Supercharged Climate Positive - Investing in Europe November 2020

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Supercharged Climate Positive - Investing in Europe November 2020
                                                    Climate Positive ®
                                                    Investing in Europe
                                                                        November 2020

                                                          Emmanuel DeSousa, Eric Kosmowski,
                                                   Joaquin Rodriguez Torres, Melanie Nakagawa

Contributing Authors
Jake Hansen, Scott Himmelberger, Martin Steinweg             
Supercharged Climate Positive - Investing in Europe November 2020
Supercharged Climate Positive®                                                                                Princeville Capital

I. Executive Summary
As global technology investors we are constantly evaluating        Based on our engagements with over 400 companies
trends in capital markets and governmental policies that           headquartered in Europe and around the world coupled
shape technology development, adoption and growth                  with our analysis of Europe’s market and policy conditions,
around the world. We have been particularly focused on             we believe the following technologies and tech-enabled
the extraordinary rise in climate technology companies             business models are well positioned for accelerated
– whose funding has grown five times faster than overall           growth:
venture capital, attracting approximately $16 billion in
2019.1 Several factors contribute to this growth - including       1.   Residential clean energy solutions
macroeconomic changes, expedited policy adoption,                  2.   Virtual power plants and distributed energy resources
increasing demand, and access to focused capital. We               3.   Digital utilities
have taken a closer look at where these factors are likely         4.   Electric vehicle charging network operators
to have a prominent impact and believe that investment             5.   Mobility data platforms
opportunities in technology companies addressing climate           6.   Mobility-as-a-service providers
change are supercharged for delivering outsized returns            7.   Intelligent building energy management
in this decade – 2020 through 2030 – and particularly in           8.   Energy efficiency-as-a-service providers
                                                                   We selected these technologies and models based on
We conclude what makes this decade distinct from                   their high growth, capital efficiency, ability to deliver
previous years are four macrotrends:                               positive unit economics, and the policy pull driving
                                                                   accelerated decarbonization. We also highlight green
•    Advancement in enabling technologies for climate              hydrogen, microgrids, electric vehicle manufacturing
     solutions and improving economics for climate tech            and batteries and certain ridesharing platforms that do
•    Healthy early-stage climate tech start-up and venture         not meet all these exacting criteria, but are exciting high-
     ecosystem                                                     growth technologies and tech-enabled business models
•    Europe’s Green Deal and stimulus accelerates policy           that should remain a focus for investors because of the
     and technology adoption                                       macrotrends surrounding their adoption.
•    Increasing consumer preferences for climate solutions
     and climate leadership from corporations and financial        Thanks to strong tailwinds blowing in Europe, including
     institutions                                                  unprecedented government stimulus targeting climate
                                                                   change, we offer our insights into why Europe’s climate-
These macrotrends are accelerating the growth in many              related technology companies are primed for accelerated
leading companies at the forefront of the climate transition.      growth and have become a market not to be missed by
We identified eight leading technologies and tech-enabled          technology investors.
business models poised for outsized growth and returns in
sectors that green the grid, decarbonize transportation and
create a more energy efficient built environment – sectors
that are responsible for nearly 60% of Europe’s carbon

 PwC research. “The State of Climate Tech 2020.” Sept 2020,

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Princeville Capital                                                                            Supercharged Climate Positive®

II. E ur ope’s Oppor t uni s t ic E nv ir onmen t:
Four Key Macrotrends
There is growing momentum in Europe for scaling                         Macrotrend 3:
technology companies addressing climate change.
                                                                        Europe’s Green Deal and stimulus accelerating policy and
Europe has always been in a leading position on climate
                                                                        technology adoption
action – whether being the first region to implement a
cap on carbon pollution in 2005 or centering its economic
growth and recovery strategy around getting to climate
                                                                        Macrotrend 4:
neutrality. Europe is also home to numerous corporations,               Increasing consumer preferences for climate solutions
investors, and policymakers that have been at the forefront             and climate leadership from corporations and financial
of advancing climate commitments and new mechanisms                     institutions
to achieve them. Despite these factors, Europe trails
the United States and China in attracting venture capital               These trends are making the European investment
in climate-related technologies – attracting $7 billion                 environment for climate technology poised for outsized
compared to the United States’ $29 billion and China’s                  performance. Indeed, publicly traded shares in climate
$20 billion.2 We believe investors who are shying away                  technology companies have outperformed nearly all other
from Europe are missing attractive opportunities to deploy              categories of European public companies this year.3 Since
capital in the region as climate technology, especially in              the beginning of the year, the performance of the NASDAQ
Europe, is benefitting from four key macrotrends:                       Clean Edge Green Energy Index, an index that tracks
                                                                        publicly traded clean-energy and low-carbon technology
Macrotrend 1:                                                           companies, has been better than that of the S&P 500 or
                                                                        STOXX Europe 600. Even when looking specifically at
Advancement in enabling technologies for climate
                                                                        the returns of technology companies, one of the best
solutions and improving economics for climate tech
                                                                        performing sectors through the COVID crisis, these climate
                                                                        technology stocks have performed significantly better.
Macrotrend 2:
Healthy early-stage climate tech start-up and venture

                                                           Index Market
                                                                 Market Cap
        1-Jan-20     1-Feb-20 1-Mar-20       1-Apr-20    1-May-20     1-Jun-20   1-Jul-20   1-Aug-20   1-Sep-20   1-Oct-20

                       NASDAQ Clean Edge Index              S&P 500 Tech                     STOXX Europe 600 Tech

                       S&P 500                              STOXX Europe 600

    S&P Capital IQ. Retrieved October 10, 2020, from S&P Capital IQ database.

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Supercharged Climate Positive®                                                                                Princeville Capital

M ac r o t r e nd 1                                                          Numer of IoT Connections in the UK
Advancement in enabling technologies
for climate solutions and improving                                  60.0
economics for these technologies                                     50.0
The last decade is marked by significant advancements
in digitally-enabled technologies that underpin many of
the most promising climate solutions. This technology
maturity coupled with new economic conditions have
helped drive the significant gains in renewable energy
deployment and consumption in Europe.
Technology Maturity
The widespread proliferation of low-cost sensors                       0.0
connected to the internet known as the internet of things                       2016      2017      2018      2019      2020
(IoT) has benefitted many applications related to climate
technologies. The number of IoT devices has exploded,                        Automotive               Consumer Electronics
more than quadrupling in just the last four years with                       Utilities                Other
signs of continued acceleration.4 Many of these devices
are being deployed in sectors highly relevant to climate
technology including utility, automotive, and smart city
applications. With the now near ubiquitous data collection         Improved Economics for Renewable Energy
from a huge number of distributed assets, climate-related          Europe is a prime candidate for renewable adoption. Many
technology companies are finding ways to optimize their            analysts expect renewables to grow significantly in Europe
operations and reduce emissions.                                   in the future due to cost declines in solar, wind, and batteries.
                                                                   Bloomberg New Energy Finance estimates that “by 2040,
The rapid and massive improvement in artificial                    renewables make up 90% of the electricity mix in Europe,
intelligence (AI) is another key enabler of advancements           with wind and solar accounting for 80%.” This growth is
in climate technology. Complex systems that are difficult          supported by reductions in capital costs, particularly steep
to model in their entirety, (mobility systems, the electric        declines in costs for solar photovoltaics (PV) and battery
grid, climate models, etc.) are ideal candidates for the           technologies, that is lowering the levelized costs of energy
application of AI-based algorithms. In recent years, AI has        (LCOEs) for renewables. These decreasing LCOEs, along
made major strides as computing power has continued to             with Europe’s high, and rising, electricity prices (compared
increase and the algorithms used to train the models have          to other countries like the US), accelerates adoption of
become more sophisticated. The amount of compute used              renewables and have contributed to new milestones in the
for training AI models, a figure correlated with the power         deployment of renewables. For the first time, renewables
and accuracy of AI-based models, has been doubling every           generated 40% of the 27 EU member states’ electricity
3.5 months for most of the last decade.5 This exponential          in the first half of 2020, overtaking generation from coal,
growth means modern AI tools leverage more than 1 million          oil and gas.6 (chart on next page7). For many countries,
times the computing power of models just 8 years ago.              renewables are now the cheapest energy source.
These improvements have unlocked more applications
that AI-based models can address with respect to climate

  Data and source for graphic: Cambridge Consultants. (2017). Gordon Davies, “The What and When of IoT Adoption.” Cisco UK & Ireland
Blog, 19 May 2017,
  Open AI. “AI Doubling Its Compute Every 3.5 Months.” Medium, 17 May 2018,
  Farand, Chloe. “Renewables overtake fossil fuels in EU electricity generation.” Climate Change News, 22 July 2020, https://www.
  Chart source: Ember.

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Princeville Capital                                                                                                                                                                            Supercharged Climate Positive®

                                                       Renewables Beat Fossil
                                                       Renewables Beat Fossil Energy                                                                                   M ac r o t r e nd 2
                                                           Generation in Europe
                                                                                                                                                                       Healthy early-stage climate tech
                                                                                                                                                                       start-up and venture ecosystem
        % of total EU-27 electricity generation

                                                                                                                                                                       As expected, the pandemic has delivered some contraction
                                                                                                                                                                       in overall deal volume in Europe, with European venture
                                                  30                                                                                                                   funding for the first half of 2020 declining 20% from 2019–
                                                                                                                                                                       when it was at an all-time high. At the same time, there are
                                                  20                                                                                                                   important trends to look for that indicate a healthy and
                                                                                                                                                                       expanding early-stage European climate-tech start-up and
                                                                                                                                                                       VC ecosystem in this reset environment that are creating
                                                   0                                                                                                                   opportunities for investors.
                                                                                                                                                                       Expanding Pipeline of Companies
                                                                  Fossil Fuels                                             Renewables                                  We are seeing healthy growth in the early-stage climate
                                                                                                                                                                       technology company pipeline. Capital raised by so-called
                                                                  Coal                                                     Wind and Solar                              “purpose-driven” companies doubled from $1.9 billion
                                                  Source: Ember                                                                                                        in 2018 to $4.4 billion in 2019.9 More importantly, an
                                                                                                                                                                       overwhelming majority of these purpose-driven companies
                                                                                                                                                                       - 410 out of 500 companies10 - identified in the “State of
European Central Banks (ECB) have also set interest rates                                                                                                              European Tech” report include climate action as part of the
so low that the cost of borrowing for low-risk renewables                                                                                                              company’s core mission. And not only is climate change
projects remains at historically low levels. For renewables,                                                                                                           the leading issue tackled by these companies, these
because a greater portion of the total cost results from                                                                                                               companies have also attracted the highest level of capital
the upfront capex investment relative to fossil-fuel power                                                                                                             investment,11 filling up the European climate tech pipeline
plants, the economics of these projects is particularly                                                                                                                with companies reaching growth-stage.
sensitive to the interest rate. According to researchers
from ETH Zurich, a full 25% of the reduction in the cost of                                                                                                            Growing Investor Diversification
wind power over the last 15 years has been because of the
                                                                                                                                                                       There is an evolution happening in the European ecosystem
lower interest rates.8 There is little near-term expectation
                                                                                                                                                                       that is beginning to favor financially-motivated and
of interest rates being raised again, thus paving a runway of
                                                                                                                                                                       globally-oriented investors to help companies scale. Two
continued low-cost financing for renewable projects.
                                                                                                                                                                       factors are coming together.

                                                                                                                                                                       First, strategic (e.g. corporate venture capital) investors
                                                                            ECB Intrest Rate
                                                                                                                                                                       have played an important role in many European deals –
    7                                                                                                                                                                  nearly 25% of climate tech deals done included a strategic
                                                                                                                                                                       investor.12 However, we anticipate that some of these
                                                                                                                                                                       European investors are likely going to pause in their capital
    5                                                                                                                                                                  deployment while their main businesses recover from the
    4                                                                                                                                                                  economic downturn. This will be particularly pronounced
    3                                                                                                                                                                  for some corporate VCs, such as those from oil and gas or
                                                                                                                                                                       fossil fuel asset-heavy utilities, as they have undergone
                                                                                                                                                                       fairly substantial cost-cutting over the last few months.
    1                                                                                                                                                                  This pause is likely to create an opportunity for other
    0                                                                                                                                                                  investors, especially those with strong corporate networks,
                                                                                                                                                                       to provide a differentiated value add to these companies.











  Adverse effects of rising interest rates on sustainable energy transitions, Nature Sustainability
  “The State of European Tech 2019.” atomico in partnership with Slush and Orrick,
   Based on a set of 528 unique companies identified by Dealroom. The sum of all companies per SDG is greater than that number as some
companies may be addressing more than one goal. Source: Id.
   See PwC supra note 1.

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Supercharged Climate Positive®                                                                                                        Princeville Capital

Second, the European venture ecosystem is beginning                                          slowdown in overall venture funding (for all sectors, not
to attract a more geographically diverse pool of                                             just climate tech), investors in late stage and technology
investors. Historically, while European tech companies                                       growth (Series C and later) remain close to Q4 2019 levels.15
have developed strong technology, relatively few have

                                                                                             M ac r o t r e nd 3
successfully scaled across Europe and none so far
has succeeded in becoming an international giant of
the likes of Google, Facebook, Microsoft, Apple, and
Amazon. This may be in part due to Europe’s inherently                                       Europe’s Green Deal and stimulus
fragmented nature, but other elements include a weaker
                                                                                             accelerates technology adoption
growth equity environment and a historical lack of
global expansion ambition among European startups.13                                         Notwithstanding an abrupt economic upheaval caused by
However, there are now a growing number of European                                          a global pandemic that could have derailed Europe from its
start-ups looking to expand globally and seeking investors                                   ambitious climate goals, Europe remains steadfast in its
with a broader geographic footprint and larger pools of                                      commitment to lead on climate action. Europe’s Green Deal
growth capital. Last year, for rounds $20M and above,                                        is the policy fulcrum and growth engine for the European
33% of investors were from North America while 60% were                                      economy. The North Star to this package is Europe’s goal
from Europe.14 We see even more opportunity for globally-                                    to be the first climate neutral continent by 2050. To achieve
minded investors to help European companies scale their                                      this, Europe plans to raise its 2030 emissions-reduction
ambitions.                                                                                   target from 40% to 55% (below 1990 levels). This level of
                                                                                             ambition will mean nearly every sector of the European
Europe, with its strong policy and consumer support for                                      economy will have to ensure they are moving quickly to
climate-related technologies, remains an ideal environment                                   decarbonize – a pull for climate innovation at a scale never
to scale climate related businesses. Given many of the                                       seen before.
same climate-related challenges are common around the
world, there should also be ample opportunity for European
climate technology companies to become major global                                          However, there are now a growing number
forces. Out of the roughly 25 climate-related technology                                     of European start-ups looking to expand
focused funds we know in Europe, there are only a few                                        globally and seeking investors with a
specifically targeting growth stage investments, with the
vast majority focused on early-stage tech companies.
                                                                                             broader geographic footprint and larger
We believe that the European climate tech ecosystem                                          pools of growth capital.
is primed for growth equity investors, with a truly global
mindset, to invest in promising technology companies and
drive their expansion around the world. To date, despite a

                                                                European Venture Dollar Volume Through Q2’20
      Total Invested Capital Per Quarter ($b)

                                                 8.0    6.6                  6.4
                                                                                               4.4                  4.7
                                                 6.0                                                                                      4.4

                                                        3.6                  4.0               3.6                  3.4
                                                 2.0                                                                                      3.1

                                                 0.0    0.9                  0.9               1.0                  0.8                   0.7
                                                       Q2'19                Q3'19             Q4'19                Q1'20                 Q2'20

                                                               Angel-Seed      Early Stage   Late Stage + Technology Growth
Source: Crunchbase

   Ghosh, Shona. “7 investors and founders reveal 6 reasons Europe has never produced its own Facebook, Google, or Amazon.”
Business Insider, 30 May 2019,
   Teare, Gené. “European Venture Report Q2 2020: Funding Down to 2018 Levels After Record High in 2019.” Crunchbase, July 20, 2020,
   Gené Teare and Sophia Kunthara. “European Venture Report: VC Dollars Rise in 2019. ” Crunchbase, January 14, 2020, https://news.

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Princeville Capital                                                                           Supercharged Climate Positive®

And despite the potential for a global pandemic to knock Europe off course, European governments used this moment to
make climate change the centerpiece of its post-pandemic development plans for decades in the future. Consistent with
this vision, the European Union introduced the world’s largest “green” stimulus and committed to direct 30% of the total
recovery package toward climate protection from 2021-2027. This makes the EU’s green stimulus 10 times larger than any
other country (see chart below).

Europe Outpaces Rest of World with Green Recovery Efforts

            Green Stimulus Spending ($b)                                       Green Share of Total Stimulus
 300                                                                 25.0%





             26                                                                                            1.9%        2.4%
                                       1.4          0.8
    0                                                                  0.0%
             US           EU          China        India                           US          EU         China        India

        Source: Rhodium Group16

While specific details and allocations remain under discussion, current estimates indicate that total green stimulus
spending from the Next Generation EU package will likely represent 20% of total EU and member state stimulus spending.
This unprecedented influx of new investment into climate policies and projects to decarbonize the power sector (e.g.
renewables/hydrogen), and programs to increase energy efficiency is likely to be an important accelerant for climate
technology solutions in Europe. Related sectors such as low-carbon transport, energy storage and batteries, infrastructure
and green buildings will also benefit from Europe’s stimulus.

The EU package, for example, includes a two-year €20 billion boost for “clean” vehicles, a target of 2 million electric &
hydrogen vehicle charging stations installed by 2025 and €10B in European Investment Bank project loans for renewable
energy and hydrogen. From this we anticipate rapid growth in demand for the companies in our pipeline that provide
advanced mobility software solutions and technology solutions to support and integrate additional distributed energy
resources into a smart grid. Relatedly, energy efficiency solutions are also well-positioned to benefit from Europe’s
“Renovation Wave Strategy” – a plan to stimulate faster building renovation and efficiency deployments in Europe.

We are optimistic regarding how these stimulus measures can serve as an accelerant to many Climate Positive® sectors.
We also recognize that political leadership and policy measures are important achievements that do not happen in a
vacuum. They require the support and investment by other stakeholders (e.g. consumers, corporations, banks) to
overcome challenges such as those created by inertia (e.g. incumbents slow to adopt new technologies) or complex and
highly fragmented sectors (e.g. energy systems).

   Source: Kate Larsen, Pramit Pal Chaudhuri, Jacob Funk Kirkegaard, John Larsen, Logan Wright, Alfredo Rivera, and Hannah Pitt.
“It’s Not Easy Being Green: Stimulus Spending in the World’s Major Economies”, sourcing from IMF Fiscal Tracker, official government
announcements, Rhodium Group.

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Supercharged Climate Positive®                                                                                                Princeville Capital

M ac r o t r e nd 4
Changing consumer preferences and climate leadership from corporations and
financial institutions

Rounding out the key macrotrends                              In In what
                                                                 what    areas
                                                                      areas  dodoyouyou see
                                                                                      see thethe biggest
                                                                                               biggest   need
                                                                                                       need forfor
driving    adoption    of     climate                                change
                                                                       change in in
                                                                                 Europe’s  economies?
                                                                                    Europe's  economies?
technology in Europe are changing
consumer        preferences       on                              Environmental sustainability                                                 54
environmental sustainability and the                               Fairness of pay and wealth                                                51
growth in climate-specific leadership                 Training and qualification for future jobs                                   39
from European corporations and                   Competitiveness to US and China on tech and…                                 35
financial institutions announcing                                              Gender equality                           25
ambitious commitments to address                                           Speed of innovation                          23
climate change.                                                    Protection of personal data                     18
                                                                Immigration of skilled workers                    17
Europeans Prioritize                                                                    Others         2
                                                                                                   0       10    20      30    40       50     60
In a recent McKinsey survey of
Europeans, 54% of respondents                                                    Source: McKinsey and Company
indicated      that    environmental
sustainability is the area with the
biggest need for change in Europe’s
                                                                                                       #European          Company
society (chart at top right).17                  Initiative             Description
Relatedly,    increasing    concerns                                                                   Companies          Examples
around climate change are driving
                                                                        GHG emission
changes in consumer preferences                                         reduction targets
towards        more      sustainable
consumption. In a poll from October
                                                                        (either well-below
                                                                        2°C or 1.5°C                       494
2019 of nearly 20,000 people across
28 countries, more than two-thirds
say they changed their behavior in                                      100% renewable

the past few years out of concern for
                                                                        commitment                         113
climate change.18

European Corporations                                                   Commitment to

                                                                        use energy more
Commit to Climate Action                                                productively to lower
                                                                        GHG emissions
This consumer shift in behavior
is contributing to the dramatic
increase we have seen in the
number of European corporations
                                                                        to accelerating
                                                                        transition to EVs                  51
announcing climate commitments.
More than 1,500 companies with
a combined revenue of more than
$11.4 trillion announced in just               science suggest that in order to meet                       These commitments and other
the last year their pledges to be “net         the Paris Agreement temperature                             declarations have now positioned
zero” in emissions by 2050, including          goals, the world must get to net zero                       corporations as major investors in
large European headquartered carbon            in global carbon dioxide emissions by                       breakthrough climate technologies,
emitters such as BP and Shell. “Net            mid-century, an effort that involves                        attractive potential acquirers for
zero by 2050” goals are important              unprecedented changes across all                            the growing ecosystem of startups
commitments because the latest                 sectors of the economy.                                     focused on climate solutions, and

   McKinsey & Company. “How purpose-led missions can help Europe innovate at scale.” McKinsey & Company, 10 December 2019, https://
   Are you doing anything different in your life to combat climate change?” Ipsos, Energy & Environment, 10 March 2020, https://www.ipsos.

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Princeville Capital                                                                             Supercharged Climate Positive®

as some of the largest buyers and               March of this year, one of Sweden’s         change. Storebrand also set a policy
developers of clean power (see chart            national pension funds announced it         that bans holdings in companies that
below). For a country like Ireland who          was divesting from holding fossil-fuel      get more than 5% of their revenue from
houses the data centers for tech giants         companies as a way to manage the            coal. In total, Storebrand divested
such as Google and Facebook (who                financial risk posed by the low carbon      $47 million from these companies–
have committed to 24/7 clean power              energy transition – a move that is          admittedly a mere fraction of their
and net zero by 2030, respectively), we         estimated to affect approximately           total assets under management –
expect a surge in renewable energy              $400 million in investments.19              but sending an important signal that
deployment and advanced software                                                            divestment is reaching companies not
control solutions to manage their               We anticipate that divestment efforts       just because of their physical carbon
power grid.                                     will create significant opportunities       footprint, but extending to their policy
                                                to redirect this capital into climate-      and lobbying activities.
Financial Institutions                          aligned investments. For example,
Decarbonizing Portfolios                        at the end of 2019 the European             We believe these macrotrends drive
In addition to European corporations            Investment Bank launched a new              accelerated growth for specific
driving     demand       for    climate         climate strategy that included an end       European climate technologies and
technologies to meet their own                  to financing of fossil energy projects      tech-enabled business models in this
commitments, we are encouraged by               by 2021 and increasing the share of         coming decade (2020-2030).
a growing set of financial stakeholders         financing dedicated to climate action
                                                and environmental sustainability to
focused on decarbonizing their
                                                reach 50% of its operations in 2025.20
                                                                                            We anticipate that
own portfolios. From life insurers
to financial institutions, European             We are also seeing other motivations        divestment ef for ts will
investors’ appreciation of climate risk         for divestment and restrictions             cr eate signific ant
is growing, spurred by initiatives such         on investing that translates into
                                                                                            oppor tunities to r edirect
                                                more capital seeking sustainable
as voluntary commitments to disclose
                                                investments. In August, Norwegian           this c apit al into
climate risk, the introduction of
climate stress tests, and desire to limit       life insurer Storebrand with about $91      climate - aligned
financial risk exposure from holding            billion under management, divested          investments.
stranded assets (made even more real            from oil and chemical companies
during this summer’s wave of write-             citing these companies’ lobbying and
downs by nearly every oil major). In            advocacy positions against climate

                               Corporate Renewable
                               Corporate Renewable Energy Purchased Globally (MW)

            Google                                    1683                                          1023
         Facebook                 671                  440
           Amazon              501              424
         Microsoft          402           360
        BHP Group               607
  QTS Realty Trust              544
          Wal-Mart              541
          Ball Corp      227     161
  Anheuser-Busch          310
         Starbucks       242 50

                                                             Solar     Wind

                       Source: BNEF NEF (2020), IEA

   “AP1 divests from fossil fuels.” AP1, 16 March 2020,; Pielichata, Paulina.
“AP1 cuts fossil fuels from portfolios” Pensions & Investments, 16 March 2020,
   “EU Bank launches ambitious new climate strategy and Energy Lending Policy.” European Investment Bank, 14 November 2019, https://

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Supercharged Climate Positive®                                                                                     Princeville Capital

III. Spotlight on Europe’s Climate Technology
Sector-Specific Opportunities

                                              1 . G r e e ning t he E ne r g y G r id
With strong tailwinds                         Europe’s energy grid is undergoing             According to the International Energy
                                              significant transformation. Europe’s           Agency, “utilities and grid companies
blowing in Europe to green                    expected new climate target of 55%             in Europe (Iberdrola, Enel, Rte, and e.On)
the grid, decarbonize                         reduction in emissions from 1990               and in the United States (Exelon, Duke
transportation and                            levels by 2030 will require renewables         and Edison International) reported
                                              to reach 38-40% of total energy supply         record spending on software.”22 At the
support an energy                             by 2030 (compared to ~19% in 2018)21           same time, Europe is experiencing a
efficient built                               This is creating a pivotal moment              rise in customers seeking technologies
environment, this section                     for smarter and more resilient grids.          to help them manage their energy
offers our insights into                      The region’s decarbonization of its            supply and even become producers
                                              energy systems and grid through                themselves (e.g. residential and C&I
which technologies and                        the deployment of more flexible,               solar solutions, batteries and energy
business models are                           renewable, and distributed energy              storage options).
well-positioned to take                       assets are driving market expansion
flight.                                       for innovative climate technology              We have identified unique trends in
                                              companies. Through our engagement              the funding environment for resilient
                                              with many leading businesses in the            grid technology companies that
                                              region, we are seeing an increase in           will have an impact on the kinds of
                                              investment and demand by utilities for         exits we will see. Historically, this
                                              intelligent solutions to manage a grid         sector has been prone to M&A with
                                              with higher volumes of intermittent            corporates in the European energy
                                              and distributed renewable power.               sector actively acquiring disruptors
                                                                                             often fairly early in their growth cycle
                                                                                             (see chart below). But we anticipate a

              Company                         European Energy-Related Acquisitions

   Parnell, John. “EU’s New 2030 Climate Target Accelerates Renewable Deployment.” GTM, 17 September 2020, https://www.
   Munuera, Luis (lead author) and Pablo Gonzalez (contributors), “Smart Grids.” International Energy Agency. June 2020, https://www.iea.

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Princeville Capital                                                                                        Supercharged Climate Positive®

pause in corporate-led M&A as many of these corporates
(especially energy majors) are focusing on conserving cash               EU 28 Annual Solar PV Installed
                                                                         EU                    Installed
and the economic recovery for their core businesses. We                       Capacity 2000-2019
expect this will create opportunities for growth investors to
scale-up companies who are able to stay private longer and                                                                       22.2

create more value for investors.
                                                                                                                                    17.2                             16.6
We believe Europe will rapidly scale their renewable
deployment, transforming their grid permanently. This new        15.0                                                        13.4
grid will shift from centralized fossil-fueled generation                                                                               10.0
                                                                 10.0                                                                            8.2
towards decentralized renewable generation with an                                                                         6.5                                     8.2
increasing need for diverse types of distributed energy                                                              5.7                               5.8
                                                                                             0.8         1.1
resources (DERs). In this transformation, residential             5.0            0.2
clean energy solutions, along with large-scale solar,                                  0.3
wind, and storage will be the key asset types driving grid        0.0
decarbonization. The growing number of DERs across the
continent is already beginning to give rise to innovative
business models such as virtual power plants (VPPs)
that aggregate thousands of these resources to provide           Source: Sunpower Europe 23
services to the grid. As the grid becomes more complex
and distributed, traditional utility monopoly business           government subsidies (as shown in the chart below).
models are being disrupted unlike ever before, giving rise       We see this growth as a continuing trend going forward,
to a new class of digital utility competitors. We describe       as the economics for solar have become attractive in
these trends and the innovative models emerging in more          multiple European countries.
detail below.
                                                                 In terms of future solar deployment, we see residential
A. Residential Clean Energy Solutions                            solar as one of the keys to unlock Europe’s energy
                                                                 decarbonization goals. The potential for solar rooftops
Climate Positive® Insights: Europe is poised for strong          in Europe is large, with 90% of EU rooftops unused for
growth in rooftop solar and other residential clean energy       solar, representing at least 600 GW of rooftop capacity
solutions due to improved solar economics that now               across the EU.24 The primary drivers being high and
avoid heavy reliance on subsidies, electricity prices that       rising household electricity prices (prices in Europe are
are among the highest in the world, strong consumer              higher than in the US), continued decline in costs of PV
demand for clean energy solutions, and aggressive                systems and batteries, and favorable policy stimulus
European decarbonization targets and associated policies.        (such as policies that unlock increase distributed
Winners in this market will be those with the best unit          energy resources and grid integration). When combined,
economics, a scalable and digitized business model, and          research from analysis firm Wood Mackenzie finds that
a comprehensive product offering that can address a              residential solar-plus-storage in Germany, Italy and
customer’s complete clean energy needs.                          Spain, is close to reaching grid parity (where costs per
                                                                 kWh of grid power is the same or more than the cost per
                                                                 kWh of the solar-plus-storage system).25 We see Europe’s
Solar installations in Europe experienced quick growth
                                                                 residential solar market rapidly developing and following
during the 2007-2011 timeframe driven by strong
                                                                 a path similar to the US (which has created multiple
policy stimulus, including high feed-in-tariffs. As solar
                                                                 large players like Sunrun, Vivint, Sunnova and Tesla/
installations scaled during this period, many countries
                                                                 SolarCity), as now all the conditions are in place for this
realized that their incentives were unsustainable (several
                                                                 model to flourish.
countries faced steep increases in household electricity
prices due to surcharges coming from feed-in tariffs). As
a result, countries pulled back on their incentives, leading
to a drop in the market. In the last two years, however, with
prices of solar systems already in steep decline, solar
installations as a whole have experienced notable growth
acceleration, this time with relatively minor reliance on

    Solar Power Europe. “EU Market Outlook for Solar Power 2019-2023.” Solar Power Europe,
   McCarthy, Rory. “Europe Residential Energy Storage Outlook 2019-2024.” Wood Mackenzie, 24 July 2019.

                                                                                                                                                              Page 10
Supercharged Climate Positive®                                                                           Princeville Capital

Improving Customer Experience with Digital                       that residential solar companies can extract significant
Tools                                                            value and scale by creating a business model attached to
                                                                 new homes that offers hybrid electric heat pumps, storage,
Following the growth of the residential solar market, we
                                                                 smart devices, etc, This way they can deliver a more
have seen multiple startups entering this market in recent
                                                                 comprehensive electrification package to the customer
years. Many of these startups are disrupting traditional
                                                                 while also acquiring customers efficiently, traditionally a
residential solar business models by improving customers’
                                                                 challenge in the rooftop solar industry. While we have not
experience for acquiring and owning solar systems in their
                                                                 seen this business model emerge in Europe, we can expect
homes. They are offering financial innovations to offset
                                                                 it will be arriving soon as residential solar penetration
the purchasing barriers created by high upfront costs.
                                                                 continues to expand.
Companies like Solease (Netherlands) and Zolar (Germany)
are offering customers access to PV systems by paying a
low monthly fee that is lower or similar to what customers
                                                                 B. Virtual Power Plants (VPPs) and Distributed
are currently paying for their electricity, enabling customers
                                                                 Energy Resources (DERs)
to capture savings from the beginning.
                                                                 Climate Positive® Insights: As countries across
                                                                 Europe are moving to higher renewable penetration,
Startups like Enpal (Germany) similarly offer customers
                                                                 the increased reliance on intermittent resources
the value of solar installed without the burden from a
                                                                 is driving the need for, and increasing the value of,
substantial initial cost and instead offer customers fixed
                                                                 flexible resources to balance the intermittent supply.
monthly payments less than or equal to their energy
savings. They have innovated on a proven business
                                                                 Opportunities are arising for distributed assets and the
model by moving away from a traditional door-to-door
                                                                 software that controls them to provide services to the
sales business model and taking an all-digital and virtual
                                                                 electric grid. The market has historically featured many
approach to sales and marketing. According to Enpal’s
                                                                 companies with good technology, but not enough assets
Founder and Chief Executive Officer Mario Kohle, “our long-
                                                                 to control and a lackluster total available market to scale.
term vision is to be a complete clean energy provider to our
                                                                 With renewables and DERs coming on to the grid faster
customers. Our digital tools are not only the foundation
                                                                 than ever, there is now more need and opportunity for these
of this vision, but have made us more resilient throughout
                                                                 companies to capitalize on these distributed resources.
the pandemic. By using digital marketing to generate leads
                                                                 The winners in this market will be those businesses
and closing sales virtually, we were able to maintain strong
                                                                 who can cost effectively gain operational control of a
sales through Q2 and Q3 this year.” Through Princeville
                                                                 significant base of assets, aggregate them in ways to be
Capital’s investment in Enpal, we have seen how software
                                                                 able to participate effectively in energy markets, and drive
tools like their automated roof evaluation and PV system
                                                                 the most value so as to incentivize more asset owners to
design (leveraging satellite imagery, lidar and customer
photos) have helped drive down customer acquisition
costs, traditionally a major portion of the total cost to
serve and scale these businesses. These companies are            As Europe moves toward a greater use of renewables for
also creating and deploying customer facing apps to track        energy generation, we are already seeing the underlying
energy consumption and energy production of the installed        weaknesses in Europe’s grid. This is reflected by the fact
PV systems.                                                      that many countries have sporadically experienced negative
                                                                 energy prices (due to renewables generating too much
Expansion into Smart Home Ecosystem                              electricity at times of low demand), which create complex
                                                                 challenges for operators trying to balance their grids.
As the European market matures, we predict growth for
                                                                 Additional wind and solar power expected to be connected
these players as they move to other verticals related to
                                                                 to the grid in future years will only worsen the situation
the customer’s home energy ecosystem, much like the US
                                                                 and put unprecedented stress on the infrastructure. The
players have done in recent years. Players like Sunrun and
                                                                 intermittent nature of renewables will create a mismatch
Tesla have leveraged their relationship with the customer
                                                                 between supply of energy and demand, which the grid’s
to expand their product offering. All of the major players
                                                                 infrastructure - designed for centralized fossil fueled
in the US now offer solar plus storage, access to smart
                                                                 generation - is not prepared for. Further, without major
home devices that control energy use (EV chargers, smart
                                                                 advances in grid flexibility, costly infrastructure upgrades
thermostats, etc) and many are thinking of the broader
                                                                 and major amounts of new transmission lines will be
possibilities that arise from having a large installed base
                                                                 required in order to accommodate very high levels of
of solar plus battery assets (e.g. companies are starting to
develop and test out VPP and demand response offerings).
Beyond these service and device extensions, there is
also exciting opportunities for untapped market growth           European countries will need to find new ways to balance
in Europe for those residential solar companies that can         the grid with the additional wind and solar power expected
successfully attach to the new homes business. Through           to be connected. As a global innovation leader, we
discussion with leading experts in this sector we learned        asked Emmanuel Lagarrigue, Chief Innovation Officer

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Princeville Capital                                                                                 Supercharged Climate Positive®

                                                 European VPP
                                                          VPP Market
                                                              Market Growth


                                                                                                                                             $ Millions

              -                                                                                                                   -
                     2019      2020       2021       2022      2023       2024      2025       2026        2027        2028

                            Capacity                    Market Revenue                   Implementation Spending

                   Source: Guidehouse Insights

for Schneider Electric, where he                 real-time, aggregated control of the           •     KiwiPower’s (Germany) white
thought Europe has a competitive                 available energy resources to meet                   label DER management platform
advantage in scaling distributed                 the ever-changing supply needs.                      has 1GW of energy assets under
energy resources and management?                 Europe’s DER capacity will outpace                   management and a 60MW
“Among the most uniquely positioned              centralized    generation    capacity                portfolio of battery storage in 10
opportunities are those enabling                 driving the growth of the VPP market,                countries.
the proliferation of decentralized               with analysts forecasting that the             •     t i k o E n e r g y ’s (S w i t z e r l a n d )
electricity generation and storage               market size will reach $3 billion                    platform allows for the aggregation
assets. And that will be achieved                annually by 2028.26                                  and ramping up or down of small
mostly with software, platform                                                                        residential loads such as heating
business models and smart ESG                    With the growth of the DER market, we                systems, coolers, PV systems,
financing.” Expanding on Lagarrigue’s            expect to see an increasing number                   batteries or EV charging stations.
response, we expect energy storage               of new startups entering the space,
to become a key flexible asset due               and existing players scaling and               But VPP endeavors are not limited to
to the plummeting technology costs.              cementing their market position. We            startups. Traditional utilities are also
Batteries will enable the storage of             believe that there will be a greater           entering this market. Earlier this year,
surplus wind and solar energy for use            need for startups that leverage digital        Centrica (UK) and sonnen (Germany)
at a later time. As battery storage and          tools to track real time data from             aggregated a network of batteries to
other distributed energy resources               energy assets to optimize energy               sell storage capacity when the grid
(DERs) are added to the grid, they will          use. There are multiple examples               is overloaded and discharge energy
drive demand for smart grid solutions            of startups offering sophisticated             back to the grid during periods of peak
to balance these DERs. The potential             software platforms with quickly                demand.27
and value of virtual power plants                scalable business models. These
(VPPs) – networks of decentralized               include:                                       Similarly, in Italy, Enel X has begun
power generating, consuming, or                                                                 aggregating       residential   energy
storing assets which can be flexibly             •   Moixa (UK) developed a cloud-              storage systems to help balance
ramped up or down – will significantly               based software platform that               the grid.28 With utilities beginning to
increase. VPPs maximize the value of                 connects storage devices to the            pilot their VPP programs, we expect
DERs and sophisticated management                    grid and applies AI to optimize            to see significant M&A activities as
platforms are needed to provide                      power distribution.                        incumbent utilities see the threat to

   Asmus, Peter. “The European Take on Virtual Power Plants.” Guidehouse Insights, 11 December 2019,
   “UK’s most advanced Virtual Power Plan announced.” Smart Energy International. 21 January 2020,
   Colthorpe, Andy. “Virtual power plants: Enel X’s aggregated home storage goes into action in Italy.” Energy Storage News, 16 January 2020,

                                                                                                                                        Page 12
Supercharged Climate Positive®                                                                        Princeville Capital

their existing business model and seek to protect their        Frictionless Customer Onboarding Experience
positions. We anticipate, however, that with growth            and Better Rates:
capital, some of these companies will be poised to
compete and win if they can control enough assets.             •   Customers can quickly switch to the new utility
                                                                   online in only a few minutes (these utilities will
C. Digital “Challenger” Utilities                                  manage the transition with the old supplier).

                                                               •   Digital utilities allow easy access to a 100%
Climate Positive® Insights: The traditional utility
                                                                   renewable energy & gas offering at lower rates than
business model is under threat from all sides. The rise
                                                                   “traditional” utilities – often because the digital
of wind, solar, and other distributed resources is putting
                                                                   utilities are nimble, carry less overhead, and have no
pressure on the traditional utility revenue model and a
                                                                   hard asset costs that need to be recovered.
continuation of a global move towards deregulation is
loosening the grip that once dominant monopolies had
                                                               Direct Access to Energy Consumption and
on their respective markets. Customer expectations
                                                               Ability to Optimize All Energy Assets:
are also changing with consumers demanding better
customer service, digital tools, access to clean energy
                                                               •   Leverage smart meters to give customers direct
options, and the ability to monetize their own distributed
                                                                   access into their energy consumption and insights
energy resources. All of these factors are allowing a
                                                                   into their electricity bill.
new crop of challenger utilities to enter the market.
                                                               •   Provide apps and web-based sites to help customers
We have seen success with different models around the              easily manage their accounts and energy bills.
world, but the common denominator across all of them
is a digitally enabled, engaging customer experience           •   Moving to other verticals like the electric vehicle (EV)
that gives consumers access to clean energy options.               charging space. An example is OVO’s (UK) Vehicle-
The companies that are most disruptive are those that              to-grid (V2G) trial where the company offers a V2G
are able to offer all of this while leveraging digital tools       charger that optimizes EV charging costs by selling
themselves to reduce their operating costs below those of          energy back to the grid in periods of high demand
the traditional utilities. We expect the winners to be those       and charging the car when electricity is cheaper. This
that can continue to expand on their offering, adding              company has also implemented an EV tariff program
additional services like home energy management and                and signed a partnership with Polar’s EV charging
EV charging management, to give customers a simple and             network to offer charging-as-a-service plans with
optimized clean-energy experience.                                 100% renewable energy.

Europe is experiencing interesting developments in the
utility market, with new innovative business models
                                                               •   Technology platforms that enable distributed energy
arising that challenge incumbent utilities’ grip on the
                                                                   optimization for local and residential assets. For
market. It is not a coincidence that Tesla is showing
                                                                   example, Germany-based GreenCom’s white label
renewed interest in the European energy market: Tesla
                                                                   energy IoT platform connects residential distributed
has acquired a license to trade electricity in Western
                                                                   assets and enables providers to launch digital energy
Europe and has recently conducted a survey in Germany
                                                                   services that can turn these distributed energy
to gauge potential customer’s interest in a range of Tesla
                                                                   assets into revenue streams, aggregated storage
energy products and services. Experts speculate that
                                                                   capacity, and additional grid flexibility.
with the right partner in Europe, Tesla could launch a
material challenge to Germany’s incumbent utilities. But       •   Trading networks for solar and battery storage. For
Tesla is by no means the only company looking to do this.          example, Social Energy’s utility model is delivering
                                                                   renewable energy through a network of homeowners
In recent years, Europe has seen a rise in the number of           with solar across the UK. Their smart energy platform
so-called “challenger” utilities such as OVO (UK), Bulb            allows customers to generate, store and trade 100%
(UK), and Tibber (Norway). This is particularly pronounced         renewable energy and get paid a market leading
in deregulated energy markets with fully open competition          price for doing so. With their trading tariff, customers
among retail energy suppliers. These digitally enabled             get access to lower cost green electricity.
players have challenged traditional business models by
offering customers a hassle-free way of accessing green
energy and gaining more visibility and control of their
energy consumption. Specifically, the business models
we see gaining the most traction offer some combination
of these services:

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Princeville Capital                                                                                                                                                                              Supercharged Climate Positive®

                                                    UK's Electricity
                                                    UK’s Electricity Supply Market Shares
                                                                                   Shares by
                                                                                          by Company
                                                                                             Company (%)






                                                British Gas                                                       EDF                                                               E.ON

                                                npower                                                            Scotish Power                                                     SSE

                                                Shell Energy                                                      OVO Energy                                                        Utilita

                                                Utility Warehouse                                                 Bulb                                                              Octopus

                                                Avro Energy                                                       Green Energy Network                                              Small Supliers

         Source: Ofgem

A prime example of the disruption “challenger” utilities have caused can be seen in the UK where the market was dominated
by its so-called “Big Six” suppliers (British Gas, EDF Energy, npower, E.ON UK, Scottish Power and SSE). New challenger
utilities like OVO (now the second largest in the UK after acquiring SSE), Bulb and Octopus have taken considerable market
share from the established utilities.

But the story playing out in the UK is happening in markets across Europe to one degree or another. We expect many
opportunities to arise in the coming years from new utilities that can best capitalize on all of these emerging trends in the
energy market.

                                                                                                                                                                                                                                                            Page 14
Supercharged Climate Positive®                                                                                             Princeville Capital

2 . De c ar boni z in g Tr an s por t
As global climate technology investors, we have closely followed emerging regional trends that support decarbonization
in Europe’s transport sector, estimated to be approximately 24% of total greenhouse gas emissions in Europe. But more
specifically, we are focused on the trends, technologies and tech-enabled business models that reduce emissions from
road transport which is responsible for an overwhelming majority (72%) of Europe’s transport sector emissions.29

A key regional trend is the transition from carbon emitting internal combustion engine (ICE) vehicles to more Climate
Positive® electric vehicles (EVs). This is because the pace at which EVs are deployed has a direct impact on the
opportunities for associated technologies, such as EV charging, to scale faster. We believe that the pace of EV growth in
Europe in the next decade will be transformative for companies in these subsectors.

While other key EV markets in the US and China have seen dips in EV sales, Europe has experienced significant growth in
EV sales. In 2019, EV sales in Europe increased by 44%, the highest growth rate since 2016. This growth led the European
EV market to command 26% share of the global EV market as the charts below illustrate.30

               Global Electric-Light-Vehicle
                      Electric-Light-Vehicle Sales                                     Global Electric-Light-Vehicle
                                                                                              Electric-Light-Vehicle Sales
                           by Region                                                               by Region
               100%                                                                    2.5


               80%                                                                      2

                                                                       Million Units

               60%                                                                     1.5
     % Share


               40%                                                                      1


               20%                                                                     0.5


                0%                                                                      0
                  2015       2016     2017      2018    2019                             2015       2016        2017        2018      2019

          China       Europe    United States   Rest of World                    China          Europe     United States     Rest of World

                      Source: McKinsey and Company

Additionally, in contrast to a slowdown in EV sales globally in the first quarter of 2020, nearly all core markets in Europe
saw significant increases in EV penetration. In the first quarter of 2020, with the exception of Hong Kong, all of the top 10
markets for EV penetration were in Europe. Overall, the EV penetration rate in Europe increased to an industry-best 7.5%
in early 2020.31

    European Academies Science Advisory Council, “Decarbonisation of transport: options and challenges.” European Academies
Science Advisory Council. March 2019,
   McKinsey & Company Automotive & Assembly Practice. “McKinsey Electric Vehicle Index: Europe cushions a global plunge in EV sales.”
McKinsey & Company, 17 July 2020,

     Page 15
Nine of the top 10 EV penetration rates are in Europe
Princeville Capital                                                                             Supercharged Climate Positive®

                                                  EV PenetrationRate
                                                                 Rate (%)







           1      2       3       4        5      6      7       8       9       10      11     12     13      14      15      16

                      Europe       Q4’19       Q1’20                 Rest of the world        Q4’19    Q1’20

         Source: McKinsey and Company

Europe benefits from the same macro conditions that                            the goal of 1 million public chargers by 2030.
are driving the acceleration of EV adoption around the                         This is to be accomplished by offering local
world – factors including total cost of ownership (TCO)                        authorities and municipal enterprises a 50-60%
of EVs becoming competitive with and even surpassing                           subsidy on charging stations from any provider.
the TCO of ICE vehicles, maturing technologies in the EV                       This program has created a surge in consumer
ecosystem, and a larger influx of capital both among EV                        confidence in EVs, leading to a record breaking
startups and incumbent automakers that are shifting                            11% EV penetration in July auto sales in Germany.
development dollars to electric models, all leading to                       – In France, President Macron announced an €8
greater EV deployment. However, it is Europe’s policy                          billion rescue plan for the local auto industry and
environment that makes its market particularly unique and                      set a goal of having over 100k public charging
supports EV outperformance relative to the US or China.                        points next year, producing 1 million EVs annually
Here are a few key policy developments (not exhaustive)                        by 2025, and boosting EV adoption rates. This will
that we have built into our analysis.                                          be accomplished through a combination of EV tax
                                                                               benefits to drivers (up to €5,000 for the purchase
•   The European Commission’s 2020/21 emissions                                of used or new EV upon scraping ICE vehicle),
    standard – 95g of CO2/km – went into effect on                             and subsidies to condominiums, workplaces, and
    January 1, 2020 and is unsurprisingly boosting EV                          municipalities on installing charging points via
    sales as it requires that 95% of the new passenger                         any private supplier.
    vehicle fleet must meet this standard in 2020 and 100%
    in 2021.                                                         Two additional key trends are adoption and growth in
•   Many European cities and member states are pushing               the digitalization (e.g. Information and Communication
    for even more ambitious emissions reductions goals               Technology) that will benefit market segments such as
    independent of EU policy:                                        the mobility sector and new policy tailwinds for these
       – 19 cities have announced plans to reach zero                technology-enabled mobility solutions. For example,
          emissions ahead of the Green Deal’s 2050                   the automotive industry is one of the most digitalized in
          deadline, with Norway being the most ambitious             Europe and an overwhelming majority (81%) of respondents
          – resolving to have 100% of new vehicle sales be           from the European automotive sector believe the digital
          carbon free by 2025.                                       economy will bring the most positive opportunities for
       – In Germany, Chancellor Merkel announced a €50               growth.32 ICT applications in mobility are already on the
          billion COVID recovery program, which included             rise and we expect this to be accelerated due to new policy
          €2.5 billion investment into EV chargers, with             momentum generated by the Green Deal which explicitly

   European Commission, “Objectives of Digital Transformation Scoreboard 2017: Evidence of positive outcomes and current opportunities
for EU businesses.” January 2017.

                                                                                                                            Page 16
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