A look at Recent M&A Activity In Renewable Energy Start-Ups and the Regulatory Environment that supports it

By: Adbi Adan

When we think about the role renewable energy plays in our lives we rarely think about large companies. Our main focus on leading a greener life consists of turning off the lights, taking shorter showers and using public transportation. On the larger scale huge mergers and acquisitions of startups in the renewable energy space are proving to be a huge driver of the acceptance and adoptions of renewable in the business atmosphere. These acquisitions also serve as a way some of these companies can hedge their bets and go further into renewables.

One recent acquisition that made waves in the startup world was Google’s acquisition of Nest Labs LLC. Nest is famous for their Nest thermostat, a thermostat that utilizes technology to limit waste and distribute heat or air conditioning effectively. This acquisition costed Google 3.2 Billion dollars. Many have speculated Google’s acquisition of Nest is a bold into the energy space. Google also this year reached its goal of becoming a 100% renewable run company. Google is making bold moves into the energy space and it just shows that these big companies view the energy market as a market they have to be in. Another tech company that is expanding its reach more aggressively in the renewable energy space is Tesla. Tesla currently is investing heavily in their electric vehicles, both cars and trucks, to solar roofing. A lot of this is coming from Tesla’s CEO Elon Musk. Musk also invested heavily in SolarCity another subsidiary of Tesla focused on drastically reducing the cost of solar panels.

Lately valuations for energy companies has been growing exponentially. Just last year the average Series A round for a clean energy company was 7 million up 2 million from 2015. Many venture capitalist are taking a long bet on an assortment of clean tech companies, but still are a bit hesitant. It’s widely acknowledged that renewable energy is the future, but for VCs this area is still surrounded by a lot of uncertainty, particularly around regulation. Regulation around energy policy in the past few years has been extremely volatile. With the span of a few a few years the United States went from setting higher fuel standards for cars to pulling out of the Paris Climate agreement. This vast change is what some say is driving away institutional capital from investing more heavily in clean tech start-ups.

When we think about the role start-ups are going to play in ushering in the new wave of renewable energy it is pivotal we create a regulatory environment that not only fosters growth, but also protects nature. The current problem with regulation in the energy space is that either it’s too extreme or too lax. This type of regulation in no way will help start up reach the scale needed to tackle the climate change crisis our generation is currently facing. Cleantech startups possess a skill that has the ability to impact not just our energy consumption, but how we interact with energy all together.