Cleantech Group shares perspectives on how the first half of 2025 has panned out against original expectations in January, and what to look out for moving forward

 “Adjusting to the chaos. Whether we like it or not, this is what we all need to be doing. We just ended a quarter in the U.S. that began with so-called Liberation Day (which, as of mid-June, the Budget Lab at Yale reports, has brought about a 600% increase in average effective tariff rates since Inauguration Day), and ended with the ongoing horse-trading in the U.S. Congress on what exactly will be sacrificed to fund tax cuts. Renewable energy and other areas of the cleantech innovation landscape will get hit. Just how punitively, TBD. There is endless noise andparalyzing uncertainty. But life must carry on and is carrying on.”

--Richard Youngman, CEO, Cleantech Group

Cleantech Group's Mid-Year Outlook

By Suzanne Forcese

In January Cleantech Group put forward a 2025 year-ahead outlook, with takes on what would grow, flow, and slow in 2025.

In a recent mid-year webinar Cleantech Group checks in on how well those predictions have aged. More significantly, predictions for the next 6 months are discussed.

WATERTODAY presents the highlights of the mid-year webinar led by AnthonyDeOrsey, Research Manager; Diana Rasner, Group Lead, Materials and Chemicals, and Waste & Recycling; and Luis Rebelo, Policy Manager for Europe & Cleantech for Iberia.

Investment Trends

Despite expectations Investments were stable in H1.

US and Europe overlap on AI and AI Infrastructure priorities.

• Energy security is coming clear through in US while the European focus stays the same.
• Central themes are in Fusion, Fission, EVs, Charging, Hydrogen, Data Center/Chips, AI for materials

“Investment decisions are mostly on hold due to the uncertainties with tariffs in Europe. It’s a ‘wait and see moment’,” according to Luis Rebelo.

“Investments are only telling a part of the story,” Anthney DeOrsey said. “Recent cancellations and bankruptcies inject uncertainty in the North American First-of- a-kind (FOAK)projects whereas in Europe it is the high cost of energy that is stalling progress.”

Dorsey views the flattening of grants, cancellation of projects, repeal of tax incentives, all likely to affect debt access in the U.S. Rebelo points out the difference in funding – in Europe it's the Banks and they have less appetite for risk. Also, there is more of a learning curve in understanding clean tech projects.

Expected To Grow

For starters -- Everything that is happening in and around Data Centers. “We predicted more exits along this continuum, but are seeing activity now,” DeOrsey says. “There are more shots on the Fusion Goal—improvements in computing and manufacturing are advancing, reactor models previously considered too complex.”

What's next?

• Partners and investors are more familiar with fusion milestones and as a result are backing milestone-based financing. Companies will be able to focus more on higher triple products versus fundraising.
• Nuclear Fission is experiencing rapid revival. In the U.S. more splintering of regulation, to the state level and potentially with varying regulations according to reactor design.
• As regions in Europe commercialize modular reactors, the US will have to coordinate between private and regulatory entities to certify and scale new nuclear solutions to accelerate the timeline for deployment.
• Lingering questions: which parties best positioned to finance construction of SMRs?

Semiconductors and chips have become one of the most active cleantech spacesWhat's next?

• Expect a wave of materials and nanotech innovation to grind thermal resistance down as far as possible.
• Speed-to-manufacturing will be critical—companies that can fit their process into off-the-shelf equipment will be advantaged.
• Asia Pacific innovators making a very fast play in these spaces expect stiffer competition for US and European Innovators.

“It all comes back to the Materials the further we get into the supply chain,” DeOrsey.

Critical Minerals – A reversal of supply chain dynamics

• Innovators need to strike fast while the minerals are hot—onshoring is the name of the game
• According to Diana Rasner – In the mining of critical minerals alone we’re looking at anywhere between $500B to $800B investment dollars to get us to our goals. The mines are looking to the processors who are needing to fulfill the demand obligation. “This is a global issue – smelters are shutting down because supply is in short stock. With that we must look to diversify where our virgin supply is coming from to alleviate these issues,” Rasner adds.

Enhanced Geothermal Now a “2020s” thing

The investment data only tells part of the story–geothermal companies are now moving into projects faster than expected.

What’s Next?

• Fervo’s drilling success sets a precedent –validation of hypothesis that horizontal drilling technology transferred from fracking can unlock geothermal power,
• Expect more crowding into this space.
• Expect more collaboration between companies with complementary expertise.

Wildfire Tech – Too practical to ignore

Increased financial risk, sobering effects of Los Angeles, January 2025, cuts to FEMA and Forest Service, all accelerating the tech

What's next?

• Expect the pressure from large tech companies that have at-scale infrastructure and computing power.
• Competitive advantages in the next evolution of this industry will come from physical interventions prescribed burns and autonomous suppression

In the Flow

Power resilience: Grid emphasis remains LDES pauses. Concerns over renewables projects continuity is dulling the pull-through effect on long-duration storage

What’s next?

• Tech for grids will continue to accelerate but watch closely for scale demonstrations, implementing new tech/systems in grids is a complex process often with fragmented regulatory schemes
• Long duration storage will slow in the U.S. where renewables are embattled in the current policy environment and fewer industrial electrification incentives remain.
• Long duration storage growth may splinter between the U.S. and Europe where Europe had immediate economic motivation to adopt renewables.

Non-Lithium energy Storage: challenged but alive.

Despite major price pressure from low lithium prices there may be life from niche market uptake and policy pressure

What’s next?

• Low lithium prices will continue to put pressure on producers to drive cost down (unlikely to go up to ‘22 levels)
• However, there is a potential counterbalance from the OBBB FEOC restrictions, which may raise cost for li-ion in the middle term. 
• Competition from Chinese incumbents –and potentially innovators—will layer on an additional challenge for US and EU

“Systems Change” AI made an immediate impact this year. Energy, chemicals, agriculture all require systems change -- some AI innovators are out of the gate with end-to-end solutions.

“Beyond the norm of solving specific problems in systems, there are AI companies promising to re-write the way industries work,” DeOrsey.

What's going to slow

Hydrogen experiences a sharp reversal. The inflation reduction act provided a push to Hydrogen in the U.S., but expectations were coming down to earth even before the repeal.

What's next?

• The OBBBA accelerates phase-out of the 45V-hydrogen tax credit (from 2023-2028) likely motivating projects with established tech but cooling new tech projects.
• Watch for focus of low-carbon hydrogen suppliers to shift to geographies with net-zero motivations (Japan)and plans for hydrogen to plat to expanded markets (Korea’s plan to expand to 2100 hydrogen buses by 2030)

Tightening market policy signals chilling batteries

Bankruptcies still fresh in people’s minds, changing incentives around EVs

What's next?

• Tax credits for EVS now to be phased out by Sept 25 softening but not limiting demand.
• Expect some consolidation of Chinese players as price pressures continue to compound, expect more drive for global geographic diversity by Chinese players
• Accelerated 45X advanced manufacturing phase-out and tightened FEOC restrictions for batteries will be a second wind for U.S. battery recyclers

Last in the Slowing Category is Carbon Removals – Supply chasing demand

Oil & gas big tech keeping the space moving, but policy melt + ESG pullbacks threaten cost and revenue profiles in the space.

What's next?

• The OBBBA reduces incentives for DAC, DAC projects still largely require premiums to be economically viable, expect minimal impact beyond the existing challenges to DAC
• Transferability of tax credits still intact, but with foreign entities restrictions, further tightening the pool of buyers outside of big tech, oil and gas.
• The OBBBA puts carbon utilization on par with storage in CCUS, co-benefits (e.g. carbon-to-value) will more likely be long-term value creation pathway for companies in this space.

Stakes In the Ground for 2025

Safe Bets:

• Tightening FOAK Space, more project cancellations, input costs (electricity, supplies) to remain volatile
• Expect U.S. regulatory change to ease nuclear development
• Record breaking PPAs with AI/data center vs. Everyone else
• Partnerships >domestic supply/dominance
• Focus on clean-tech and defense nexus
• Continued focus on grid resilience -- innovative solutions and LDES/ Storage

Coin Flips

• A geothermal IPO
• Cleantech/healthcare overlaps
• Food security will start bleeding into resource security discussions
• Major fights for water rights will break out in the U.S.
• E-waste mandates/incentives start forming globally
• End of the European partition on nuclear – AI and Hydrogen?
• Renewed focus on water security

Wild Cards

• AI for clean tech hit by another “wave of creative destruction”
• Geoengineering gets a breakout or two – watch co-benefits
• O & G majors M & A of small mid-tier mining companies
• Biogas becomes next hydrogen wave
• Advanced Geothermal firm, clean power, and industrial heat
• Major announcement on industrial electrification

Webinar recording https://tech2.cleantech.com/-clarity-through-chaos?utm_medium=email&_hsmi=370404326&utm_content=370404326&utm_source=hs_email