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Transforming Climate Tech Companies with Cutting-edge, Cost-effective IT Solutions

Sustainability

October 5, 2023

Climate Tech Industry Landscape 

Climate tech companies broadly include those that provide technologies and services to enable the decarbonization of the global economy. There is an urgent need to reduce greenhouse gas (GHG) emissions and combat climate change. This has led to a surge in innovations and sparked investor interest across several industries, particularly those related to renewable energy generation, batteries and energy storage systems (BESS), electric vehicles (EVs), EV battery tech, green hydrogen, solar energy and other low-carbon fuels, renewable energy software and grid management platforms, and climate management.  

Recent advancements in battery technology have enhanced the feasibility of energy storage systems and the appeal of EVs for consumers. Governments around the world are also offering subsidies and incentives, and modifying or introducing regulations to encourage the adoption of renewables and EVs. Institutions are developing precise guidelines that industries must adhere to, to ensure sustainability and adaptability. 

According to a McKinsey report, the market size for BESS alone is expected to reach $150 billion. 

With increasing pressure from customers and regulations becoming more stringent, climate techs need actionable measures to shift towards more sustainable production methods. Several non-profit institutions and alliances have emerged in recent times, such as European Portable Battery Association, Global Battery Alliance, International Renewable Energy Alliance, International Energy Agency, Global Renewable Alliance, etc., which promote and guide climate techs towards sustainable changes. 

Considering the market drivers, regulatory changes, consumer demand, and technology innovations, it is an excellent time for climate techs to improve their effectiveness. Nevertheless, maintaining control over costs will be crucial in this endeavor. 

Five Major Industry Challenges 

1. Ever-increasing demand leading to more GHG emissions

Energy consumption for production in climate techs significantly contributes to GHG emissions and carbon footprint. Fossil fuels, which have served as the primary source of energy for decades, are finite and contribute to environmental degradation. For example, the production emissions from battery-electric vehicles (BEVs) can be up to twice the amount of production emissions from internal combustion engine (ICE) vehicles. This is owing to the use of materials with high emissions, such as aluminum and battery-active components. Therefore, it becomes imperative to decarbonize the entire value chain to ensure the net-positive CO2 benefits of EVs. 

2. Regulatory and policy barriers

Regulators need granular, traceable data throughout the entire value chain. However, obtaining such data from various entities is a complex task due to its unavailability. With multiple regions having their own guidelines, the lack of standardization and consistency further complicates the interpretation and implementation of these requirements. Many stakeholders view this situation as a hindrance to market growth rather than a facilitator.

3. Climate change

Our planet is witnessing more extreme weather events, such as heatwaves, floods, and storms. Energy generation companies need to be more resilient to climate change to remain operational during such events and meet consumer demands. Therefore, although it is a complex process, it has become a necessity and a regulatory requirement to integrate climate risks and assess the financial impact of climate change. 

4. Supply chain volatility

The complexity of managing large-scale coordination among business units, vendors, customers, and other stakeholders across countries and regions in a regulated environment makes disruptions more likely. Moreover, climate techs deal with a limited supply of low-carbon/environment-friendly raw materials. Consequently, the pressure on the low-carbon value chain will only increase. 

5. Intermittency, variability, and performance degradation

Renewable energy requires storage systems as the sources are inherently intermittent and variable in nature. The effectiveness of these energy storage systems hinges on their ability to capture surplus energy during peak generation periods and release it when the generation is low to ensure grid stability and reliability. This adds a considerable level of complexity to grid management. Moreover, the numerous charge and discharge cycles that these systems undergo contribute to their gradual degradation over time. 

Harnessing Technology for Sustainable Transformation in Climate Tech 

The key to driving climate tech progress lies in strategically implementing technology to achieve maximum impact. Here’s how technology can play a pivotal role in addressing the challenges faced by climate techs: 

1. Holistic impact assessment and data-driven solutions

By leveraging its expertise in data management, the IT industry can provide comprehensive climate tech solutions that encompass data capture, aggregation, measurement, monitoring, and reporting. As the demand for granular data continues to grow, data traceability will be crucial.

2. Integration of IoTs and sensor-based data into the value chain

The deployment of IoTs and smart sensors enables real-time data collection regarding energy generation and equipment performance, facilitating proactive maintenance. Access to real-time views and analytics will result in improved reliability, reduce manual data tracking, and support end-to-end traceability.

3. AI-powered solutions

The combination of AI and analytics, supported by cloud computing, empowers organizations to make informed decisions, conduct diagnostics, optimize processes, gain timely insights, perform scenario analyses, and receive intelligent recommendations, all of which are essential for staying aligned with market requirements. 

Optimizing Climate Tech with Advanced Technology 

The key considerations for climate tech companies include cost efficiencies, emission reduction, and renewable energy transition. Leveraging digital technologies can reduce emissions by at least 20%.  Now, let’s delve into where these technological advancements can make a substantial difference:

1. Launching/enhancing digital platforms

Digital platforms can enhance customer engagement and open new revenue streams.  

Sample use cases:  

  • Digital platforms can be used to predict clients’ energy consumption patterns and provide energy and cost-saving recommendations.  
  • Similarly, such platforms can be leveraged to ascertain optimized transportation routes that result in minimal emissions.  
  • Platforms with integrated climate analytics can provide property and asset-level carbon footprint insights.
  • Customers can be given real-time information on the nearest and most efficient battery charging stations with predictive time estimates.

2. Optimization and reduction

Technology can drive operational efficiencies, supply/demand forecasting, preventive and predictive maintenance, and energy and water consumption optimization. 

Sample use cases

  • As it is difficult to store renewable electricity at scale, power grids must balance supply and demand in real time. AI-powered solutions can automate and optimize grid operations by continuously balancing and forecasting demand and supply, reducing carbon emissions. 
  • Machine learning algorithms can help anticipate the growth and maintenance needs of battery charging stations by monitoring performance, providing information about when and where to upgrade/replace existing components, and ensuring smooth functioning. 
  • Technology can also be used for monitoring fossil fuels and renewable fuels from production to distribution to track consumption, mass gain/loss, leakages, and detect anomalies.

3. Climate resiliency

Integrating climate risk analytics with enterprise risk models can help mitigate physical as well as transition risks and assess the financial impact of climate change on the business and operations. 

Sample use cases: 

  • By monitoring weather forecasts, energy generation capacity and storage and distribution needs can be calculated.
  • By integrating climate analytics into the business and operations processes, the impact of climate change on operational costs and revenue streams can be calculated. 

4. Enabling a responsible and sustainable supply chain  

As organizations extend their sustainability efforts into complex global supply chains with thousands of components, obtaining a detailed analysis of CO2 emissions across the entire value chain becomes crucial for carbon accounting. Moreover, customers, investors, and regulators are demanding emissions reduction solutions throughout the supply chain from manufacturing to transportation and shipping by incorporating renewable energy transition, EVs, route optimization, waste reduction, circularity, and water treatment. There is a pressing need to standardize and automate the collection, verification, and monitoring of data.  

Sample use cases:  

  • Granular data from Scope 3 emissions can be used for supply chain analytics, emission reduction recommendations, and comprehensive life cycle analysis (LCA). 
  • By implementing intelligent routes and fuel optimization strategies companies can significantly reduce the carbon footprint across all business units and within the supply chain.  
  • Companies can also track the net zero transition of suppliers by capturing and analyzing their data on climate, environmental, and social indicators. 

Conclusion 

Climate technologies will be pivotal for driving sustainable growth, and organizations must prioritize its expansion to ensure a sustainable future for our planet. Increasingly stringent industry benchmarks on ESG (Environmental, Social, and Governance) pillars are making the transition to cleaner energy and sustainability more challenging, especially in sectors with significant energy consumption, carbon emissions, and hazardous chemicals. 

IT solution providers can give climate techs a first-mover advantage and enhance their brand value.  

Many enterprises are now recognizing the immense potential of data and AI-based capabilities. They understand that failing to harness NextGen technology means missing out on a substantial opportunity to stay ahead of the curve. 

Climate techs will benefit from incorporating unified data platforms to optimize their production and supply chain with minimal capital investment and operational disruptions. Importantly, industry leaders are also witnessing that it is possible to reduce costs and CO2 simultaneously.  

 To learn more about Hexaware’s transformative digital solutions for climate tech companies, download our brochure. You can also visit www.hexaware.com and contact us. 

About the Author

Amit Kadam

Amit Kadam

With 25 years in the IT industry, Amit Kadam is driving our ESG and ClimateTech services that help enterprises meet their ESG goals, mitigate climate risks and transition to net zero. He has been instrumental in conceptualizing and building comprehensive frameworks and solutions on ESG Integration, Impact of climate change to the business and operations, regulatory reporting, and compliance solutions; incorporating global taxonomies and regulatory requirements like SASB (Sustainability accounting standards board), TCFD (Task Force on Climate-Related Financial Disclosures) , SFDR (Sustainable Finance Disclosure Regulation)

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