion and related applied sciences, as it will likely be difficult to supply compliant lithium batteries domestically if supplies largely originate from China. Even with that potential opening, anticipate continued competitors from China in sodium-ion, with incumbents like CATL and modern start-ups like Zhongna Power lively within the house.
“Techniques Change” AI
Whereas we have now noticed the impression of AI on cleantech – not simply software program, however {hardware} innovation, too – over the previous few years, a development we didn’t have categorized in January that we do now could be that of “programs change” AI. Techniques change AI are options that we see as overhauling your complete manner that sure programs work, versus options to particular issues or subsets.
Examples embody:
- ThinkLabs: Create end-to-end grid modeling and administration utilizing physics-informed fashions, basically offering “tens of 1000’s {of electrical} engineers” to diagnose and resolve points within the grid. This will likely be an particularly essential resolution as utilities must map enhancements to the grid to accommodate generational demand progress at a time when grid liabilities as a consequence of pure catastrophe threat are growing.
_ - Utilities and ISOs are already seeing the worth in generative AI for grid administration and outage prevention; see the current collaboration between CAISO and OATI’s Genie product. We anticipate extra of this within the coming months.
_ - Lila Sciences: Leverage AI for supplies formulation and direct interventions with robotics to create self-driving factories for battery supplies and hydrogen electrolyzers. This innovation represents greater than only a change to the science of supplies discovery, however a step change within the iteration course of to see which new supplies work and don’t work in the actual world, and far sooner.
_ - Inari: Makes use of AI to information crop scientists to exactly perceive and manipulate plant DNA. As a substitute of conventional, usually time-consuming breeding strategies, they will use AI-driven evaluation of in depth information units to pinpoint precisely which edits and edit sorts can have probably the most constructive impacts at particular areas inside a crop’s DNA construction.
_ - As we have now put ahead in current months – AI can have an enormous impression on the event of crop inputs on account of R&D effectivity beneficial properties at a time when altering climate patterns are closing the home windows of alternative to regulate crop remedies however opening the door to improvements like biostimulants to enrich modern approaches.
With that mentioned, not each AI cleantech firm will succeed. We see a transparent differentiator for corporations providing industry-specific instruments with proprietary information, somewhat than these counting on public information or LLMs, which can turn out to be commoditized. AI integration in R&D, manufacturing, and in-situ interventions (like mining) will present vital aggressive benefits. One other method to say it – AI would require a knowledge uniqueness benefit, deep tech integration, or each, to proceed standing out throughout the cleantech theme.
The Gradual Class – What Will Proceed to Face Headwinds?
Hydrogen
This stays firmly in our “sluggish” class. The basic dynamic hasn’t modified: adoption markets outdoors of conventional makes use of like sure chemical compounds and ammonia-based fertilizers haven’t picked up. We’ve seen quite a few cancellations of hydrogen-based inexperienced metal initiatives in current months and the extra hypotheses like distance transport haven’t borne out.
The OBBB’s accelerated phase-out of the 45V hydrogen tax credit score (from 2033 to 2028), whereas not eliminating it, will make it tougher for brand new hydrogen manufacturing applied sciences to get off the bottom in time to take benefit. There’s a regional nuance right here, with some hydrogen innovators shifting focus to Asia-Pacific, notably Japan and Korea, the place vital authorities targets and adoption momentum exist. An instance is Amogy’s July 15th announcement that it accomplished $23M of its current $80M fundraise spherical to give attention to bringing ammonia-to-power (maritime, stationary storage) to APAC international locations together with Japan, Korea, and Singapore.
Battery Manufacturing and Supplies
Within the U.S., the accelerated phase-out of electrical automobile (EV) tax credit in September 2025 will boring (however not remove) demand for EVs, and thus sluggish the market pull-through for EV batteries. As put ahead in our year-ahead outlook in January, main world venture cancellations (e.g., Kore Energy and FREYR Battery) and bankruptcies (e.g., Northvolt) have introduced into sharp focus the challenges of vertically-integrated battery manufacturing within the U.S. and Europe.
Nevertheless, some innovators are discovering inventive options, comparable to Ascend Components leveraging European alternatives or Redwood Power repurposing second-life batteries for information heart backup storage. Furthermore, the FEOC restrictions for battery manufacturing referenced earlier are more likely to problem producers of batteries which can be sourcing Li-ion supplies and elements from China (the bulk). An fascinating byproduct of this improvement could also be a second wind to battery recyclers within the U.S. This may increasingly appear counterintuitive, given the current Li-Cycle chapter, however with the brand new FEOC restrictions set to use to manufacturing services established put up 2025, supplies recyclers that may effectively entry feedstock could also be in place to offer “FEOC-free” battery supplies.
Carbon Removals
Carbon removals stay within the “sluggish” class regardless of respectable funding and industrial traction. The belief points we mentioned on the outset of the 12 months round voluntary carbon market’s “phantom credit” and associated controversies nonetheless linger, and at a time when company commitments are receding. The pool of patrons for credit and acquirers of corporations stays extremely concentrated in huge tech and oil and gasoline, and there are solely so many of those patrons to go round.
Microsoft’s current deal with Chestnut and Oxy Low Carbon Ventures’ current acquisition of Holocene (be aware that Occidental Petroleum additionally acquired Carbon Engineering in 2023) are proof of the place momentum comes from on this house. The OBBB, whereas permitting tax credit score transferability, has tightened restrictions on international entities shopping for credit, additional shrinking the market.
Nevertheless, there’s now extra potential for the utilization sections of the carbon seize, utilization, and storage (CCUS) to develop because the OBBB now locations CCUS on the same footing for tax credit, encouraging co-benefits like carbon-to-value and carbon-to-fuels. On the sustainable aviation fuels (SAF) entrance, the OBBB does cut back the part 45Z manufacturing tax credit score quantity ($1.75/gallon to $1/gallon) however extends credit by two years by 2029. So whereas we anticipate the carbon removals market to stay challenged, we anticipate SAFs that use carbon as an enter (e.g., e-SAF) to proceed growing at present momentum. See progress on initiatives like Infinium’s Challenge Roadrunner as indicators.
Our H2 2025 “Bingo Card”
We divide this part into “Protected Bets,” “Coin Flips,” and “Wild Playing cards.” In every space, my colleagues and I will provide you with our daring predictions.
Protected Bets – Issues We Really feel are More likely to Happen
Anthony DeOrsey, Analysis Supervisor
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- The Overseas Entity of Concern (FOEC) coverage is anticipated to tighten, making manufacturing and constructing more difficult as a consequence of coverage, tariffs, and rising electrical energy costs.
- There may even be extra regulatory modifications on the native/state stage to ease nuclear (fission) improvement, tailor-made to reactor sorts, to draw financial exercise pushed by information facilities and AI.
Diana Rasner, Group Lead, Materials & Chemical compounds and Waste & Recycling
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- AI-driven information heart PPAs (energy buy agreements) will scale from megawatts to gigawatts.
- To deal with crucial minerals provide chain points, there will likely be extra partnerships growing throughout geographies and corporations, somewhat than a single home provide dominance, because of the complexity and lengthy timelines for mining and manufacturing.
Luis Rebelo, Coverage Supervisor, Cleantech for Europe & Cleantech for Iberia
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- Count on cleantech to merge with protection tech in Europe, creating dual-use functions, pushed by institutional capital deployment in protection and elevated public budgets.
_ - Grid safety and resilience may even be a protected wager, as current blackouts in Spain, Portugal, the Czech Republic, and Italy spotlight the grid’s strain, resulting in extra give attention to modern options and lengthy period power storage.
- Count on cleantech to merge with protection tech in Europe, creating dual-use functions, pushed by institutional capital deployment in protection and elevated public budgets.
Coin Flips – Issues We expect are Potential, However Might Go Both Method in 2H 2025
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A geothermal IPO is probably going before anticipated, pushed by sustained demand from the AI revolution and the precedence of power safety/independence, mixed with industrial traction and technical breakthroughs.
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Cleantech and healthcare overlaps will turn out to be extra obvious, with pharmaceutical innovators touting power use discount of their merchandise, probably main them to be acknowledged as cleantech innovators.
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Meals safety will speed up into mainstream dialog, given its shut ties to power and nationwide safety, with elevated give attention to crop genetics.
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- A much less heated debate round nuclear power in Europe is feasible, pushed by the EU’s want for low-carbon power for the AI race and the potential use of extra nuclear capability for pink hydrogen.
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Water safety will return excessive on Europe’s agenda as a consequence of droughts, dry years, and rainfall shortages, with AI and information facilities including to the strain, particularly in Southern Europe.
Wild Playing cards – Issues We Assume are Additional Afield, However Might Shock Us in H2
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AI for cleantech could face one other wave of “inventive destruction”; whereas not a bubble, the quickly accelerating capabilities of fashions imply that corporations counting on LLMs or public information will likely be challenged by newer, extra highly effective innovators.
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A geoengineering breakout is feasible, notably the place co-benefits exist, particularly when overlapping with the water and meals safety arguments, i.e., fashions that evolve from local weather arguments to useful resource safety arguments.
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- A significant oil and gasoline or service firm may interact in M&A with small-/mid-tier mining corporations, leveraging their drilling and useful resource extraction experience (e.g., ExxonMobil in lithium extraction).
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Biogas might turn out to be the “subsequent hydrogen wave,” providing power resilience and provide, however with its personal set of challenges relying on regional benefits.
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The position of geothermal power in Europe might considerably increase as a consequence of excessive power prices and the necessity for various electrification options, particularly with a brand new EU geothermal motion plan introduced.
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There may be constructive surprises in industrial electrification bulletins in Europe, constructing on PPAs and behind-the-meter renewables/batteries, to counter the stagnation in Europe’s electrification fee.
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How did we do? What may we be lacking? And extra importantly, what are you seeing on the market?
