A lot can change in a few months.
The world of climate technology hasn’t exactly been turned upside down, but it’s definitely more crooked than it was in the summer. The results of the US federal election may have put the startup-friendly Inflation Reduction Act in jeopardy, possibly throwing a wrench into the business plans of many companies.
At the same time, however, the growing computing needs of AI have pushed data center operators to look to the ground for electricity sources, leading to increased interest in a variety of energy sources, including nuclear. , renewables, batteries and even fusion.
With the dawn of 2025, it’s a good time to look at the trends that are likely to define the next 12 months.
Advanced nuclear
Nuclear power got a lot of love last year, from Microsoft restarting a reactor at Three Mile Island to Google signing a 500 megawatt deal with startup Kairos. The driver? Data centers, data centers, data centers. With AI servers facing a power shortage as early as 2027, tech companies have raced to get electricity wherever they can find it.
Nuclear power is one of those places. Historically, adding nuclear capacity has meant large power plants that take a decade or more to build. But a new wave of startups has proposed smaller designs that can be more easily mass-produced, or so the thinking goes. They have not yet been tested at scale, and the success of nuclear startups will depend on how the first ones go.
In their favor, these companies have the benefit of a streamlined regulatory process, which should help speed the time from proposal to construction.
But they are also facing stiff competition from renewable energy sources, which are proven and quick to deploy. Unless there’s a breakthrough in AI model training or completion, expect to hear more about tech’s love affair with nuclear in the coming year.
Fusion power
We’re just over two years from the National Ignition Facility’s groundbreaking announcement that it had produced the world’s first controlled, net-positive fusion reaction. Fusion startups obviously used the news to jump-start their fundraising efforts. Among this year’s winners: Acceleron Fusion, Marvel Fusion, Marathon Fusion, Type One Energy, Xcimer Energy and Zap Energy.
Expect more this year too. Building a fusion power plant, even a demonstration unit, is expensive. Several startups have begun work on prototypes, demonstrations and even commercial reactors, including Commonwealth Fusion System and Zap Energy. Many of them have goals of connecting power plants to the grid in the early 2030s, which means they have a lot of work to do in the coming years. And that means they’ll need more money soon.
It’s a risky technology, but the rewards include remaking the trillion-dollar energy sector. If companies are able to achieve scientific and engineering milestones, expect more investors to line up in 2025.
Hydrogen
Few sectors are as exposed to potential changes in the Inflation Reduction Act as hydrogen. Many startups hope to eventually deliver gas at $1 per kilogram, but not until the end of this decade or early next year.
To get there, they have been optimistic that the two-year IRA could help them bridge the gap with a $3 per kilogram subsidy for hydrogen produced from renewable electricity. If this provision is repealed, a number of hydrogen startups may be at risk of growing. Big companies are already confused.
At the same time, scientists and investors have warmed to so-called geological hydrogen, or hydrogen that is produced naturally within the Earth. Can it save the industry? The next 12 months could be a time to disconnect.
What else?
The coming year will almost certainly bring more changes, especially as politicians and regulators grapple with the growing demand for energy from AI. Changes to the permitting process could spur a wave of investment in grid-connected technologies, but if those efforts stall, expect more companies to sign deals with energy providers to bypass the grid and connect directly to power centers. data.
Investors have told me that it will probably be challenging for many startups to raise new funding in the coming year. The most exposed companies are those that are overly dependent on vulnerable subsidies.
But 2025 is just as likely to throw a twist – it’s useful to remember that the current wave of climate technology emerged during the first Trump administration. Next year may have some surprises as well.
