Green energy and sustainability updates from the EU and Finland

• State aid for green transition in Europe and Finland
• Finland’s energy cluster and green investment pipeline
• 2023 Finnish VC and startup activity in climate tech and sustainability

State aid for green transition in the EU and Finland

On 26.01.2024 the Finnish government announced the preparation of a €400 M support program to attract green transition investments to Finland, thus becoming a part of the EU-wide state aid competition program. The move will improve Finland's competitiveness against other countries in green and sustainable energy, including attracting and developing startups and scaleups in the industry.

The case with the delayed Freyr Battery factory construction in Vaasa proves the importance of not losing the momentum.

State subsidies are boosting green tech in the EU. For example, in the battery sector which has been traditionally prioritized in Finland: Germany granted the Swedish sustainable lithium-ion battery maker Northvolt €900M in state aid for the construction of a new EV battery manufacturing plant which influenced the scaleup’s decision to build the facilities in Germany and not the US. The deal was greenlighted in the beginning of January 2024, a week before  Northvolt announced securing Europe’s largest green loan ever at $5bn from a group of 23 commercial banks, alongside the European Investment Bank and the Nordic Investment Bank.

France supported Verkorm, a French low-carbon battery manufacturer, with €660M in October 2023. Subsidies made part of the €2B+ round combined with €850 million Series C-investment led by Macquarie Asset Management and a €500 million loan from the EIB. The funds will be used to finance the launch of a Dunkirk-based gigafactory which is supposed to go live by 2025.

For more information about the latest EU green tech support negotiations around the Net Zero Industry Act read here. 

And what about the green transition in Finland?

The country has set the target of becoming carbon neutral by 2035 – a full 15 years before most other European countries and the EU as an entity. Many Finnish cities have set their goals even higher: Helsinki, Tampere, Turku, Lahti, Espoo, and Lappeenranta all strive to be carbon neutral by 2030.

Finland’s energy cluster has been traditionally strong and active in green transition, geographically concentrated in the north of Finland, Vaasa area. One example is EnergyVaasa, the largest energy technology hub in the Nordic countries together with the startup accelerator EnergySpin that Paolo Borella advised for a few years starting from 2017 to design and ramp-up their acceleration program. This cluster operates globally and consists of 180 companies with a combined annual turnover of €6B.

Among Finland’s green transition forerunners are Wärtsilä - an engineering giant offering sophisticated lifecycle solutions and smart technologies for the marine and energy - and green startups and scaleups, such as Capalo AI, P2X, Kapacity.io, Cactos, Virta, and AW-Energy (see more about the green startup rounds below). Important are also Finland’s battery ecosystem and Hydrogen Cluster Finland, which aims to create a hydrogen value network of companies and industrial organizations throughout the country. 

The pipeline of green investments in Finland amounts to $220B, which includes projects from both Finnish and multinational companies. The green investment figures published on the Data Dashboard of the Confederation of Finnish Industries (EK) include a total of €3B in green investments to be completed in 2024 and as much as €6B to be completed in 2025, and you can find a great dashboard on their website that allows to filter data by technology, location, phase etc:

Screenshot from the Data Dashboard of the Confederation of Finnish Industries (EK)

2023 Finnish VC and startup activity in climate tech and sustainability

Finally, if we look at the VC investment, green & sustainable tech was trending in 2023 in the Nordics: 6 out of 10 biggest rounds raises by startups were in climate tech. While Finland has recorded an overall decline in startup investments ($680m in 2023 in comparison to $1.9bn in 2022), there has been a lot of activity in the green space:

Greencode Ventures has launched a €40m fund for digital climate tech startups that can have an impact within the 10 year lifespan of the fund and help to optimise green alternatives in 4 areas: energy, mobility, the built environment and industry (Aug 2023).

NordicNinja VC has announced its Fund II, with €200 million dedicated to investing in climate and deep technologies aimed at fostering a more equitable and sustainable future (Sep 2023).

Lifeline Ventures announced a fresh €150 million fund aimed at early-stage startups across Finland, deeptech including climate tech (see the recent investment into Origin by Ocean together with Voima Ventures) (May 2023).

Voima Ventures launched their third, €90 M VC fund to back Nordic & Baltic science startups from labs to global markets with the focus on deeptech including climate tech.

And several Finnish startup raised funding rounds in 2023:

• Carbo Culture, Finnish carbon removal startup (€18.3 M)
• sustainability-oriented One Click LCA (€40 M)
• Norsepower harnessing the power of the wind for large ships to decarbonize the shipping industry (€28 M)
• Finnish plastic alternative producer Paptic Ltd (€23 M) (with further €4.5m in the second closing in January 2024)
• growth funding of Virta Ltd, electric vehicle charging platforms leader (€85M).

In addition, let's not forget the great work of VTT, the Finnish research institute, that is engaged in a variety of climate tech projects (like EU Mission Adaptation to Climate Change) to further develop technologies, and licence or spin them off generating a hefty 10% of the Finnish deep tech startups.

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It definitely looks like sustainability and green tech startup rounds are making history and we see  Finland has done several rights moves to leverage the great potential in this industry - expertise, human capital and high-tech innovations - to establish itself as a recognized player on the European and international arena, thus also contributing to reaching the ambitious target of becoming carbon neutral by 2035.