March 14, 2022

Is this solar power startups' moment to shine?

The cost of solar has been reduced more than 64% since 2010 and is seen as a solution for energy sovereignty

Mimi Billing

6 min read

Photo: Enpal

Russia's war on Ukraine has accelerated Europe's resolve to wean itself off cheap Russian gas. Alternative energy sources like solar, hydrogen and next-generation nuclear are coming into the spotlight — and startups are in on the action. 

Solar power has recently increased in popularity, in part because many see it as a key way that Europe can wean itself off Russian gas.

One of the solar superfans is Harald Överholm, CEO and cofounder of Swedish solar startup Alight.

“The energy transition is closely linked to the situation we have now,” Överholm says. (Europe currently relies on Russia for around 35% of its natural gas.) "Distributed energy supplies and energy transition are core solutions."


Sustainability startups have previously been hit hard when the stock market falters, but this time alternative energy startups may come out on top, reckons David Frykman, a partner at Norrsken VC.

This transition requires dramatically increased investments in these areas

“The fossil-free energy-related businesses are less likely to be hit hard, as the Ukraine war has made it abundantly clear that Europe needs to move away from dependence on Russian oil and gas. This transition requires dramatically increased investments in these areas.”

According to Frykman, green energy has jumped from the ESG budget to the national security budget pretty much overnight. He compares it to Covid, when two decades of digitisation took place in just two calendar years.

“Now, the current geopolitical climate might give rise to the same happening in the fossil-free space,” Frykman says.

From industrial solutions to households

The solar energy industry is made up of several layers.

At the top are big commercial projects where startups are scarce. Madrid-based Rated Power, a SaaS startup founded in 2017, is a rare startup that does operate in this area. It develops cloud-based solutions to help maximise the potential of solar plants and reduce the cost of energy.

Swedish startup Alight is another that focuses on the commercial sector — companies do, after all, use about 70% of all electricity produced. With power purchase agreements (PPAs), Alight builds solar panel systems for commercial and industrial customers across Europe, with the help of subcontractors. These are either in solar parks that feed power to customers via the electricity grid or on the roofs of factories and commercial buildings for companies like Toyota.

Alight customers pay a fixed price for the electricity when the solar panels are installed and produce electricity. In the past, solar energy prices were seen as expensive, but now, with a hike in gas prices as well as carbon pricing, they suddenly look very competitive.

If you compare the fixed price of solar energy with the price of electricity on the grid, the price is fantastic all of a sudden

“If you compare the fixed price of solar energy with the price of electricity on the grid, the price is fantastic all of a sudden. That is also because the cost of producing solar energy is diminishing,” says Överholm.

From 2010 to 2019, there was a 64%, 69% and 82% reduction in the cost of residential, commercial-rooftop and utility-scale solar energy systems, respectively.

Companies like Alight do not usually raise much venture capital since the money needed for planning and building the solar parks is more likely to be financed by private equity or bank loans.


Ventures capital, instead, has focused on solar startups serving households.

The big German market

Germany-based Enpal is the European solar startup that has raised the most venture capital so far, following a €150m injection from Japanese VC SoftBank six months ago.

Enpal focuses just on the German market, for now. “Germany is a big market and so far only 10% of houses have solar panels. With all the extras we plan, it is important to do it right. Startups usually fail because they want to do too much. We focus on what we are good at,” says chief evangelist Wolfgang Gründinger.

Enpal is different from most other solar startups because it's "full stack". It sources the solar panels, modules, batteries and inverters directly from China, employs all the installers and also built its own software.

“It's not just a yoga class that you throw out. It's not just software. It's a hardware product that is super complicated and has to be connected to the grid. And there is not only the technical side of it,” Gründinger says.

For Germany, which will have decommissioned all its nuclear power plants by the end of this year, solar has become important. It's an area the government has put a lot of money and effort into. The total solar photovoltaic (PV — turning sunlight directly into electricity) capacity in Germany reached 59 gigawatts in 2021, according to Germany's PV Magazine.

In comparison, Sweden’s complete solar capacity stood at 1.1 gigawatts in late 2020, the same as one large nuclear power plant.

However, Germany is still heavily dependent on Russian gas and, following Russia’s invasion of Ukraine, is having to accelerate its plan even further to have 100% renewable energy by 2050.

Energy improvement targets have over the last few weeks been brought forward by 10 years. “That stuff that would take years of debating in parliament before but now it's mobilisation time," says solar startup Otovo’s founder Andreas Thorsheim.

This, and the fact that Germany has the most liberalised energy market in the world, is making it a highly attractive market for all solar startups — and not just the native ones.

Solar energy by leasing

The Norwegian listed startup Otovo raised €30m in February, led by the leading solar investor in the Nordics: Axel Johnson (which also invested in Alight and Svea Solar). The startup is on a roll. Unlike Enpal, Otovo is more of a marketplace: it does not install its own solar panels but instead uses local contractors.

Not doing installations itself has meant Otovo has been able to expand more quickly. Since the start in 2016 it's  become available in seven countries in Europe, including Germany. This year it will launch in another six markets.

“We're taking a very small risk when we go into a country because we don't have to buy a warehouse, 400 helmets and 2,000 metres of scaffolding — it's a difference between making a restaurant chain and having a Foodora. It's a lot faster to do Foodora because you're using burger joints that already are there,” says Thorsheim, referring to the takeaway delivery company.

What Enpal, Otovo, Swedish Svea Solar and Dutch Solease have in common is the way they let customers lease or rent solar panels instead of buying them upfront. According to Thorsheim, this is also the system that has worked best in the US, where the solar energy sector is more mature.

We're taking a very small risk when we go into a country because we don't have to buy a warehouse, 400 helmets and 2,000 metres of scaffolding

Another country that has been of great interest to these companies is the UK. With high electricity needs due to badly insulated houses, as well as a price cap on energy costs that is set to rocket in April, Thorsheim is certain that the solar energy market will explode this year.

“The UK has very little solar energy compared to some of the other European countries of the same size. We believe all the stars are in line for the UK booming in 2022. And we want to be there from the start,” Thorsheim says.

Mimi Billing

Mimi Billing is Sifted's Europe editor. She covers the Nordics and healthtech, and can be found on X and LinkedIn