2025 can be the 12 months climate tech learns to like AI

Quite a bit can change in just a few months.

The climate tech world hasn’t exactly been turned the other way up, but it surely’s definitely more askew than it was in the summertime. The U.S. federal election results can have imperiled the startup-friendly Inflation Reduction Act (IRA), likely throwing a wrench into many firms’ business plans. 

Yet at the identical time, AI’s skyrocketing computing needs have driven data center operators scouring the earth for sources of electricity, bringing a surge of interest in a variety of power sources, including nuclear, renewables, batteries, and even fusion.

As 2025 dawns, it’s a very good time to take a look at the trends which are more likely to define the approaching 12 months.

Advanced nuclear

Nuclear power received plenty of love this past 12 months, from Microsoft restarting a reactor at Three Mile Island to Google signing a 500-megawatt take care of startup Kairos. The motive force? Data centers, data centers, data centers. With AI servers facing an influence shortage as soon as 2027, tech firms have been racing to get their hands on electricity wherever they’ll find it. 

Nuclear power is one in all those places. Historically, adding nuclear capability meant big power plants that take a decade or more to construct. But a brand new wave of startups has been proposing smaller designs that could be more easily mass produced, or so the considering goes. They haven’t been tested at scale yet, and the success of nuclear startups will depend upon how the primary few go.

Of their favor, those firms take pleasure in a newly streamlined regulatory process, which should help speed the time from proposal to construction. 

But they’re also facing stiff competition from renewable power sources, that are proven and quick to deploy. Unless there’s a breakthrough in efficiency for AI model training or inference, expect to listen to more about tech’s love affair with nuclear in the approaching 12 months.

Fusion power

We’re just over two years out from the National Ignition Facility’s groundbreaking announcement that it had produced the world’s first controlled, net-positive fusion response. Fusion startups undoubtedly used the news to kickstart their fundraising efforts. Among the many winners this 12 months: Acceleron Fusion, Marvel Fusion, Marathon Fusion, Type One Energy, Xcimer Energy, and Zap Energy.

Expect more this 12 months, too. Constructing a fusion power plant, even an indication unit, is dear. Several startups have begun work on prototypes, demos, and even industrial reactors, including Commonwealth Fusion System and Zap Energy. Many have goals of hooking up power plants to the grid within the early 2030s, which implies they’ve plenty of work to do in the approaching years. And which means they’ll need extra money soon.

It’s a dangerous technology, however the rewards include remaking the trillion-dollar energy sector. If firms are capable of hit scientific and engineering milestones, expect more investors to line up in 2025. 

Hydrogen

Few sectors are as exposed to potential changes to the Inflation Reduction Act as hydrogen. Many startups are hoping to eventually deliver the gas at $1 per kilogram, but not until later this decade or early next.

To get there, they’ve been optimistic that the two-year-old IRA will help them bridge the gap by means of a $3 per kilogram subsidy for hydrogen produced by renewable electricity. If that provision is nixed, a variety of hydrogen startups might be at risk of going belly up. Large firms have already grown skittish.

At the identical time, scientists and investors have warmed to so-called geologic hydrogen, or hydrogen that’s produced naturally inside the Earth. Could it save the industry? The subsequent 12 months could be a make or break moment.

What else?

The approaching 12 months will almost actually bring more changes, especially as politicians and regulators grapple with growing power demand from AI. Changes within the permitting process could drive a wave of investment in grid-related technologies, but when those efforts stall, expect more firms to sign deals with power providers to sidestep the grid and connect on to data centers.

Investors have told me that it’ll probably be difficult for a lot of startups to lift latest funding in the approaching 12 months. Essentially the most exposed firms are those which are overly depending on vulnerable subsidies.

But 2025 is just as more likely to throw a curveball — it’s helpful to keep in mind that the present climate tech wave emerged through the first Trump administration. Next 12 months might need some surprises in store, too.