Why climate tech startups get this one thing wrong

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Oct 31, 2024

Melissa Ball, associate director of technology at Energy Impact Partners (EIP), dives into the crucial yet often misunderstood world of techno-economic analysis (TEA) for climate tech startups. She emphasizes common pitfalls like bad assumptions and focusing on components instead of systems. The discussion highlights the dangers of false precision and unhelpful metrics, urging startups to adopt a broader perspective to enhance economic viability and competitiveness. Tune in for insights that could redefine the future of climate tech!

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ADVICE

TEA Throughout Development

Use techno-economic analysis (TEA) at every stage of technology development, from initial brainstorming to market refinement.
TEA helps define targets, prioritize resources, and identify what truly matters for a product's success.

ANECDOTE

Unreasonable Assumptions (Electricity)

Startups often make unreasonable assumptions, like assuming low electricity prices alongside high capacity factors from renewables.
This creates an unrealistic scenario where a company assumes constant access to cheap renewable energy.

ANECDOTE

Unreasonable Assumptions (Organics)

Another unreasonable assumption is that organic molecules are always cheap, neglecting purification costs.
Redox flow batteries, using organic molecules, must consider these costs to compete with alternatives like LFP.

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This might be our wonkiest topic yet: Techno-economic analysis, or TEA.

Before a startup proves its technology is commercially viable, it models how a technology would work. These TEAs include things like assumptions about inputs, prices, and market landscape. They help investors and entrepreneurs answer the question, will this technology compete?

TEAs are important to the success of an early-stage climate-tech company. And a lot of startups get them wrong. As an investor at Energy Impact Partners (EIP), Shayle and his team see a lot of TEAs—and have some pet peeves.

So what can startups do to improve their TEAs?

This episode is a re-run from October 2023. We’re making a new episode on TEAs soon – stay tuned. But to start, we’re running this episode as a way to set up our next one.

In this episode, Shayle talks to his colleagues Dr. Greg Thiel, EIP’s director of technology, and Dr. Melissa Ball, EIP’s associate director of technology. They cover topics like:

Bad assumptions about things like levelized cost of production
Focusing on a component instead of a system
Focusing on unhelpful metrics
Using false precision—something Shayle calls “modeling theater”

Recommended Resources:

Activate: Techonomics: Establishing best practices in early stage technology modeling
Department of Energy: Techno-economic, Energy, & Carbon Heuristic Tool for Early-Stage Technologies (TECHTEST) Tool
National Renewable Energy Laboratory: Techno-Economic Analysis

Catalyst is brought to you by EnergyHub. EnergyHub is working with more than 70 utilities across North America to help scale VPP programs to manage load growth, maximize the value of renewables, and deliver flexibility at every level of the grid. To learn more about their Edge DERMS platform and services, go to energyhub.com.

On December 3 in Washington, DC, Latitude Media is bringing together a range of experts for Transition-AI 2024, a one-day, in-person event addressing both sides of the AI-energy nexus: the challenges AI poses to the grid, and the opportunities. Our podcast listeners get a 10% discount on this year’s conference using the code LMPODS10. Register today here!