What is the fuzz about Energy Start Ups?
Two decades ago, the energy market looked quite different. A few big players dominated the market. Most of these were and are (ex-)state-owned corporations. Two developments changed the market completly: First, the liberalization
of the market in the EU and, second, the opportunity to generate power with new technologies, foremost solar panels and wind turbines.
This development lead to a democrazitation of the energy market (especially in Germany) – a perfect opportunity for start ups. The market development broke the quasi monopoly position of the old utility corporations and furthermore, it became easier to access the power market for new players. Therefore, twenty years ago, the energy market suddenly became more attractive for young companies.
Why are Energy Start Ups important?
Start ups are more likely to drive forward disruptive innovation than big corporation. While big corporations are dominated by bureaucracy, slow decision making and complexity, start ups are able to move faster, more agile and tend to be more risk. As explained earlier, the energy market was dominated by a few players – huge corporations which generated huge revenues.
Obviously, in this situation a new, unproven technology with high risk might not be of high interest for such big companies. Start ups typically choose such new risky technologies and develop business cases around them. In the case of failing, they are much quicker to adapt and oftentimes the right product only arises after multiple pivots
. Although a lot of start ups fail, some of them make major break throughs and secure double digit market shares.
Energy Start Ups have the important role, that every innovation in thos sector will also help to fight climate change. One of the best examples from Germany is the company EnPal
, which offers PV modules-as-a-service. They take over all the investment and work for implementing solar modules – the customer only has to pay a monthly fee. Therefore, everybody is able to afford PV modules as the biggest obstacle – upfront investment and organization around the installing is outsourced to EnPal. With this innovative business model, renewable energies become more attractive and help to enfore a renewable future.
How is the European Energy Market developed?
As with all investment, the European countries with the highest GDP are also home to the most energy start ups. Germany, France and Great Britian are home to the most start ups in this field. These countries have the perfect starting point for start ups. Regarding start ups per capita, Scandinavian countries have a even higher number than all other European countries.
There are three key reasons why these countries promote start ups. First, most of these countries have a high availability of risk capital – both companies and a network of VCs are heavily investing in start ups. Furthermore, there is a start up infrastructure: accelerators, public funding and universtities are creating an enviroment where start ups can thrive. Second, these countries offer highly skilled workforce. Third, these countries offer huge domestic markets – for both B2C and B2B business models.
Overall, while the west of Europe is home to thousands of energy start ups, the east of Europe lags behind. The reasons for this difference is the lower VC activity and the smaller available markets. Also, state funding for start ups is less prominent in the eastern European countries.
Regarding sectors, digital services (e.g., SaaS platforms for energy management) and solar are the two leading topics among energy start ups. For more detailed information, contact us right away.