Three French companies have emerged as the most prolific venture capital dealmakers for new energy technologies as the country starts to seek out low-polluting alternatives for its aging nuclear reactors.
Engie SA, Demeter Partners SA and Total SA participated in more green-energy deals than any other venture capital firms last year, according to the most recent data compiled by Bloomberg New Energy Finance. While the $62.3 million that French funds put into the industry is a fraction of the overall $7.5 billion VCs invested in green energy, the number of deals indicates a budding community of early-stage financiers outside Silicon Valley.
Even as Electricite de France SA seeks to prolong the lives of aging nuclear reactors, the leading presidential contender is pushing for a shift toward renewables and companies are gearing up to make bigger investments in wind and solar farms. The VC funds are backing technologies that modernize the power grid to cope with power supplies that vary with the weather and can accommodate more electric mobility.
Even so, the government will need a replacement for aging reactors, and renewables are looking increasingly cheap. Germany in April awarded the biggest contracts yet to build offshore wind farms without subsidy, prompting developers such as Dong Energy A/S to forecast a drop in technology costs.
“All outcomes require the government to think about accommodating the growing share of renewables,” said Traum from BNEF. “Policies will be needed to incentivize technologies that help integrate them into the grid.”
Total Venture
The French government has put money into eight of the 10 active funds managed by Demeter Partners, a Paris-based investor that stakes as much as a third of its seed funds in startups. The European Investment Fund is another key investor at Demeter, which has been putting money into technologies that help grids handle renewable energy.
“Regarding the new frontiers such as storage, energy efficiency and smart grids, I think there’s a lot to do,” said Lionel Cormier, managing director at Demeter. “The energy transition is on the way, this will open up a lot of opportunity for the French players.”
Total’s venture capital unit similarly sees opportunities in computer software and other gadgets that facilitate the way electricity is used.
“For renewables energies, one of the key elements is how you do connect to the grid, how do you arbitrate between what you produce and what you consume,” said Francois Badoual, CEO of Total Energy Ventures. “That’s clearly an area of interest for us.”
While its parent remains focused on oil exploration and production, Badoual unit has invested about 160 million euros ($170 million) in clean energy-related technology companies since 2008. Most of them are in the U.S. where activity levels have been high, but he also sees opportunities in France, particularly in the emerging clean mobility sector such as car-sharing and digitalized parking.
Paris’s new role in clean technologies dealmaking may continue. Engie’s Lepercq says that his company’s venture capital unit has invested more in the first quarter than in all of 2016.
“In VC, we’ll do fewer deals in 2017, but the amount is already exceeding last year,” he said. “Each investment is bigger, their number will be more limited, and the vision will be much more strategic.”