String of high-profile cleantech bankruptcies highlights sector’s profitability challenges
What’s happening? The highest number of US-based renewable energy and cleantech companies have filed for bankruptcy since 2014, reported the Financial Times. Despite attracting significant investment from multi-billion-dollar institutions such as Microsoft, Amazon and SoftBank, many now struggle to raise funds amid high interest rates and delays in federal tax credits. Wood pellet provider Enviva, battery company Moxion Power and solar power firm SunPower are just three of the biggest name bankruptcies in the space. The capital-intensive nature of cleantech, combined with rising competition from an increasing number of sectors like AI and defence, has made securing private funding more challenging. (Financial Times)
Why does this matter? The fiscal struggles facing cleantech companies could jeopardise global efforts to combat climate change and meet renewable energy targets, particularly in the US, where President Biden has made ambitious climate investment policy a cornerstone of his tenure. The vast sums invested in these now bankrupt firms – Moxion Power raised $110m, while SunPower was acquired by oil giant Total as recently as 2022, for example – are proving insufficient as profitability becomes increasingly difficult to reach in a highly competitive, unforgiving macroeconomic environment.
Cleantech giant struggles – Even in China – where the cleantech sector contributed to 40% of the country’s economic expansion in 2023 – some of the industry’s biggest names are struggling. Longi Green Energy Technology Co., the world’s largest producer of solar wafers, reported a significant loss of CNY 5.24bn ($739m) in the first half of 2024 due to severe overcapacity in China’s solar industry. The oversupply has driven prices to record lows, putting immense financial pressure on solar manufacturers globally. Although cleantech giants such as Longi can cope with the strain, smaller firms and startups typically face bankruptcy, restructuring or acquisition.
Carbon removal woes – One vertical within the cleantech market epitomising the industry’s struggles is carbon removal. According to a Bloomberg analysis, over 800 startups are pledging to pull carbon dioxide from the air. The overabundance of carbon removal firms has already led to several high-profile bankruptcies in the space, including Running Tide, which used microalgae to capture carbon and sink it deep in the ocean. It had signed large carbon removal contracts with Microsoft as recently as last year, agreeing to remove over 12,000 tonnes of carbon over the next two years. However, this could not save the company from closure in June 2024.
A “bipartisan success story?” – Despite Running Tide’s struggles, other cleantech companies are thriving. For example, carbon capture machine manufacturer Svante raised $100m in August from the Canada Growth Fund, while battery developer Sila Nanotechnologies raised $375m in June, suggesting fundraising wins remain. Indeed, many, including energy consultancy Rystad Energy, are bullish about the sector’s growth prospects despite the string of high-profile bankruptcies. Regardless of November’s US election result, Rystad is confident the domestic renewable and cleantech sector will be largely unaffected even by a Republican victory as “cleantech is increasingly becoming a bipartisan success story”.
Investments keep flowing – The Biden administration also announced on 5 September it would invest $7.3bn from the Inflation Reduction Act to fund clean energy projects helmed by rural electric cooperatives. Across the Atlantic, BNP Paribas announced on 3 September it raised €150m ($166m) for its Solar Impulse Venture Fund, further illustrating the robustness of the wider cleantech market. Despite challenges impacting certain players, sufficient political and investor appetite remains to ensure the cleantech market continues to develop and innovate.
