Climate technology startups can focus on the reduction of carbon emissions, but some capitalize on the outbreak of demanding energy centers supplying the BOOM of the AI.
Technology giants such as Amazon and Microsoft accelerate their investments in AI infrastructure, while simultaneously looking to reduce carbon costs and emissions.
This has created new opportunities for climate startups to evolve on a market known for its notable carbon footprint. Data centers currently represent 1 to 2% of global electricity consumption, and estimates of the search for Goldman Sachs, this will increase to 3 to 4% by the end of the decade.
“We definitely feel a lot of market because of the AI boom,” said Luca Mezossy-Dona, CEO of Ionate, a London-based startup developing equipment to detect the disturbances of the electricity network.
There are many challenges associated with the connection of data centers to the network, told BI Bi. “We had people say that it can take two to five years, in some geographies, so that the data centers connect to the grid,” she said. “So, consequently, it is important to obtain an uninterrupted electrical supply.”
Data centers can also exert additional pressure on local networks. For example, Elon Musk’s startup, XAI, asked for 300 megawatts of grid power for its supercomputer in Memphis and obtained approval for 150 megawatts.
It is not only the startups connecting the data centers to the grid that obtain a boost from the AI arrow. Gawley said she saw growing interest in more reliable and decentralized energy sources, such as nuclear, clean hydrogen and energy storage.
Matthew Nordan, general partner at Azolla Ventures, told BI that he saw an increasing demand for data center startups among the portfolio of his business. He stressed that startups such as Scalvvy, which makes modular power electronics for data centers racks to convert voltage and current with lower losses, and Zanskar, a startup using AI to increase the success rate of geothermal power, which he called a “critical” electricity source to “the AI centers of power”.
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Big Tech Boost
Material energy startups, often with a high intensity of CAPEX, find new customers with deeper pockets – hyperscalers and large technological companies.
Harry Morgan, director of 7% Ventures, told Bi that startups take advantage of Big Tech’s own energy commitments to evolve their technology, because giants like Microsoft and Amazon test emerging technologies such as small modular reactors to obtain projects to provide energy faster.
“This is less on the side of pure energy production, but what we have seen recently was focused on building projects and the ability to deploy things at speed,” said Morgan. “We see applications such as robotics for solar manufacturers and the integration of batteries for new generation assets.”
These income opportunities are detached from a slower funding period for climate startups. In the first quarter of 2025, climate startups obtained $ 10 billion, down 50% compared to the $ 20 billion raised in the first quarter of 2024, according to Pitchbook data.
A Google data center. Images AP
Balance decarbonization with profit
However, climate technology startups will face the challenge of balanced their broader decarbonization objective with the environmental impact of the service of a carbon -high sector.
The founders and investors told Bi that they did not see it as a mutually exclusive situation because they believe that this is an opportunity to make industry more sustainable.
“The broader impact of data centers could be really positive from the climate point of view,” said Morgan. If more renewable energy sources are used to regularly supply data centers, then solar and wind energy will become more deployable, which reduces the cost of these energy sources, he added.
Nordan agreed with feeling. “I do not see any compromise inherent in this for climate technology startups. When you are not good to reduce embodied emissions of cement or tension conversion with lower losses, it is impacting that you do it in a data center or a more prosaic environment,” he said.
“The first work of all CEOs is to capitalize on the company, and the tide can go out in this category for a while,” added Nordan, referring to the drop in the financing of the climate startup and the need for the founders to find tenable sources of income.
“So all leader that is worth their salt will determine how to use data centers as a entry market and the cost of others as they evolve,” he said.
The data centers are hungry for power, Mezossy-Dona said: “But good innovations will make them fundamentally more effective.”
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