Climate tech’s biggest hits and misses in 2023


Female archer in the field at sunset
Image Credits: myshkovsky / Getty Images

Climate tech might have been down in 2023, but it’s not out yet.

That’s not surprising, really. For the broader economy, this was the year of the recession that never arrived. Investors grew reticent to write checks and skyrocketing interest rates blunted profitability projections for large climate tech projects like offshore wind installations.

Yet, while investment in climate tech declined 40% in the third quarter of 2023 compared to a year earlier, according to a PwC analysis of PitchBook data, the sector fared far better than the broader market, which saw a drop of 50% in the same period. And climate tech’s share of all checks written to startups has risen steadily over the years, amounting to 10% of all venture capital and private equity investments through the third quarter of 2023.

What’s more, early-stage deals represent only about half the total, continuing a trend that emerged in 2020.

That means climate tech is all grown up, right? In some cases, yes. But the sector is still riddled with risky bets that have the potential to reap enormous returns along with substantial climate benefits.

This year has been one full of drama for climate tech. Let’s dig in.

Fusion goes boom while fission goes bust

Late last year, the fusion world was awash in excitement. In December, the team at the National Ignition Facility said they had produced a net-positive fusion reaction, the first time anyone had been able to do that outside of a hydrogen bomb.

There was a big caveat, namely that the “net positive” qualifier met the scientific definition: The energy going into the reaction was measured at the point where the lasers hit the gold cylinder containing a BB-sized fuel pellet. That’s a heck of a qualifier, but crossing that scientific threshold gave other fusion projects confidence that their designs could pan out. The whole pursuit was no longer about chasing a theorem.

Then in August, the team announced that their first success wasn’t a fluke. When the facility’s 192 laser beams converged on the target and compressed the tiny fuel pellet, the resulting fusion reaction released more than 3.5 megajoules of energy, an improvement of more than 10%.

The biological theory that explains why investors are bullish on fusion

The breakthroughs probably don’t budge the timeline for commercial-scale fusion power, currently estimated to be about a decade away, but they do lend credence to the idea that fusion could become a key source of carbon-free power before 2050.

The same couldn’t be said for fission power, which had a pretty terrible year.

The newest fission reactor was hooked up to the grid in August, with its twin scheduled for early next year. Together, they’re seven years behind schedule and more than $16 billion over budget. Meanwhile, costs for other fission designs aren’t looking any better: Renewables paired with storage significantly undercut every other approach.

Fission suffered another blow earlier this month, when small modular reactor startup NuScale said it was canceling its first reactor, which was to be built for a utility in Utah. It’s not the end of the company or fission power, but it’s not a good look either.

Room-temperature superconductors remain lukewarm

Room-temperature superconductors hold enormous potential to revolutionize a number of fields, from fusion power and the electric grid to mass transit and medicine. But they can’t seem to elevate themselves above wishful thinking or outright scientific misconduct.

This summer, a small Korean lab headquartered in the basement of an apartment building dropped evidence purporting to support the discovery of a room-temperature superconductor. Called LK-99, the purported superconductor took the internet by storm, resulting in multiple labs and individuals running their own experiments to test the supposed “evidence.”

What if room temperature superconductors were real?

But like many other memes, LK-99 quickly fizzled. Within a few weeks, other scientists had investigated the material and determined that it was little more than a refrigerator magnet made from nontraditional compounds.

Then, earlier this month, another candidate bit the dust. Documented in a Nature paper published in March, the material required enormous pressure to exhibit what the paper’s authors claimed were superconducting qualities. But as other researchers scrutinized the paper’s data and methods, they began to question whether the new wonder material was more fanciful than factual. Most of the authors soon also called for the paper’s retraction.

In November, that’s exactly what happened, dealing another blow to Ranga Dias, the lead author. It wasn’t the first time one of Dias’ papers had been retracted, nor was it the first time he allegedly fabricated claims. A TechCrunch+ investigation in March revealed that Dias had falsely said his company was supported by big name investors.

It wasn’t a good year for room-temperature superconductors. Will next year be better? I wouldn’t hold my breath.

IRA hits the road

The Inflation Reduction Act might have been the headline of 2022, but it wasn’t until this year that the law started to exert its force on the market.

Batteries are already a hot commodity, but the IRA’s generous incentives for domestic production spurred a flurry of construction across North America as companies raced to set up gigafactories. Automakers and battery manufacturers have already pledged nearly $100 billion in battery-related investments.

Beyond North America, the IRA also sparked a tech arms race with the European Union. The bloc, which had been accustomed to the U.S. dragging its feet on climate action, was caught off guard by the law’s $369 billion worth of incentives. The initial outrage has mellowed somewhat, with the EU announcing its own proposal, the Green Deal Industrial Plan, which seeks to redirect €245 million worth of pandemic funds toward climate-related companies.

Good with the bad

While 2023 wasn’t a breakthrough year for climate tech, it wasn’t a bust either. On balance, things continued to trend up.

For evidence, look to venture capital firms. Several have closed or started raising sizable new funds. Union Square Ventures has started putting its new $200 million climate fund to work. In July, Azolla Ventures announced a $239 million fund that will invest in pre-seed and seed round companies. At One Ventures, a relatively new climate tech firm, closed a whopping $375 million fund in October. And recently, Congruent Ventures, an early-stage firm, started raising a $250 million fund.

That’s a bet of over $1 billion across just four firms — a sizable vote of confidence in a sector that refuses to be written off.

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