Green Tech Germany
Reading time approx. 15 min.Green Tech Germany: The new German Economic MiracleIn 1924, Theodor Stiebel presented a ring immersion heater at the Leipzig Spring Fair. It was produced from a hollow cylinder and therefore heated up very fast. The young mechanical engineer could not have guessed that he was laying the cornerstone for a growth boom that would reach its full potential about 100 years later. But that is exactly what he was doing.
Today, ELTRON Dr. Theodor Stiebel, which later changed its name to Stiebel Eltron, is among the elite of green tech companies poised to ignite a green economic miracle. Their products and solutions not only provide revenue and jobs, but also management that is more environmentally sound and conserves resources. They are popular because they seem to merge economics with ecology: Ideally, more green technologies mean greater economic growth and decreased emissions at the same time. This impossible task seems to work here and German companies are especially good at achieving this result. According to the GreenTech-Atlas 2021, issued by the German Federal Ministry for the Environment, Germany's contribution to global economic performance is around 3.4 percent. However, the presence of German companies that provide green technologies on the global market is a tremendous 14 percent; this presence is even higher when it comes to sustainable mobility and circular economy. The pioneers include traditional conglomerates like Bosch and Continental, with their sustainable mobility technologies, but also startups, like Ineratec and middle-sized companies like family-owned Stiebel Eltron from Holzminden, Germany.
Why is that? Why are the oft-scolded Germans clearly leading in green tech? And what strengths does this business demand? An analysis of six traits, plus an additional factor.
Tenacity
The current boom at Stiebel Eltron began almost 40 years ago with a strategic decision that was long considered a mistake. When the oil price shock of the 1970s turned energy into a high-priced product, this middle-sized company from Lower Saxony set about developing heat pumps. These miniature power plants use electricity to convert ambient warmth into heating energy and became a low-resource, low-cost alternative to traditional gas and oil heat. The only problem was that in the 1980s, as oil prices sank again, the demand for heat pumps plummeted. But contrary to anyone's expectations, the family-owned company stuck with it.
“For decades, we lost money on our heat pumps,” says Henning Schulz, a spokesperson for the company. A company driven by the capital markets would never have withstood that kind of stalemate. “As a family company focusing on the long term, however, we stayed true to the technology, because we always believed in it.” Today, this stubbornness is paying off.
After four decades of research and investment, the company from Holzminden now holds about 300 patents for heat pumps and is one of Europe's top 5 providers. Currently, the company is putting almost half a billion Euros into its production capacity to triple the output of climate-neutral heaters by 2027. At the same time, the company is investing in the development of efficient ventilation systems, which have become indispensable for passive houses, among other things. Here too, the company from Holzminden is one of the market leaders.
Henning Schulz thinks this long-term success is based on a typical German corporate pattern.“In this country we have a lot of family companies with an engineering spirit and the persistence to hammer away at ideas until their time comes, so that better technologies can come to fruition.” And for Stiebel’s technology, the time has definitely come. In basements and furnace rooms in Germany alone, at least 500,000 alternative heating systems must be installed to reach the current federal climate goals. Year to year.
Reliability
Unlike a few years ago, innovators here find themselves in an environment where their protracted research and development projects can pay off. The European Union's “Green Deal” is basically a powerful business support program for sustainable technologies. “And in the first six months, the multi-party coalition has created more reliable conditions than the former government did in the previous 16 years,” says a top manager from the green tech sector. An example is the federal government's immediate climate protection program presented in July 2022: It prescribes that in the future, builders and property owners will only be allowed to install heating systems that operate on at least 65 percent renewable energy — a big advantage for efficient technologies like heat pumps.
Experts are correspondingly optimistic about further growth of the sector. The authors of the GreenTech-Atlas estimate that by 2030 domestic market volume will grow to €856 billion — more than doubling. Their confidence is also based on a continuously growing resource for Germany's future success: well-educated engineers and scientists. This means researchers and innovators who will ideally also bring entrepreneurial ambition with them for translating innovative technologies into marketable business models. People like Tim Böltken.
Curiosity
Anyone hosting Tim Böltken for a Zoom interview quickly gets the feeling that they are talking to the future. This is because this doctorate-level process technologist and three co-founders have developed a process for converting carbon dioxide and green electricity into climate-neutral fuel to tank up ships and aircraft, among other things.“We are virtually reversing turning photosynthesis,” the young entrepreneur and co-founder at Ineratec explains.
Currently, Böltken’s 100-employee startup in Frankfurt is building its pioneering first high-capacity facility. When the Ineratec power plant starts operation in 2023, it will be the first of its kind in the world and produce up to 4.6 million liters of biofuel every year. Ineratec will get the necessary CO2 in Frankfurt from a neighboring biogas facility, and in the future 100 percent of the electricity will come from renewable sources.
However, the highlight of the innovation is a container that could be seen behind Böltken during the Zoom interview. This standard container contains a complete modular power-to-liquid system that can sail to the energy sweet spots. Wherever abundant sun and wind are available, Ineratec will be able to produce fuel from the container without causing a greenhouse effect. Like conventional crude oil, the biofuel can be transported on a tanker or ship wherever energy is in short supply. In contrast to a hydrogen economy or e-mobility, Böltken’s energy source needs no new infrastructure, but uses the existing one. “Our climate-neutral fuel can be mixed with conventional fuels,” the founder explains, “and its portion can continually grow with production capacity.” Area of application: the whole world. Demand: gigantic. Ineratec's innovation: a potential best seller in millions.
The company began as a spin-off of the Karlsruhe Institute of Technology (KIT), where Böltken got his doctorate. He met his cofounder Paolo Piermartini while doing his doctoral work at KIT, and another co-founder is his former doctoral supervisor.“With our origins at KIT,” says Böltken, “we always had good access to research infrastructure. Right from the founding, we’ve benefited from close collaboration and consultation.” When continuous innovation meets a market environment that absorbs and nourishes it, things can really boom. That seems to be the case right now in Germany.
Entrepreneurial spirit
Jan Christoph Gras thinks the close integration of universities and business is one of the greatest strengths of the German green tech scene. Gras is a serial entrepreneur, founder of Tomorrow Bank, venture capitalist and investor in a plethora of companies. “Where green tech is concerned, the Germans have an advantage over the Americans, because our scientific research and educational institutions are just fantastically set up,” says the divinely-gifted capitalist Gras. With his venture capital fund Planet A Ventures, over the past year and a half, Gras has focused exclusively on European green tech startups whose technologies have a demonstrably significant impact on the climate and environment. In the early stages, green tech innovators lacked capital and professional guidance, Gras thinks. But that is changing now.
“Over the past two decades, it has been said that: Software eats the world. In the coming two decades, green tech will do the same. Because there’s no alternative to rebuilding the economy and society. In a world that does business sustainably, green tech companies will be the ones that prosper. And that’s exactly what we’re investing in.”
Gras has checked out about 3,500 companies and business ideas in the past year and a half. His fund has currently invested in six — including Böltken’s Ineratec. After the fund initiators had trouble gathering capital — “as newcomers, we had to prove ourselves first” — the fund is now practically drowning in inquiries, Gras explains. “Pension funds, family offices and conglomerates are beating a path to our office.” Now the impact investors have exceeded their originally planned volume of €100 million in capital. How the formula of innovation plus capital translates into company startups can be seen from the numbers at the German site “startupdetector.de”. According to the site, in 2021, the largest growing startup segment was environmental technologies. This was 144 percent above the previous year.
Market readiness
Investment in German startups and the number of financing rounds fell in the first six months of crisis year 2022. For Nicolas Bradford, Head of Sustainability Services at corporate consulting firm MHP, this dip represents “completely normal market consolidation. In the medium term, the market will no doubt grow further, because the demand is simply too high.” Bradford and his colleagues have recently studied how the German green tech sector will grow and where improvement is needed. For their study “GreenTech Made in Germany”, they asked 40 experts from politics and business and identified areas where the green tech pioneer nation needs to improve. Among others, these include reducing bureaucracy, better financing and support for green tech, as well as further setting of political conditions.
According to Christoph Gras’s observation, what is most lacking is transfer of innovations into business. “Preparation for the business world and bringing together initial investors are handled shabbily by most universities,” Gras criticizes. “We have exceptional scientists, but the matchmaking with entrepreneurs is missing.”
Imagination
Nonetheless, the experts in the GreenTech-Atlas expect the German environmental technology market to grow by 8 percent a year. Even demand for sustainable products and services should continue to grow in a completely natural way. “Generation Z and coming generations place much greater demands for the sustainable qualities of companies and their offerings,” consultant Bradford says. And a driving force is not even priced in, even if it has the potential to be a real game changer. “In the future, we’ll have to internalize the external effects of how we do business,” Bradford says. “Nature, whose resources we’re all helping ourselves to, must have a price attached to it. It's still much too easy not to do business sustainably.” Exploitation of natural resources is still being rewarded all over the globe. According to a Yale University study, extraction of fossil fuels is currently being subsidized worldwide to the tune of 5 billion US dollars a year.
But what would happen if the ludicrous fossil fuel extraction stopped in the future? What if one day there was a price for methane emissions, water consumption, and plastic waste? What if resource consumption was made more expensive and release of environmentally damaging emissions was taxed, as is already happening with CO2?
“Sooner or later we’ll see tolerable regulatory intervention,” investor Gras is convinced. “When that happens, resource-intensive technologies will suddenly fall behind, while competitive opportunities for environmental technologies will brighten further.”
Imagination plus Digitization
In order to harmonize the supply of CO2-free technologies, products and services with ecological necessities, speed is called for. Only companies that can scale realignment of their industrial value creation at a speed comparable to the rapid growth of digital tech companies like Apple and Amazon will be able to survive in the new market environment. The basis for that is comprehensive data monitoring and management processes. Climate relevancy can only be managed once it is documented precisely along the whole supply chain. In short: Sustainability and digitization are inseparably connected.
It is very possible that today's green tech founders stand before a similar boom to the one a young Theodor Stiebel anticipated in 1924. Except that today, with climate change, resource scarcity and pollution of the planet, its rise may be much faster and steeper.
Discover more:
Digitalization X Sustainability
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How progress changes the world
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The eternal circle
What if profitability and sustainability are not a contradiction in terms? But a product? What if circular economy isn't just an idea? Is it a necessity? How circular economy can find ways to save the planet - when we are ready for it.
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Green Tech Germany: The new German Economic Miracle
An analysis of six traits, plus an additional factor.
“For decades, we lost money on our heat pumps,” says Henning Schulz, a spokesperson for the company.
After four decades of research and investment, the company from Holzminden now holds about 300 patents for heat pumps and is one of Europe's top 5 providers. Currently, the company is putting almost half a billion Euros into its production capacity to triple the output of climate-neutral heaters by 2027. At the same time, the company is investing in the development of efficient ventilation systems, which have become indispensable for passive houses, among other things. Here too, the company from Holzminden is one of the market leaders.
“In this country we have a lot of family companies with an engineering spirit and the persistence to hammer away at ideas until their time comes, so that better technologies can come to fruition.”
“We are virtually reversing turning photosynthesis,” the young entrepreneur and co-founder at Ineratec explains.
Currently, Böltken’s 100-employee startup in Frankfurt is building its pioneering first high-capacity facility. When the Ineratec power plant starts operation in 2023, it will be the first of its kind in the world and produce up to 4.6 million liters of biofuel every year. Ineratec will get the necessary CO2 in Frankfurt from a neighboring biogas facility, and in the future 100 percent of the electricity will come from renewable sources.
“With our origins at KIT,” says Böltken, “we always had good access to research infrastructure. Right from the founding, we’ve benefited from close collaboration and consultation.”
“Over the past two decades, it has been said that: Software eats the world. In the coming two decades, green tech will do the same. Because there’s no alternative to rebuilding the economy and society. In a world that does business sustainably, green tech companies will be the ones that prosper. And that’s exactly what we’re investing in.”
“Preparation for the business world and bringing together initial investors are handled shabbily by most universities,” Gras criticizes. “We have exceptional scientists, but the matchmaking with entrepreneurs is missing.”
But what would happen if the ludicrous fossil fuel extraction stopped in the future? What if one day there was a price for methane emissions, water consumption, and plastic waste? What if resource consumption was made more expensive and release of environmentally damaging emissions was taxed, as is already happening with CO2?
It is very possible that today's green tech founders stand before a similar boom to the one a young Theodor Stiebel anticipated in 1924. Except that today, with climate change, resource scarcity and pollution of the planet, its rise may be much faster and steeper.