On Monday, Bill Gates announced the establishment of a $1 billion investment fund, Breakthrough Energy Ventures, geared towards fighting climate change through clean energy innovation.
The Microsoft co-founder and philanthropist is joined by 20 like-minded investors, including Alibaba founder Jack Ma, former New York City mayor Mike Bloomberg, Silicon Valley venture capitalists John Doerr and Vinod Khosla, former energy hedge fund manager John Arnold, Amazon.com CEO Jeff Bezos, Reliance Industries chairman Mukesh Ambani, amongst others, whose combined net worth is nearly $170 billion.
The BEV fund has a 20-year duration and is set to begin making investments next year. Investments will largely go to funding the commercialization of new technologies that reduce greenhouse-gas emissions in areas including electricity generation and storage, transportation, industrial processes, agriculture and energy-system efficiency.
“Anything that leads to cheap, clean, reliable energy we’re open-minded to,” says Gates.
Last year, Gates unveiled the Breakthrough Energy Coalition following the UN climate talks in Paris, a group of 28 global billionaire business leaders and institutional investors committed to invest in new forms of energy. The new BEV fund, takes this one step further, and many of the BEC members have signed onto Gates’ new venture.
The group has pinpointed a list of scientific priorities to help guide them down the right “path toward the energy future we need,” which consists of five “grand challenges,” corresponding to the biggest contributors to greenhouse gas emissions around the world, including electricity, buildings, manufacturing, transportation and food.
It is likely that the first wave of investment will be geared towards developing energy storage technologies, which allows for greater reliance on intermittent energy sources like solar and wind.
Gates says that he’s been surprised that technology innovation isn’t discussed more as a solution to climate change, since clean-energy advances could limit economic trade-offs from switching off carbon-emitting fossil fuels.
But as Gates and Khosla’s own energy investments — which include backing for Pacific Ethanol, nuclear power firm TerraPower and Kior, a company with a technology to turn wood chips into a biofuel that could be refined — prove, investing in new energy technologies can be hit or miss — it takes time for new technologies to become widely adopted or financially successful.
In a post he wrote for his blog, Gates highlighted the need for private funding to take government-funded research to the next level: “Government funding gives scientists the freedom to come up with bold new ideas and try to prove they will work. But government research is not enough. The world needs the skills and resources of investors with experience driving innovation from the lab to the marketplace. The private sector knows how to take great research, turn it into a great product and ultimately create a great company to bring a transformative technology to market.”
“When it comes to energy, though, this transition — from idea to product to company — is often complicated by the challenges of the market. Unlike a software start up, getting a new technology from a lab to market takes a lot of infrastructure, a lot of upfront capital, and a lot of time. The Breakthrough Energy Coalition created BEV to address some of those challenges in the energy market. We are willing to wait a longer time for returns than other funds. We have a higher tolerance for technical risk, because we know it’s tough to determine which technologies will succeed in a complicated energy market.”
Gates says that the success of the transition to clean, reliable and affordable energy relies on far more resources that the $1 billion in capital committed to the BEV fund — that’s just the beginning. The Breakthrough Energy investors plan to team up with governments, businesses and institutional investors to bring in additional funding and research new solutions.