A Bill Gates-backed private-public fund prepares to invest in clean technology projects worth as much as $ 15 billion in the US, EU and UK, with the aim of subsidizing scales of technology to help countries to achieve net zero emissions.
Breakthrough Energy Catalyst, which raised $ 1.5 billion in private capital from philanthropies and companies, will invest in four key areas: direct air capture, green hydrogen, aviation fuel and energy storage technologies.
Jonah Goldman, managing director of BEC, told the Financial Times the fund will mobilize as much as $ 15 billion, or ten times the initial investment, using innovative financial structures and partnership agreements.
“We are last-mile financing and therefore we will be the most risky capital out there,” says Goldman. “We’re really trying to demonstrate which of the technological paths is going to be the most effective.”
The fund is part of the Breakthrough Energy group, which was started in 2015 by the billionaire founder of Microsoft. Breakthrough energy companies arm provides venture capital to green technology beginners and includes among its board and investors other prominent business founders such as Mukesh Ambani, Jeff Bezos, Masayoshi Son and Sir Chris Hohn.
The new BEC fund will provide three types of capital – philanthropic donations, submarket equity investments and product acquisition agreements – to finance large projects that would not otherwise be financially viable.
The focus will be on creating markets for the green products and technology and reducing the cost of production for materials such as green steel and green hydrogen. This attracted the interest of the steel group ArcelorMittal and the car manufacturer GM among the initial corporate supporters.
There has been a huge increase in private and philanthropic investment in clean technology since the beginning of the pandemic, according to Professor Richard Templer, director of innovation at the Grantham Institute at Imperial College, London.
“It’s patient capital, it’s big capital,” Templer said. “In the past, venture capitalists would just say, this is an engineering project, this is not for us. . . ”. But that is changing and new funding models are being developed, he said.
One of the goals of BEC – which does not expect to generate normal financial returns – is to reduce the “green premium” for products such as sustainable aviation fuel. The green premium refers to the additional cost of a green product compared to its unsustainable counterpart, such as ordinary jet fuel.
One example could be a refinery for sustainable aviation fuel, Goldman said, where the technology was proven but the economy did not support large-scale production. American Airlines is one of the companies that contributed to the fund.
“There are six different ways to do sustainable aviation fuel, and we know they all work and they all have different challenges,” Goldman said.
“We just have to build a bunch of them to see where we can get the green premium cuts, through things like engineering.”
Several governments have supported the fund, including the US Department of Energy, the UK and the EU, where it has a $ 1 billion partnership with the European Commission.
In the unusual structure, BEC-backed projects will be funded in part by long-term downsizing agreements of customers willing to pay for sustainable products – green steel contracts or sustainable aviation fuels, for example.
“These projects are big projects, which are going to require a lot of capital,” Goldman said.
“We know you can do it. You just have to see if you can do it on a scale in an economical way, ”Goldman said. “This is what all these things have in common. They all need the intervention to bring them to this next stage of commercial demonstration and to really start building markets. ”
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