How Amazon decides which climate tech start-ups to invest in

Amazon has purchased the naming rights to rename Key Arena to Climate Change Arena.

Source: NHL Seattle

If Amazon is to achieve its goal of zero net carbon emissions by 2040, it will need to rely on the new technology. To catalyze the process, the company has a $2 billion venture capital fund to raise and grow climate technology startups.

Watching where Amazon is investing is one way to track innovation in the space. It can also give investors an idea of ​​which parts of its own business Amazon intends to prioritize in the future.

“A lot of what we’re investing for is three to five years,” Matt Peterson, president of Amazon’s Climate Pledge Fund, told CNBC. “We try to look around the corners to see where our needs are going to be and where the needs of other companies are going to be. I mean, with a 2040 time horizon, you know, you can’t really look for one or two years later, you have to think long term.”

The Climate Pledge, announced in June 2020, is funded entirely with money from Amazon’s balance sheet. For Amazon, the priority is more about embracing the technologies it will need to achieve its climate goals — making money is a good thing, too.

“If the companies we invest in happen to be doing well and become the next Tesla or bring back our investment multiplier, that’s great. It shows that they validate what it is, but it’s not the main focus,” Peterson told CNBC. with a broader strategic objective.

It is also open to investing in companies in many different stages, and has invested from the initial stage through to the Series B rounds. “We can invest $1 million in the company or invest more than $100 million in the company,” Peterson said.

Amazon is not alone in investing in climate technology. The space saw a fivefold increase in investment dollars to $32.3 billion in 2021, up from $6.6 billion in 2016, according to a recent report.

On Wednesday, Amazon announced new investments in Resilient Power and CMC Machinery and a second investment in Infinium. Amazon previously announced investments in CarbonCure, Pachama, Redwood Materials, Rivian, TurnTide Technologies, BETA Technologies, Ion Energy and ZeroAvia — bringing the total number of climate technology startups Amazon has invested in to 11.

Amazon is still accepting applications from startups looking for funding. The company plans to make large and small investments.

Here are five areas in climate technology that Peterson told CNBC that Amazon is looking to invest in and how to track those areas with Amazon’s current or future goals.

Food and agricultural investments

Food production requires a ton of land and fuel, food waste and spoilage leads to methane emissions, and dairy and meat production releases carbon dioxide and methane emissions — all of which are problems for Amazon if it plans to go ahead with food production.

“People forget that Amazon owns Whole Foods,” Peterson told CNBC. “We have a number of opportunities and new business models around Amazon Fresh, which are our physical stores, as well as home delivery of food.”

“If you look at where we’re going in the coming years with the growth in groceries and the growth in meals and foods in general, that’s something we want to excel at,” he added.

electrification

In September 2019, Amazon announced that it would purchase 100,000 electric delivery vehicles from Rivian Automotive. These trucks will be deployed by 2024 and are part of Amazon’s effort to convert its delivery fleet to 100% renewable energy by 2030.

As part of this electric push, Amazon has invested in Resilient Power, which is developing technology that builds an electric vehicle charging infrastructure at a tenth the size and time of installing current charging technology.

Flexible power charging stations.

Image courtesy of Amazon.

“It’s not as exciting as, say, an electric car manufacturer, but it’s just as important in my opinion,” Peterson told CNBC. “The technology they’re really trying to update hasn’t changed in probably 30 to 50 years,” he said. “It’s 70’s and 80’s style technology, with the big power plants or substations.”

For electricity to go from the grid to an EV charger, it must go through a step-down process, and Resilient Power uses semiconductors and software control rather than large physical and mechanical devices.

“We have a huge need for this, and as we map out our own needs to do that, this solution is really interesting to us,” Peterson told CNBC.

green hydrogen

Water can be broken down into its chemical parts, oxygen and hydrogen, with an electric current in a process called electrolysis. This hydrogen can then be used in various ways to generate carbon-free energy.

If the energy used to operate the electrolyzer is carbon-free, the resulting hydrogen is called “green hydrogen”. Amazon has made many investments in this area.

ZeroAvia is building aircraft powered by hydrogen fuel cells — which is especially important, Peterson says, as aviation will be one of the toughest industries to remove carbon.

Infinium makes electric fuel, which will replace diesel or kerosene in jet fuel. “The difference is instead of being mined from the ground and purified like fossil fuels, it’s made with synthetic ingredients. The synthetic ingredients are green hydrogen and captured carbon dioxide,” Peterson said.

Infinium reactors

Image courtesy of Amazon

The fuel that Infinium makes is 95% carbon neutral because it uses carbon dioxide that has been captured and not extracted from the earth. But he acknowledges that it is a technological bridge towards a long-term goal of creating completely carbon-neutral energy sources.

“At the end of the day, we don’t want to burn the fuel initially, releasing the CO2, but at least the CO2 that’s released is recycled to orbit that was captured earlier. So it’s basically net, it’s, it’s very close to zero.”

Long-term energy storage

The use of renewable energy such as wind and solar on a large scale relies on battery technology to store energy when the wind is not blowing and the sun is not shining.

Amazon is looking at long lasting battery technology in various sizes and gauges. Many long-lasting batteries are quite large, and Peterson said Amazon will need batteries in “appropriate” sizes for the many use cases Amazon will need.

Material: Reducing and reinventing plastic

For many consumers, Amazon is more visible with packages delivered to their doorstep. In aggregate, these packages create a lot of waste.

CMC Machinery System

Amazon

CMC Machinery, one of the investments announced Wednesday, has developed an automated packing machine that reduces the size of bins by nearly 24%. This allows Amazon to reduce the size and number of plastic airbags that go into boxes, Peterson said. Overall, this could allow Amazon to reduce the use of up to 1 billion plastic pads by the end of 2022.

Peterson said Amazon is interested in the long-term in technologies that can create more sustainable plastic alternatives.

“Can you make plastic that is not extractable? Doesn’t use fossil fuels? Also, can you make plastic that is biodegradable and compostable on a large scale?”

.

Leave a Comment