June 28th, 2023 — Electrifying our world has been a global effort, with different regions playing different roles in the energy transition: Germany financed early solar deployment with its feed-in tariff, China has manufactured most of the equipment installed to date, and the Scandinavians have brought wind to places nobody thought possible.
At Powerhouse, we track over 8,000 climate tech startups worldwide in our proprietary database. Our data tells an interesting story about the innovations that are coming out of the leading climate tech hotbeds today, with states like California, New York, and Massachusetts leading the way and with Texas and Colorado emerging as influential centers of innovation. A vibrant climate tech startup ecosystem has also been growing across the Atlantic, particularly in the UK, Germany, and France.
California
California Climate Tech Startups: 1607
California is home to one-fifth of the climate tech startups in our database. Despite its significant population, it has roughly 41 climate tech startups per one million inhabitants. In particular, the state hosts an outsized number of startups focused on solar and electric vehicles (EVs).
One in every four solar startups in our database is based in California. The sunny weather, favorable policies, and market conditions have accelerated the early adoption of solar technologies in California, making it the largest solar market in the United States. With proven market viability, more solar startups are working to tackle challenges in deployment and maintenance. This includes democratizing solar energy access by offering better financing solutions and solving intermittency issues through energy storage. California also dominates the EV market, with over 150 startups (the next nearest region is Canada with 45). This may be partly due to California’s car culture, but even more so is a product of the legacy of Tesla’s groundbreaking work in the sector and the tradition of Tesla alums leaving the company to found startups of their own.
New York
New York Climate Tech Startups: 661
As the second largest center of climate tech innovation in the U.S., according to our database, New York State boasts a climate tech startup density of 33 per one million inhabitants.
Building retrofits takes center stage among climate tech startups in New York. This comes as no surprise, considering that buildings in New York City account for a staggering 70% of its emissions. Regulatory compliance serves as a primary driving force. For example, New York City's Local Law 97, implementation of which began in 2019, mandates efficiency ratings for all buildings and sets maximum energy consumption and carbon emission thresholds. Non-compliance penalties start in 2024, and real estate experts anticipate annual fines amounting to $900 million by 2030 for non-compliant buildings.
Massachusetts
Massachusetts Climate Tech Startups: 340
According to our database, Massachusetts leads the per capita game with 49 startups per one million inhabitants.
The concentration of university labs gives the state a competitive edge in hardware breakthroughs, focusing on materials, batteries, and solar technologies. Our database highlights that the most well-funded climate tech startups in Massachusetts predominantly operate in the hardware space, such as Commonwealth Fusion Systems which spun out of the MIT labs.
Our database shows that the areas of focus for Massachusetts-based climate tech startups include materials, energy efficiency, and industrial processes. This trend aligns with the statistics from Greentown Labs in Somerville, MA. By the end of 2022, Greentown Labs hosted 76 startups in electricity (including energy storage), 50 in resiliency and adaptation, and 46 in manufacturing, showcasing the diverse areas of innovation within the climate tech industry.
Texas
Texas Climate Tech Startups: 278
Despite being home to the 278 climate tech startups in our database, Texas’s high population brings down its per capita rate to 9.5 startups per one million inhabitants.
Decarbonizing heavy industry is a key part of the energy transition, and Texas' petrochemical base provides a large market and experienced workforce for startups looking to develop sustainable fuels, alternative plastics, green hydrogen, and carbon capture technologies. Startups and incumbents are also exploring the potential for geothermal energy and lithium brine extraction from former oil and gas drilling sites. For early-stage companies specifically, five of the largest venture capital rounds that went to Texas-based companies in 2022 went to climate tech startups, underscoring the prominence of the sector in its investment landscape.
Colorado
Colorado Climate Tech Startups: 173
Colorado has 30 climate tech startups in our database per one million inhabitants.
Unlike Massachusetts which is known for its renowned universities and longstanding innovation ecosystem, Colorado is not always the first state that comes to mind in climate. However, the presence of research institutes such as the University of Colorado and the National Renewable Energy Lab (formerly known as the Solar Energy Research Institute) have fueled Colorado’s climate tech innovation. In 2021, the University of Colorado launched 25 new ventures, ranking fifth in university startup creation.
Interestingly, Colorado exhibits a high concentration of climate tech startups focusing on software development. This could potentially be influenced by the trend of tech talent migration to the state. According to the U.S. Bureau of Labor Statistics, Boulder, Colorado ranks third in top-paying metropolitan areas for software developers, after San Jose and Seattle.
International
Home to the world’s largest carbon trading program, European countries have fostered a robust cluster of carbon-tracking startups. In Germany and the UK, 1 out of every 5 climate tech software startups focuses on carbon tracking, as do roughly 12% of French climate tech software startups. With businesses facing capped CO2 emissions while simultaneously given the opportunity to trade surplus allowances, there is substantial momentum for startups diving into the carbon tracking space.
The hydrogen sector has gained significant traction among European startups. With a growing interest in energy independence, particularly following geopolitical events such as the invasion of Ukraine, there is a strong desire within Europe to reduce dependence on Russian natural gas. As a result, the amount of funding invested in European hydrogen startups doubled in 2022.
Takeaways
While we are witnessing an explosion of startups working in solar energy, EVs, batteries, and building decarbonization, certain hard-to-abate industries, like iron and steel, have received relatively less attention. In addition, not every area of the world has been able to take advantage of the rapid expansion of innovation we’ve seen to date in climate tech. As we strive for a net-zero target, we look forward to seeing more innovation across all sectors and geographies.
Special thanks to Huiling Zhou, Dr. Octavi Semonin, and Sam Wohlforth.
To read more about our work at Powerhouse and Powerhouse Ventures, visit our Insights page.
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