The Five Drivers of Israel’s Energy Tech Sector: Unleashing Innovation for a Sustainable Future

Israel’s reputation as a technological powerhouse has long been associated with sectors such as Cyber Security and Fintech while the country’s Energy Tech sector has been somewhat overlooked.

With recent discoveries of natural gas offshore reserves, Israel may seem to have distanced itself from the energy transition innovation revolution. However,  a deeper look at the accomplishments of the tech ecosystem proves this is not the case.

The tech sector delivering groundbreaking solutions for a low carbon economy is thriving with companies raising two times more in 2022 than in the previous year. Let’s explore some of the pillars that are driving this sector forward.

Israeli startups are making their mark in various energy sectors, from generation to storage, carbon mitigation, and pioneering hydrogen power.

Driver 1: Hydrogen Innovation 

Following the global excitement on hydrogen innovation, the Israeli tech ecosystem is also experiencing a significant increase in activity in this space, with investments rising eight times over the last four years. 

The sector currently counts above 22 startups and scale-up companies that are innovating along the value chain of hydrogen – from generation, storage, and transportation to fuel cells and more (see the full list here) – with at least four new ventures sprouting in 2022 alone.

Recognized companies such as H2pro and QD-SOL as well as newcomers Nugen and Chiral Energies have recently and successfully concluded funding rounds, reflecting confidence from investors. Furthermore, the sector is seeing groundbreaking innovation in the crucial segment of green ammonia generation, with pioneers NitroFix and Alganite. 

Next to this venture activity, both government and private entities are kick-starting the local hydrogen economy, albeit with small-scale projects so far. Recently, the Israel Ministry of Energy published a roadmap and outlined the necessary steps for the implementation of a local hydrogen policy and strategy, and various small-scale pilots are in the making.

This includes pioneering initiatives such as the establishment of the first Green Hydrogen Valley in the southern region of the country, the opening of the first hydrogen-refueling station in the north, plans to build facilities that generate green ammonia, and more.

Driver 2: Decentralization of the Grid 

While Israel’s grid is still lagging on renewable energy adoption (~10%) the electricity sector is undergoing significant reforms to head the energy transition and increase competition. The establishment of Noga, the independent system operator (ISO), is facilitating a crucial step of decentralizing the grid and enhancing digitalization with data transparency, fostering innovation and creating a more dynamic energy ecosystem.

As part of this transformation, the Israel Electric Corporation is in the process of selling around half of its power generation plants, encouraging private producers to assume a larger role in electricity generation. Moreover, the market for electricity supply is being gradually opened up to competition, starting with large business customers and extending to low-voltage consumers. These reforms aim to reduce reliance on what used to be a monopoly and promote a more diversified & sustainable energy landscape.

Another significant milestone in opening up energy boundaries was achieved during COP27 in 2021 between Jordan, Israel, and the UAE. According to the MOU, Jordan will provide Israel with 600 megawatts of electric power generated by a solar PV facility, developed by Masdar. In return, Israel will supply Jordan with 200 million cubic meters of desalinated water annually from its existing or planned plants.

This collaborative effort showcases the potential for cross-border cooperation in the energy and water sectors, promoting sustainability and regional partnerships.

Driver 3: Corporate Engagement

Increasingly in recent years, global corporations are opening a presence in Israel to engage with the local energy tech sector on a daily basis, with industry leaders ENEL, EDF Renewables, E.ON, Schneider Electric, and Siemens Energy leading the way.

This presence fosters knowledge exchange, creates opportunities for testing and validating solutions, and positions Israel as a cornerstone for cutting-edge energy innovations. Additional multinational corporations are increasing their engagement in the local ecosystem via the vehicle of tech challenges – with recent examples including Italgas and Zenith.

In the last year, also Israeli-founded global energy giants Solaredge, Ormat Technologies, and Doral Energy are increasingly involved with the local tech community, which, among other activities, has led to a number of investments in local startups in 2023 – with Solaredge investing in Wevo Energy, Ormat in Luminescent and Doral in Capow. 

The All-Stars annual energy tech event profiling some of the top 10 start-ups in the ecosystem

Driver 4: Energy Tech Companies Ready to Scale-Up

Besides the recognized achievements of SolarEdge and Ormat – each a global leader in its segment – many Israeli energy tech startups are starting to reach ‘gigaton manufacturing capacity’. Companies like Brenmiller and Apollo Power are at the forefront, recently opening their manufacturing facilities in Israel and earning global accolades for their innovative solutions in storage and PV technologies.

These remarkable achievements speak for themselves but also emphasize the need for continued investment in energy tech. They highlight Israel’s potential to lead the way in sustainable innovation, driving our transition towards a greener and more sustainable future. Additionally, the sector has witnessed a couple of successful exits, with Algolion and Ecoplant securing notable acquisitions just this month.

More than 230 startups are moving the needle and driving the energy transition for a sustainable future.

Driver 5: Accelerators, Incubators, and Venture Creation Programs 

‘It takes a village’ to sprout and cultivate tech entrepreneurship, and fortunately, the Israeli ecosystem is experiencing a surge in accelerators and other programs that have dedicated climate tech and/or energy tech focus.

The Israeli energy tech communities act as a vibrating hub for the industry, and the sector enjoys the deal flow generated by veteran programs ClimateLaunchpad, 8200 Impact, MassChallenge, and Microsoft’s AI for Good, which are now joined by new initiatives including Climate First, Epsilon, and energy-focused programs Energy Pioneers of Tomorrow (EPOT), and Energy Ideation 2 Creation EI2C – both run by Ignite the Spark.

Ecosystem development organizations Startup Nation Central and PLANETech have also launched dedicated teams focused on stimulating the growth of the sector; new venture creation entities are also being established to sprout climate and energy startups including E44,  Gravity, and Calyx. The Israel Innovation Authority has also led the way in establishing three incubators with a focus on energy tech, Net Zero Technologies Venture, ESIL, and InNegev, and other private initiatives such as Quantum Hub are bridging between corporations and startups in this space. 

“Companies in the Energy Transition domain raised $258M across 32 VC rounds during 2022, two times more than in 2021.” Startup Nation Central Climate Tech Report 2023

The Challenges Ahead – Governmental Support, Regulation & Investments

To unlock the full potential of Israel’s energy tech sector, there is wide recognition of the need for more robust governmental financing support and more flexible and lean regulation that fast-tracks pilots and scale-ups.

Similar to the success that Israel achieved in the food tech and mobility sectors, comprehensive support through government investments that de-risk technologies and enabling regulations can attract additional local and foreign investment, and position the country as an international energy tech hub.

To further explore the startups and scale-ups that make up the Israeli energy tech ecosystem, visit Startup Nation Finder.