Too hot to compute?

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Europe is in the grip of its second record-breaking heatwave in two months. As temperatures in the UK could exceed 40°C this week, beating a June record that’s stood since 1976, Turin in Italy suffered blackouts as the grid buckled under the heat. Europe is warming at about twice the global average, and what used to be a rare event is becoming a more common feature of our European summers, even in Ireland.

Heat like this drags attention back to climate change, and underneath it, to the harder question of how we generate energy and where the money that pays for it goes. You would expect a summer like this to be good for the ClimateTech founders pitching their answer to exactly that problem. It has not worked out that way in recent years, as venture capital and private equity inventors continue to pour capital into AI and its infinite appetite for data centres and power, after nearly a decade of funding ClimateTech startups.

The retreat of European ClimateTech

European ClimateTech venture funding peaked at roughly $24 billion in 2021, and has trended downward since. The exception was 2023, when European climate startups briefly out-raised their US counterparts, carried by supportive policy and industrial urgency at a time when the broader venture market was shrinking. 

In the first half of 2025, while Sifted’s data has European ClimateTech funding down 71% year on year, investment into European AI companies grew 61% and European defence jumped nearly 30%. Venture and private equity alike wanted a slice of the AI frenzy, and the money flowed out of carbon-reducing technologies and into ones that push energy demand up rather than down.

By 2024 a European ClimateTech startup took about two and a half times longer to raise a Series B than in 2021, and World Fund put the European Series B gap against the US at $13.5 billion over 2020 to 2024. Companies that were running low on the capital they needed to turn pilots into commercial-scale products suddenly faced a much harder environment, and many struggled to raise at all. Some of it is a hype-cycle hangover due to a number of issues in the sector. The interest in carbon markets stalled as government policy shifted while at the same time the hydrogen market ran into hard commercial realities. Similarly, the demand for electric vehicles never quite materialised, and both governments and European car manufacturers are still rowing back on aggressive emissions targets.

One major European startup that failed in dramatic fashion is also to blame for an investment hangover that has hurt many of its ClimateTech peers. Northvolt, Europe’s battery champion, backed by Volkswagen, Goldman Sachs and BMW and capitalised with over $13 billion, was sitting on around $30 million in cash against $5.8 billion of debt by late 2024. It filed for bankruptcy in Sweden in March 2025, the largest industrial failure in modern Swedish history, with most of its assets sold to the American firm Lyten. It was meant to prove Europe could build a strategic industry to rival China. Its collapse only raised the risk premium for investors weighing similar bets, and as a result the funding dried up.

An imperfect recovery

On paper, the funding line looks to have hit its floor and started to climb, with parts of the market calling a fully fledged comeback. PitchBook put global ClimateTech funding at $14.3 billion in the first quarter of 2026, the strongest quarter since 2023, with European VCs deploying $6.6 billion, ahead of the US.

The headline glosses over the fact that most of that money is concentrated in a handful of very large deals, and the bulk of those are late-stage rounds and debt going into energy and the software that runs it, rather than fresh equity backing new climate technology. Strip the megadeals out and the picture for the companies actually building something new is far more modest.

In the last few months Stockholm's Renasens raised a €10 million seed, led by the climate investor Extantia, for a waterless process that uses supercritical CO₂ to pull usable fibres out of blended textile waste, materials that otherwise go to landfill or the incinerator. Grenoble's Mantle8 raised a €31 million Series A, led by Sandwater with Breakthrough Energy Ventures and France's Bpifrance alongside, to go looking for natural hydrogen, a newer and more speculative bet than the green-hydrogen projects the market had already cooled on. 

The capital coming back is chasing scale and certainty, the proven and the near-term, while the first-of-a-kind technology that the energy transition actually depends on is left raising comparatively smaller rounds. 

Energy-hungry data centres

The AI boom is not only a competitor for capital. It is a physical operation that needs enormous amounts of electricity. Ireland is a cautionary tale of overpromoting the development of data centres while not reinvesting into the infrastructure to match increased demand. Data centres already use more than a fifth of Irish electricity, a share heading toward roughly a third within a decade, and around half of all demand in the Dublin region. It got bad enough that in 2021 Ireland’s energy regulator, the Commission for Regulation of Utilities (CRU), imposed what amounted to a moratorium on new Dublin grid connections, while the state spent roughly €1 billion on emergency gas generation to keep the lights on and to protect Ireland’s standing as a destination for foreign direct investment.

As public hostility hardens, politicians eventually follow the electorate. A report commissioned by Friends of the Earth Ireland and Beyond Fossil Fuels in May estimated that data centre expansion drained around €715 million from the Irish economy between 2015 and 2023, with the poorest households paying an extra €209 during the energy crisis, figures the industry disputes. In December the CRU lifted the moratorium, but with strings attached: new data centres have to bring their own dispatchable generation or batteries matching their demand, meet an 80% renewable requirement, and feed power back into the grid. In short, if you want to build a data centre in Ireland now, you have to help build the energy system that runs it.

Britain is a little further behind, but the same argument is being made. Scotland has 17 hyperscale data centres in the pipeline, enough that campaigners have asked ministers to pause approvals over fears the projects could roughly double the country’s electricity demand. One of them is the £2 billion Southside scheme in the Scottish Borders, pitched as a way to soak up surplus Scottish wind, though it is coming under public scrutiny for the potential environmental impacts of the development.

The green solution AI is funding

Faced with a huge new source of demand and with growing resistance to how that demand is currently met, the AI build-out is turning into the anchor customer for clean power. That, far more than the climate case, is what looks to be freeing up capital.

The clearest example is in Nottinghamshire. In March, Holtec, EDF UK and the investment group Tritax signed an MoU to build a 1GW data centre on the site of the former Cottam coal station, powered by Holtec SMR-300 reactors. Small modular reactors are compact nuclear plants assembled from standardised, factory-made parts rather than built piece by piece on site, small enough to place next to the demand they serve and, in theory, quicker and cheaper to deploy than a full-scale station. 

The Cottam scheme is billed as potentially Europe’s first SMR-powered data centre, and a roughly $15 billion project. It is one of a cluster: X-energy is working with Centrica on up to twelve small reactors at Hartlepool, and the microreactor firm Last Energy is partnering with DP World at London Gateway. None of these projects is being built because it is green, however. They are being built because a hyperscaler needs reliable, round-the-clock power on a site that already has a grid connection, and an old coal station provides exactly that. The low-carbon outcome is a useful side-effect, but not the reason for the deal.

The same logic runs through fusion. In February, Munich’s Proxima Fusion, a spinout from the Max Planck stellarator programme, signed an agreement with Bavaria, RWE and the Max Planck Institute to build a demonstrator near Garching and, in time, a commercial plant on a former RWE nuclear site, with Bavaria indicating up to €400 million of support. Around the same time, the European Commission committed €330 million to fusion through its Euratom programme. And it runs through grid-scale storage, now financed like infrastructure rather than venture: the EU brought 27.1 GWh of battery storage online in 2025, up 45% on the year, with American battery makers burned by slow EV sales pivoting to the European grid and development banks such as the EBRD lending against it.

AI cuts both ways. It drained the capital that used to fund a broad sweep of climate startups, and now its hunger for electricity is the single biggest reason a narrower set of technologies, nuclear, fusion and storage, can raise money at all.

What does this mean for a ClimateTech revival?

The pattern of who is getting funded shows how lopsided the recovery is. The money is going to firm power, to grid storage and to the software utilities and data centres run on. It is not flowing freely to early-stage ClimateTech, which is still thin, and it is largely skipping whole categories: carbon management, land use, food and agriculture, and the everyday renewables investors now treat as a solved problem. The first-of-a-kind venture money that takes genuinely new technology to commercial scale, the kind that backed Renasens and Mantle8, is the hardest to find of all for European founders.

There is also the question of terms. If the AI build-out is paying for the green build-out, then the green build-out gets built where the hyperscalers want it and at the size they need, not necessarily where the energy system or the public would choose. Ireland’s new rules, which force data centres to bring their own clean generation and feed the grid, are one attempt to make that bargain less one-sided, and other European regulators are watching closely. 

As Europe bakes under this current heatwave, we can only expect to see more attention and scrutiny being focused on our energy usage, particularly as AI demand continues to outpace supply, with the hyperscalers and their backers being forced to find practical solutions to the cost of their operations. It is this latter point that there might be a potential for an opportunity for founders building the next generation of solutions at the intersection of technology, energy and climate. 

What we’ve been working on at Shuttle

• Took part in the HubSpot Ventures GTM Revenue Engine Hackathon 🧑‍💻

• Refreshing our website 🚀

• Finalising the appointment of a new member to our Board 👀

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of Shuttle. We’re both sick of private markets being a playground exclusive to the ultra-wealthy so we started a company to challenge the status-quo. Shuttle’s singular focus is to unlock private markets for Millennial and Gen Z tech professionals and help them build wealth through the highest performing private market opportunities.

Scott & Rob
Shuttle Co-Founders