Legislation continues to move forward to increase incentives for investment in clean energy technology to combat the climate crisis.¹ The Build Back Better Act (“BBBA”) has been called the “most ambitious and transformational” clean energy proposal ever put forth by Congress.² The BBBA extends and expands clean energy tax credits, including a direct pay option for the commercial investment tax credit.³ The BBBA, along with the bipartisan infrastructure bill,⁴ aim to make electric vehicles and charging infrastructure more accessible for all consumers, as the infrastructure bill includes investing $7.5 billion in publicly-available chargers and the BBBA extends tax credits in order to lower the cost of electric vehicles.⁵

The incentives for investing in clean energy technology are borne out of more than just legislative encouragement. The industry and underlying technology have matured in a way that make such investment less risky than it was a decade ago.⁶ Specifically, the cost of clean energy technology has continued to decline, making it more cost competitive with existing conventional sources. For example, the levelized cost of solar photovoltaic electricity has declined by 89% over the course of ten years.⁷ As a result, these cost reductions should mean “success doesn’t depend on government intervention” as in previously booms where “fickle government subsidies were often necessary for capital-intensive energy companies to succeed.”⁸ In fact, the market is investing in clean energy “all on its own.”⁹

Investment in clean technology projects is undergoing a massive boom. In fact, in 2020, a record $501.3 billion was invested in clean energy technologies.¹⁰ This included a record $139 billion in investments in electric vehicles and charging infrastructure, which was a 28% increase from the previous year.¹¹

There is also increased opportunity in emerging climate tech startups that are focusing on using multiple industries to decarbonize the economy, resulting in unprecedented sector growth.¹² Between 2013 and 2019, capital deployed in climate tech increased at five times the overall growth rate of venture capital.¹³ Climate tech growth continued to increase throughout 2021, with more than $30 billion raised in venture capital deals up to September 30, 2021, compared to just over $20 billion in the entirety of 2020.¹⁴ Investment in climate tech startups typically starts with the funding of basic research, often by non-profits and foundations, federal and state programs, and incubators focused on combating climate change.  Investment in the growth and scaling of climate tech startups is coming from traditional venture capital and accelerators, and increasingly from corporate investment, all with greater focus on climate tech.  Large corporations, including traditional energy companies such as the oil giants, have found their shareholders and their businesses pressuring them to sustain and grow their businesses and adapt to changes in their industry, and find new opportunities to develop new businesses and new markets, while at the same time decarbonizing their businesses and responding to environmental, social and governance concerns.  Certain corporates have responded at least in part by investing in clean energy technologies.¹⁵ In addition to cash investment, corporates can bring infrastructure, R&D and manufacturing resources, technical expertise and know-how, commercial relationship and business networks to these emerging companies. Climate tech startups now have the potential for more infrastructure, tactics and resources to innovate and scale that were not available in the past and that are more supportive of their growth and success.

President Biden has set a target of 80% clean power by 2030, along with the goal of a fully carbon-free electricity grid by 2035.¹⁶ In order to achieve these goals, the President has promised to spur investment in and deployment of clean energy technologies.¹⁷ Numerous world leaders are announcing similar targets, with an expectation that large scale green investment will be stimulated through strong policies that enable long term strategic shifts.¹⁸ The success or failure of new energy tech start-ups depends on factors beyond just the cost and performance of the technologies they create. Governmental policies can prepare the market and influence the perceptions of investors by offering incentives and support for this shift.¹⁹

With support from the private sector, along with historic investments by governments, the opportunities in clean energy technology are ubiquitous.²⁰ We expect this trend to continue throughout 2022 and to offer vast investment opportunities.

¹The Build Back Better Act: Transformative Investments in America’s Families & Economy | House Budget Committee Democrats
²U.S. House passes Build Back Better bill. What's in it for renewable energy? (renewableenergyworld.com)
³How the Build Back Better bill could boost clean energy for low-income homeowners | Utility Dive
⁴What's in the final bipartisan infrastructure bill for clean energy (renewableenergyworld.com)
⁵How the Build Back Better bill could boost clean energy for low-income homeowners | Utility Dive
⁶Clean-Tech Investment Isn't Just a Bubble This Time - Bloomberg
⁷Id.
⁸Id.
⁹Id.
¹⁰Global clean energy technology investment reached a record $500 billion in 2020 - EUCI
¹¹Id.
¹²“Climate Tech Investments Grows at Five Times the Venture Capital market Rate over Seven Years,” PwC, September 23, 2020.
¹³Id.
¹⁴Id.
¹⁵How the 6 major oil companies have invested in renewable energy projects (nsenergybusiness.com) and Investing in low-carbon technologies — Chevron.com
¹⁶Creating a Domestic U.S. Supply Chain for Clean Energy Technology - Center for American Progress
¹⁷FACT SHEET: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean Energy Technologies | The White House
¹⁸Markets For Clean Technology Innovation Get Global Boost With COP26 ‘Breakthrough Agenda’ (forbes.com)
¹⁹DOE Awards $35 Million for Technologies to Reduce Methane Emissions | Department of Energy
²⁰Bill Gates & Energy Secretary Granholm Announce $1.5 Billion to Fund Technology Demonstrations to Combat the Climate Crisis (breakthroughenergy.org)

Visit 2021 – Traditional Energy Rebounds and Increased Energy Transition, for the complete list of individual, detailed articles associated with this publication.

ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm whose lawyers practice throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.