Incentive tracking apps gain firm footing as more than $1 trillion flows into climate technology

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When you spend time with people in the world of climate change technology, you quickly realize that many of them have things in common. It’s just that they’re not used to having a lot of money.

That’s because for many years, climate change has been a cost, not an opportunity, for many companies. Fortunately, that has recently begun to change, as investors flock to the space seeking opportunities in a “double-digit trillion dollar market” that is “largely isolated from general technology investing.” Joshua Posamentier, Managing Partner at Congruent, told TechCrunch+.

Investment in climate change technology has accelerated over the past five years. The sector has not been completely immune to the economic slowdown that has hit other startup industries over the past few years, but it did show signs of an uptick in the third quarter.

Part of this continued strength is due to both the United States and Europe’s commitment to climate-smart industrial policies. Between the U.S. Inflation Control Act (IRA), the bipartisan Infrastructure Act, and the EU’s Green Deal, nearly $1 trillion in tax credits, subsidies and other benefits will be provided for climate and energy-related investments and purchases. incentives are available.

But that multi-trillion dollar forecast may actually be conservative. Many tax deductions have no caps, so your IRA alone could give you more than that. Goldman Sachs estimates that the law’s climate provisions could provide $1.2 trillion in incentives and spur about $3 trillion in private investment.

This isn’t enough to bring the US or EU economies to net-zero carbon emissions (or even make up for past emissions), but it’s such a large down payment that it may be difficult to figure it all out.

Indeed, climate change technology today is in an unusual situation where it is (relatively) awash with money, with many websites, apps, and startups tracking it all and helping businesses and customers maximize their incentives. We are in a hurry to support them so that they can be put to good use.

understand everything

“Unfortunately, there is no comprehensive database of all these rebates and incentives,” said Thomas Stevens, co-founder of Upfront, a startup that catalogs incentives for merchants.

Tom Carden, director of engineering at Rewiring America, a nonprofit organization that advocates for the electrification of the economy, says it’s a good business practice for companies to collect, understand, and incorporate these incentives into their sales propositions. It is said to be costly.

Financial incentives for improving energy efficiency are nothing new. Although many states and local governments have implemented energy efficiency programs for decades, many of these programs have evolved independently, and a lack of consistency and centralization has led to industry and consumer It has become a burden for them. Carden recalls that the Colorado electrification startup spent countless hours developing and maintaining an incentive-tracking spreadsheet so vast that it was nicknamed “The Big Kahuna.”

When the IRA was passed in 2022, the 752-page law not only brought unique incentives, but also brought national attention to the complex world of incentives that came before it. Rewiring America took the opportunity to simplify things for consumers and introduced the IRA Savings Calculator. The idea behind it is to “explain the policy itself, because it’s not clear how much value the policy is to each household,” Carden said.

The organization says the calculator is used by 600,000 households, and Carden’s team has built an API that allows other organizations to access the data underlying the tool. Carden said about 200 people have signed up so far.

Currently, the IRA Savings Calculator focuses solely on IRAs (of course), but Rewiring America is also working to understand existing electrification and efficiency incentives. Some of these offers are run by the state, some by local governments, and some by state-mandated energy efficiency programs funded by utilities. The result is a patchwork of incentives that are difficult for even the most informed consumers to digest.

“We’re not alone in this. Other nonprofit and for-profit companies are also trying to figure out how to analyze this data,” Carden said.

One of those companies is Upfront. The company was founded by Mr. Stevens with Andrew Hoskins after Mr. Hoskins spoke out about applying for his rebate on heat pumps. Stevens told Hoskins, “You just spent five years at Affirm. You’re an engineer. If you can’t figure this out, what’s your everyday customer going to do?”

The two began talking to sellers to gauge interest in a service that would streamline the efficient rebate process. They received positive feedback, honed their pitch and launched their company, before eventually joining his winter 2023 batch at Y Combinator. The company has raised about $1 million in pre-seed funding, Stevens told TechCrunch+.

Upfront takes a seller’s product listing and matches its inventory with data about energy efficiency, rebate availability, and more. Depending on what a seller wants from their site, the startup will provide access to her Javascript snippet or API to allow sellers to display the presence or absence of rebates on their product pages.

“Customers can simply click on the product page and see that a $2,500 heat pump now costs $700 after rebates and incentives,” Stevens says. In the future, Upfront hopes to offer financing for these purchases.

Find non-dilutive funds

While the consumer tax credit for IRAs gets a lot of attention, there are also funds available to startups and established businesses. Hydrogen, energy storage, solar, and carbon capture are all key areas covered by the law, and many of these incentives are production tax credits. Although they are not a direct source of funds or awards, they can help make the economic situation more favorable and, as a result, strengthen a company’s application for other incentives, including grants and other awards.

Government grants and awards are a great source of non-dilutive funding, but they are never free. Pioneer founder Mitko Simeonov told TechCrunch+ that “one of the most painful aspects that companies face when applying to many of these awards is the timeline and process.” The application itself is not simple either, he added. “It takes a lot of time and effort to get these things right.”

Simeonov estimates that climate change technology companies could be eligible for tens of billions of dollars in government funding. To help these companies win more awards, Pioneer maintains a database of available government funding and uses AI models trained on public and private data about companies to identify potential matches. I suggest.

Once a client decides to start an application, Pioneer creates a dashboard to help manage the process. Then, to create the application, the startup uses generative AI trained on the client’s previous grant applications and other information to create drafts and supporting documents. If the AI ​​thinks something is missing in an application but cannot suggest a solution, Pioneer’s software will prompt clients to ask “probing questions,” Simeonov said.

Pioneer’s direct competitors are government-funded consultants that do much the same work. But the startup hopes its software is sophisticated enough that expensive, labor-intensive consulting won’t be needed as much. Simeonov said he already has several customers in areas such as logistics, batteries and electric vehicles.

Just the beginning?

The rise of incentive tracking apps and startups suggests that climate technology is at a unique point in its history. After years of struggling to find its footing, the sector is being bought by investors as well as governments around the world.

There are always risks in building tools based on business models or relying on politicians’ penchant for writing, but the coincidence of the IRA, bipartisan infrastructure law, and the Green Deal represents a sea change in industrial policy. It suggests that you are experiencing a change that will be difficult. counter. There is a possibility that the EU could face a fiscal crisis or that a future US administration could muster support in Congress to repeal the landmark law, but the possibility of that happening as the policy is more fully implemented seems to be getting lower.

The IRA’s climate change provisions are scheduled to be repealed in 2032, meaning companies like Upfront and Pioneer, as well as Eli and Pencil, will have nearly a decade to build their customer bases. And the market is likely to grow: McKinsey estimates that the world will need to invest an additional $3.5 trillion in energy and land use every year until 2050 to tackle climate change.

While the past few years may have felt like a big deal, the next few decades could be even bigger for climate technology. Fund flows are unlikely to slow down anytime soon.

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