Our planet is 70% ocean, and what if it could solve our energy challenge?
Oceans are one of the planet’s most abundant sources of renewable energy. Changes in salinity, thermal gradients, tidal currents, or ocean waves are the various ways through which we can extract this energy from the ocean and generate electricity. The predictable currents produced by the tides, the constant waves, and natural temperature differences in the ocean provide a stable energy source. Ocean energy is perfectly positioned to stabilize the power supply when the sun isn’t shining or when the wind doesn’t blow.
Ocean energy startups are gathering momentum
Even though the sector is still in its infancy, ocean-based energy solutions are gathering momentum and grabbing a prime seat at the ever-growing climate-tech table. Amidst a slower funding pace globally, ocean energy startups are showing noticeable resilience. From the start of 2023, the sector has already raised more than $38M, surpassing 50% of its 2022 funding levels and defying the overall climate tech investment trend this year.
The share of equity funding has doubled from 45% in 2018 to 90% in 2023 (YTD), indicating the growing interest in the sector amongst private investors. The average deal size has also shown a steady increase. Both of these signals indicate growing maturity in the sector. There also have been two successful exits in ocean energy that further validate this. Even though as of today, the top investors by deal count are government organizations, that picture is changing fast. There is more and more interest from equity investors, as we can see that the share of grants is reducing and the share of equity investments has dramatically increased. The sector is also witnessing increasing interest from not-only climate centric investors, but also generalist investors.
Wave Energy is the most funded technology
It is important to note that many promising technologies are still in their nascent stage, holding immense potential. Currently, we can broadly classify ocean energy into four leading technologies: wave energy, tidal energy, salinity gradient, and ocean thermal energy. Analyzing deal data since 2018, wave energy emerges as the most funded technology, followed by tidal energy, salinity gradient, and ocean thermal energy.
Wave Energy stands out as the most heavily funded technology. Its specific applications are paving the way for larger utility-scale projects. These applications include powering oil and gas platforms, supporting marine farming, supplying remote islands, serving naval bases, assisting in oceanography services, and enhancing luxury resorts.
Numerous countries are developing ocean energy systems, accompanied by the introduction of supportive policies. The United States leads investments in ocean energy startups, followed by the United Kingdom and Sweden. Interestingly, funding in the United States has grown more than fivefold from $4 million in 2018 to $23 million in 2022. Based on the progress observed in 2023 so far, the growth trend appears likely to continue.
Despite the progress made, the technologies remain expensive, and there is still a long way to go. Ocean energy is not currently on track to fulfil its role in helping the world achieve carbon neutrality by 2050, as stated in the International Energy Agency’s (IEA) Ocean Power tracking report. It is clear that there is potential and more investments will be required to further facilitate growth and innovation in this sector.
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