Europe's largest energy companies have launched more than € 1 billion ($ 1.1 billion) in new businesses, according to Reuters, with several deals announced in the last month as they accelerate the search for new technologies to outperform the Rivals.
Taking a sheet of the Silicon Valley toy book, companies such as Germany's Innogy, France's EDF and Dutch Eneco, as well as large oil tankers like Total, have created their own venture capital funds to travel the world in search of potentially Disturbing.
The race is being driven by the changing nature of an industry that has seen traditional energy suppliers struggling to keep up with renewable energy and looking for any edge over competitors in an increasingly fierce and fragmented market.
The investment objectives range from new companies that develop batteries to store solar energy in massive amounts to those that create systems to better manage the use of appliances such as washing machines and thermostats.
Companies are pitching their networks wide and their bottoms each typically scan about one thousand pitches of startups a year, but they invest in only 1-2 percent of them. Relatively small investment sizes, typically a few million dollars, allow companies to build a diverse portfolio of speculative investments.
Statkraft's fund, Statkraft Ventures, has invested in software company Greenbird smart meters, while the fund of French power company Engie has bet on the start-up of Serviz and the Canadian platform for intelligent network management Opus One Solutions .
"Companies do not know, new companies do not know, but everyone is trying to own this game," said Petr Mikovec, managing director of Inven, the venture capital fund of 180 million euros created in 2014 by the Czech company CEZ.
The new industry outlook, driven in part by explosive growth of renewable energies in the last decade fueled by government subsidies, saw energy companies take 26 billion euros of deterioration of unprofitable plants, according to the consultancy Capgemini.
It has also changed the way some large corporations view venture capital.
In the past, venture capital funds were often considered as luxuries and were among the first spending areas to be discarded when finances were squeezed. In the last five years, however, they have become a central part of business models as companies are forced to innovate to defend their market share and survive.
Internet Things
The strategy has a slightly different approach than many other venture capital funds around the world.
Instead of looking for significant or quick returns on their investments, these energy company funds are looking for startups that they can integrate into their business, allowing them to try and benefit from new tools and techniques.
"We are here to detect those startups that could add value to Total and help us imagine the future," said Francois Badoual, CEO of Total Energy Ventures (TEV).
TEV is one of the oldest European corporate capital funds in the energy industry, launched in 2008, and has invested 150 million euros in more than 25 startups, from energy storage companies like LightSail Energy to Powerhive.
The fund is closely linked to the main oil matrix, which showed that its strategy of diversification away from oil was serious with a € 950 million acquisition of battery maker Saft this year.
TEV investments, which typically start at 2-3 million euros, have to be signed by a group of Total managers and some companies are working directly with Total, such as Sunverge solar energy storage company whose products are sold by Total SunPower.
Badoual's sentiments echoed Grzegorz Gorski, a senior executive responsible for venture capital for French utility company Engie.
"Today our investments do not translate into large numbers. We need much more than return, we need to build value," he said.
For example, the investment of 2-year-old Engie New Ventures, a 3-million-euro fund in Sigfox, has allowed it to sell the French boot network - linking energy-consuming devices in homes - to customers .
Investor Burden
Investing in new businesses, especially at an early stage, is relatively inexpensive, compared to other investments that energy companies make on a daily basis, such as infrastructure improvements, allowing them to cover much of the startup scene.
The search for disruptive technologies of the future is not only driven by internal forces. Companies are under increasing pressure from shareholders to execute a strategy that leaves them fit for survival in a world where consumers dictate the market, empowered by technology.
Europe's 25 largest energy companies lost up to 23 percent of their market capitalization between June 2015 and May 2016, mainly due to huge value losses and weak energy prices, according to Capgemini. Analysts at investment bank Macquarie said inflexible public services would be the losers of the radical transformation happening in the sector.
"Investors are going to increasingly favor European public services that have exposure to technologies that will change the profit sector," they said.
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