Europe is at a turning point.In just four years, Europe has been hit by two major energy shocks that have put our households, businesses and societies under severe pressure. The first was the full-scale invasion of Ukraine that prompted a pivot away from Russian fossil fuels; the second, most recently, was the closing of the Strait of Hormuz. Together, these have forced Europe to rethink its sources of energy.
European deep-tech companies in the energy storage sector are in a unique position to contribute to strengthening the continent’s energy resilience. However, current EU financing models and policy frameworks are not equipped to meet the needs of rapidly scaling energy-tech companies. At Altris, we have successfully raised funding from several EU programs, but we’ve also encountered many bottlenecks and hurdles – and learnt a great deal along the way.
The system is evolving, but not fast enough
There’s no doubt the EU financing system is evolving to meet the needs of our changing energy landscape. That’s the good news. But things are moving too slowly relative to the needs of the critical tech companies that are now ready to scale and modernize Europe’s energy infrastructure. Institutional inertia is coming up against the needs of fast-paced innovation in a way that is hampering the Union’s ability to build stable fossil-free energy systems. The gap is felt most acutely at the scale-up phase – the so-called ‘valley of death’ between venture and growth capital – where promising companies find themselves today with no instrument built for their stage.
There is also the EU’s inherent structural challenge: issues of public funding mechanisms require the consent of all 27 member states. This is an impediment compared to China and the US, who can act more resolutely. For European energy tech companies like Altris, speed of capital deployment is itself a competitiveness issue that Brussels needs to address.
The indispensable role of public capital
Private and public investors are by nature different in terms of mandate, time horizon and risk appetite, and this is precisely why private capital alone cannot be expected to solve the challenge. While VC and PE firms are often fast-paced and highly skilled in supporting companies on their scaling journeys, they are ultimately accountable to LPs looking to make returns within a defined time frame. Public capital is slower moving but also more patient, with no LPs looking to make quick gains. For companies in the energy tech space, this distinction is key: a company whose technology can take many years to mature and be fully deployed in contexts as complex as the energy system will likely find it hard to depend on private capital alone. Going forward, the EU should thus prioritize building out its public capital instruments, as these are a vital complement to private investment.
Sovereignty as a driver of action
Europe has slowly realized that its battery value chains are volatile and largely dependent on the benevolence of non-European actors, creating a strategic liability. The Critical Raw Materials Act is a strong signal that Europe now has come to terms with the need to secure a domestic upstream supply of battery materials. However, the few European companies mining for battery-critical minerals today still find themselves having to rely on Chinese plants for refinement. So, we still rely on Chinese imports, because there is simply no scale in Europe. As long as this is the case, true “made in Europe” batteries remain an aspiration. At the same time, European companies find themselves looking abroad for investments and support due to the lack of homegrown support. New approaches to financing are critical to address this.
It is thus encouraging that the European Investment Bank has stated its continued conviction in building a competitive, sovereign European battery industry. The Commission too has begun leaning forward on the financing issues. It now appears willing to break a few of the taboos that have previously stood in the way of a more ambitious approach to financing. And yet, the question is whether this ambition will be matched by action – especially given that large EU initiatives nevertheless must pass through all member states, which presents the risk of good ideas being diluted into something quite toothless.
Four lessons on how to navigate EU funding
At Altris, we have drawn several lessons from navigating the EU funding landscape. These lessons point both to what companies can do today and where the system itself needs to improve.
- Lesson 1: You have to try in order to calibrate. Altris has had both successes and failures with raising European capital, but engaging with the public funding instruments is the only way to learn which one fits your stage.
- Lesson 2: Don’t underestimate the administrative burden. Applications take serious time and resources. While networks like InnoEnergy can be decisive in helping you navigate documentation requirements and other complexities, not every company has that support.
- Lesson 3: Treat the funding landscape as a puzzle. One instrument can exclude another later on, so do the due diligence up front and sequence carefully. Combining different kinds of funding can be very beneficial if done right.
- Lesson 4: Don’t wait for simplification. The Commission recognizes the complexity of the current financing landscape and is looking at how to simplify, but companies cannot rely on that happening anytime soon. Plan for the system as it is today.
Europe has the intention, the institutions and the political will. What it now needs is the courage to match ambition with action – and to break with the habits and assumptions that have held it back. The Commission has itself spoken of the need to break “a few taboos”, and we take that seriously. European companies in battery and energy tech are ready to scale and help build a more resilient energy system, but we need Brussels to move faster and be bolder, with financing instruments that are fit for purpose. It is time to stop hedging and start building.