Private equity is backing the low-emissions technologies needed to meet global net-zero goals.

• Private capital has sponsored more than 1,000 clean tech companies in the United States, and as of June 2022, private investment in renewables alone increased by approximately 144% year-over-year.
  
  
• Recent analysis from BloombergNEF and the Business Council for Sustainable Energy shows that, in 2022, the United States was the number one attractor of private investment in clean tech globally.
  
  

Private investment offers the capital and risk absorption needed to power the clean energy transition, while providing continued support to the legacy energy infrastructure that remains essential to the United States.

Private investment accelerates in clean tech, despite headwinds

Private equity is helping clean technology achieve broader adoption – as of June 2022, private equity and venture capital investment in renewables increased by about 144% year-over-year to $11.92 billion globally.

Private equity renewable energy deals show no signs of slowing down in 2023, despite uncertain market conditions and high interest rates. While other investment sources face headwinds, analysis from S&P Global shows that appetite for private investment in clean energy companies remains high. S&P Global reports that “strategic flexibility, immediate-term valuation stability and incoming regulation” are among the factors giving private equity investment an edge over other types of financing.

Firms are investing millions in high-growth solar and wind projects, carbon capture and storage technologies, and renewable natural gas. In addition to investments in the physical infrastructure necessary to support the energy transition, private equity investments in renewable energy power purchase agreements (PPAs) are helping firms maintain strong returns in a high interest rate environment. PPAs will continue to appreciate as companies around the world look to lock in power sourced from renewables in order to meet emissions reduction goals.

U.S. private investment leads green financing

While private equity firms are leading investment in the energy transition globally, data shows that the United States dominates in venture capital and private equity investments in clean tech. Over the past decade, private capital has invested nearly $150 billion in U.S. clean tech companies.

According to a recent report from BloombergNEF and the Business Council for Sustainable Energy, the United States was the number-one attractor of private investment in clean technologies at $25 billion in 2022 – over triple the investment in China, the number-two attractor, which drew approximately $6.9 billion in the sector.

Government incentives lay the foundation for private equity’s investments in clean energy

With the passage of the Inflation Reduction Act in the United States, governments have increased their commitments to subsidize early-stage research and development and pilot programs in renewable energy – but additional investment is needed to develop and commercialize emerging technologies, like wind energy, solar power, and hydrogen.

The International Renewable Energy Agency (IRENA) has estimated that over $100 trillion of capital will be required to achieve Paris Agreement goals and mitigate the effects of global climate change. Private equity investment is critical to meet this financing gap. According to a 2023 analysis by Bain & Co., the energy transition presents “a clear opportunity for private equity to do what it does best: supply investment capital and help businesses accelerate growth.”

The bottom line

The U.S. private equity industry is stepping up to power the clean energy transition, even as interest rates rise and other investors back away from clean tech investments. As governments double down on research and development programs, grants, and tax credits to spur development of low-emissions technologies, private equity continues to shoulder risks inherent to early-stage development, facilitating the investment necessary to scale emerging technologies for widespread adoption.