Written by Mark Brownridge, Strategic Relations Director, and former Director General of the Enterprise Investment Scheme (EIS) Association.
I’ve been lucky enough to be involved in the EIS industry for over 20 years now and particularly during my time as Director General and COVID, saw first hand how technology and innovation can revolutionise not just companies but whole industries. And the pace of revolutionary transition can be rapid too. Who for example had heard of, yet alone was using, zoom pre pandemic? And yet within 6 months of 2020, we were all zoom veterans. Zoom went from 10 million daily meeting participants in December 2019 to 300 million in April 2020 ( Source: Statista)
Covid of course forced revolution upon us at great pace but more widely, technological transition has been progressing for some time. Whilst the Covid threat has dissipated, the world still faces huge problems and challenges, and technology remains the best solution to address these. Macro trends tend to drive the best business ideas. And one of those macro trends may well have experienced a transition “moment” in 2024.
Why? Ratcliffe-on-Soar, the country’s last remaining coal-fired power station, closed for good in 2024 making the UK became the first advanced economy to quit coal. Why is this important? Time to put my long ago gained history degree to good use and give you a history lesson.
Arguably, one of the most important times in Britain’s history is the period from 1750-1900, better known as the Industrial Revolution. The Industrial Revolution established Britain as the foremost economy in the world and saw a number of huge technological advances that impacted every person and every aspect of their life in Britain.
But quite literally what powered the Industrial Revolution was the transition to new energy sources. Instead of people or animals, some industries began using water and wind as sources of energy. People started using coal for fuel instead of wood or peat. Coal was also used to heat water to make steam for the newly invented steam engine. Oil and natural gas were used for heating and lighting.
People, industry and indeed economies therefore became reliant on coal, oil and gas. And their use didn’t go unnoticed by countries across the world as they too took advantage of these new sources of energy to improve their economic lot. For the next 250 years, these relatively cheap and abundant energy sources fuelled the world without, of course, anyone realising the huge climatic toll that was being paid.
Slowly, the link between these energy sources and climate change became startling evident and countries began to introduce climate policies to try and encourage more sustainable, cleaner energy sources. Since then, coal’s demise for example, in the UK has been rapid. In 2012, it generated 40% of the nation’s electricity but the EU’s carbon trading scheme, which forced power companies to buy credits if they wanted to emit carbon and the UK’s carbon tax, introduced in 2013 have been ruinous for coal.
“Because coal is so polluting it became much more expensive to generate [electricity with] and just couldn’t compete with renewables,” Frankie Mayo, lead UK analyst at the energy thinktank Ember has said. “Interestingly coal was replaced by wind and solar, not gas. It shows the speed at which this transition can happen. Since 2012, UK power sector emissions have fallen by three quarters .” At the same time, renewables met a record 48% of the UK’s electricity needs in the first quarter of 2023 – an impressive figure when you consider that 13 years ago they accounted for just 7%.
So that transition “moment” I mentioned earlier could more appropriately be called the fourth major transition to different energy sources in our history.
The first (1830-1950) was the shift from traditional biofuels (primarily wood) to coal, the second (1950-1980) consisted of the development and adoption of refined oil products, and the third (1980-2020) involved an increased reliance on natural gas. This transition from fossil fuels to low carbon energy could be the most important energy transition we ever make given what’s at stake as far as our climate is concerned.
The major difference from the other 3 transitions is that this one isn’t driven by economic prosperity but by sustainability. The current energy transition does not only involve a transition to a low-carbon economy; it is much more complex than that. The World Economic Forum defines an effective energy transition as “a timely transition towards a more inclusive, sustainable, affordable and secure energy system that provides solutions to global energy-related challenges, while creating value for business and society, without compromising the balance of the energy triangle.” In other words, although the current energy transition is mainly driven by environmental sustainability concerns (i.e. climate change concerns), it will only be successful if it simultaneously provides energy security and access, and facilitates economic growth and development. Others are far better qualified than me to give the climate arguments so I’ll stick to the economic argument.
Firstly, what sectors should we be focusing our economic efforts on. Well, the good news is that the two biggest energy related CO2 emission sectors are power generation and personal vehicles. In both these areas, good progress is being made.
However, other sectors are currently lagging, these include transportation, buildings and industry. And time is against us, with net zero policies in place for 2030 and ultimately 2050 as well as the acknowledgement that electricity demand is on course to double by 2050. Secondly then, how do we get there. This is where I take off my history hat and put back my EIS hat on because startups can play a huge part in leading the fourth major energy transition.
Already, startup founders are creating intelligent systems that help consumers and businesses manage energy usage more effectively—whether through smart tariffs, advanced storage systems, or better integration of clean technologies like solar, heat pumps and electric vehicles.
Then there’s electrifying transport fleets, greening buildings, and finding alternatives to carbon-intensive industrial processes. All ripe for innovation for a determined founder or founders. And those who crack these challenges will be key to reducing emissions and accelerating the global energy transition, creating the future infrastructure of the long term zero carbon economy. And in their quest to build a better world, as a happy by product they will also build world-leading companies and be part of the next cohort of unicorns.
Clearly, as EIS and VC investors, its our job to unearth this cohort and it’s why we are so excited by the energy transition that is taking place right now. At Blackfinch Ventures, our investments of nearly £100 million into startups along with our team's experience as founders and entrepreneurs, allow us to recognize the immense potential for innovation in the energy transition.
Our energy team owns and manages over 120MW of renewable assets and our property team have invested over £450 million into the built environment across commercial and residential. This breadth of knowledge, experience and contacts gives us unique insight into the challenges in these sectors and is precisely why we recently launched our Energy Transitions EIS Portfolios product.
Investing in the energy transition not only provides potential environmental and health benefits as well as cost efficiency (who doesn’t want lower energy bills?!) and energy security but also substantial economic benefits which as the World Economic Forum pointed out above, will be crucial in ensuring the fourth energy transition is a success and which investors in the transition can enjoy a part of.
To learn more about this new product and the investment opportunity for your clients, you can download the brochure on the EIS product page of the website.
