Renewable Energy Startups – How Do They Work, and Can They Work?

renewable energy startups

Photo by Zbynek Burival on Unsplash

Energy is a vital part of our daily lives. 

We need energy to operate the cars and buses that take us from our homes to our workplaces. We also need energy to power our homes so we can cook, watch TV, and surf the internet. 

At the moment, most of us rely on coal-powered electricity and fossil fuels for these needs. But science shows us that we won’t be able to rely on these energy sources forever. The longer we depend on fossil fuels, the more we’ll wreck our planet.

So what are the alternatives? Solar, wind, geothermal, biofuels, and hydropower are all alternative sources of energy that are clean, renewable, and now, increasingly affordable. 

In the past two decades, a plethora of renewable energy startups has popped up to deliver renewable energy solutions to consumers all around the world. Their goal is simple: to make renewable energy accessible and interesting enough so more people switch from fossil fuels to them.

And with these lofty yet admirable goals, it’s worth asking how successful these startups become. In this article, our team at Aspiration will do just that. As a climate-friendly platform that supports renewable energy companies, we’ve been keeping track of the renewable energy startups that have come to grab the world’s attention in recent years. 

In this article, we explore how renewable energy startups work and what makes or breaks a renewable energy startup.

What are renewable energy startups?

Renewable energy startups are companies that develop innovative solutions to energy challenges and gaps. They’re usually no more than 5 years old with about 5-25 staff members.

Renewable energy startups are different from traditional businesses in that they are focused on growing an innovative idea or solution into a marketable product or service. 

Their business model often relies on constant research and development to develop a solution that solves existing energy challenges. The risk that the solution may not work means that renewable energy startups don’t usually have success guaranteed.

Most renewable energy startups focus on energy sources like wind, solar, and biofuels. These alternative energies can be found almost anywhere on the planet. They’re more abundant than fossil fuels and certainly also cleaner.

The key goal that most renewable energy startups try to achieve is to make clean energy generated electricity and fuels as affordable and convenient as natural gas and coal-powered electricity. The majority of people will switch to renewable energy only if they can afford it.

It’s also worth noting that renewable energy startups are key actors in the fight against energy poverty. They provide vulnerable communities with access to electricity and cooking fuels, allowing children to study at night and families to live without the harmful health effects of toxic fumes. 

Renewable energy startups that successfully produce energy solutions tend to get acquired by larger companies. Others receive funding from venture capital firms to expand into more mature, formal organizations.

What does it take to build a renewable energy startup?

Building a renewable energy startup takes a lot of planning and business acumen.

Renewable energy startup founders have to first be able to identify the energy challenges. They need to understand the root causes of modern energy problems as well as the economics behind energy demand

It’s only when they understand these things that they’re able to see the business opportunities

With the available opportunities in mind, the founders can then build a business plan around them. Business plans involve careful analyses of existing renewable energy regulations, government initiatives and plans, and thorough studies of the product supply chains that are required.

Careful thought also has to go into what resources will be needed to build the renewable energy product or service. The product has to be unique so it can’t be easily copied and acquired by competitors. 

Once a product or service idea has been fleshed out, it’s always a good idea to talk to potential customers to get their feedback on the item’s usefulness and relevance. The feedback helps startup employees understand what energy challenges customers face, plus how willing they would be to purchase a renewable energy solution.

How do renewable energy startups work?

Renewable energy startups occupy a niche that involves a good amount of experimentation and government and nonprofit partnerships.

They have to provide products and services that might use experimental technology but aren’t too expensive that potential customers become reluctant to ditch fossil fuels for renewable energy.

In the initial stages of product or service development, renewable energy startups need a decent amount of funding to run pilot projects to determine the effectiveness of their solutions. The same funding may also help startups with promising portfolios expand further and obtain more partnerships and investors.

At the tail end of the 2000s, renewable energy startups working with solar, wind, or biofuels were highly sought after by investors who were excited by the business potential of the technologies. Unfortunately, some of these startups failed to produce scalable products and services.

As a result of that experience, venture capital investors today are more interested in energy storage and batteries, smart grids, and electric vehicle charging infrastructure.

Once the startups have a working product or service, they usually partner with local governments, nonprofits, and similar-minded businesses to get the items distributed and marketed on a large scale. In the process, startups may help create local jobs and make local communities more resilient against climate change.

Can renewable energy startups become successful?

Renewable energy startups can become successful but it’s not easy. They have to deal with challenges like unsteady consumer demand, complex installations, and investor skepticism.

For a start, consumers may be reluctant to switch to renewable energies if the installation costs are high or the prices are above what they’d normally pay for fossil fuels. Startups have to ensure that their products and services provide the same value as fossil fuels and are as convenient to use and access

Then startups have to overcome the difficulties posed by research and development. Because renewable energy is still a young sector, parts for renewable energy systems might not be available in the countries where the startups are located. New technologies have to be built from scratch and systems may need to be tested several times before they can be considered fit for installation.

At the moment, the trend among renewable energy startups is to focus more on software than hardware. Since the late 2000s when venture capitalists lost nearly $15 billion in failed hardware-focused renewable energy startups, investors have favored programs and applications that serve as links between the hardware, customers, and the developers. 

Renewable energy startups cannot overlook investment funds because their success and future growth hinge on the availability of capital. Without money, they would just be stuck at the prototype stage.

3 renewable energy startups that have become successful

Among the renewable energy startups that have become successful, Green Mountain Power, Kite Power Systems, and Opus 12 stand out the most. They’ve been able to scale up to a wide customer base and have been around for more than 5 years.

Green Mountain Power

Based in Vermont, Green Mountain Power provides electricity from hydro, solar, and nuclear power plants to three-quarters of homes and businesses in Vermont. Their energy supply is considered to be more than 63% renewable and almost 100% carbon-free.

They’re now on a mission to make Vermonters less reliant on the grid with projects that allow community members to share rooftop solar panels and home battery systems. As a certified B Corporation, they also have an Energy Assistance program that provides heating and electricity discounts for lower-income families. 

Kitepower

Kitepower is a renewable energy startup based in the Netherlands that develops kite-shaped airborne wind energy systems. The kites use 90% less material and have lower noise emissions than traditional wind turbines, making them ideal for remote locations where logistics and transport challenges persist. 

Kitepower can harness stronger winds at higher altitudes with little need for infrastructure construction. A quick setup may just include a generator, the energy-generating kite, and a few electrical cables. 

Opus 12

Opus 12 is a Berkeley-based chemical technology company that produces devices that recycle CO2 into cost-competitive plastics and fuels. Using only water and electricity as inputs, the devices can capture emissions from the world’s heaviest polluters and create valuable energy products from that waste.

In the 5 years since their foundation, Opus 12 has built partnerships with influential organizations and agencies like NASA, Shell, and the U.S. Air Force.

3 renewable energy startups that failed

Unfortunately, not all renewable energy startups make it past the prototype stage. Some, like Solyndra, KiOR, and Abound Solar failed big even after securing millions in investment. 

Solyndra

Perhaps the most feared name in the history of renewable energy startups, Solyndra was a solar panel manufacturer based out of California that went bankrupt after misleading the Department of Energy with a $527 million loan. 

The company’s unique copper-indium-gallium-diselenide (CIGS) photovoltaic technology was praised by energy officials but proved to be inefficient and too expensive compared to conventional solar panels made of crystalline silicon. 

The failure cost $1 billion in private investment losses

KiOR

KiOR is another failed startup that dampened investors’ hopes in renewable energies. It was a biofuel company that had developed a technology that could convert biomass, such as wood and agricultural by-products, into transportation fuels. 

Despite having secured multiple projects and partnerships at the height of its growth, the startup fell behind on its production goals and was eventually found to have faked technical data. 

Abound Solar

Abound Solar was a manufacturer of cadmium telluride photovoltaic cells that went bankrupt after being unable to produce enough products to be profitable. The failure was blamed on low international photovoltaic cell prices at the time, though impatient investors were also a potential contributing factor to the startup’s downfall.

Abound Solar’s failure was not as spectacular as Solyndra’s, but it nevertheless rattled investors’ confidence in the future of renewable energies

Aspiration supports renewable energy

Aspiration is the world’s most environmentally-friendly neobank that puts the health of the planet first. We offer innovative savings accounts and carbon offset services that help turn each transaction you make into positive climate-fighting action.

We don’t invest any money in fossil fuels or other environmentally-destructive industries. We believe that renewable energy is the future that our planet needs. 

Open an account with us today and explore the different ways you can help make the planet better with your money.

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