field guide to not funding vaporware
I’ve watched cleantech investments fail because no one checked the physics. A hydrogen electrolyzer claiming 95% efficiency looks transformative until you run basic energy balances and realize it exceeds theoretical limits. Carbon capture ventures promise solvent breakthroughs that fail once you apply mass transfer fundamentals. Critical minerals projects project recovery rates that don’t match established mineralogy. When capital flows into technologies that violate scientific constraints, you get stranded assets and disappointed investors.
Equity research figured this out a decade ago. Top banks started hiring petroleum engineers, chemists, and materials scientists alongside MBAs. Their teams got sharper R&D assessments not by building more complex spreadsheets but by knowing the difference between innovation and impossibility. Accuracy improved 15-20% in forecasting outcomes because engineers could challenge claims based on flawed assumptions. Cleantech needs the same shift.
I built a 6-stage pipeline to embed engineering checks into investment decisions:
- Technical screening at TRL 6 or above, validating performance against physical limits
- Additionality testing to confirm genuine market failures and catalytic justification
- Risk assessment that quantifies scale-up bottlenecks like heat transfer or material degradation
- Economic modeling using probability weighted scenarios linked to engineering parameters
- Portfolio fit to ensure alignment with overall strategy
- Structure design through milestone based instruments that tie capital release to verified progress
Running this on actual deals showed that 30% of reviewed projects exceeded thermodynamic constraints. Even basic Python tools comparing claims to theoretical boundaries prevented significant capital misallocation.
What the literature tells you
Society of Petroleum Engineers papers have solvent degradation data that changes carbon capture economics by 30-40%. Electrochemical society journals show electrolyzer degradation rates of 15-20% per year versus the 5% in commercial models. Materials science research has ore grades and impurity profiles that limit critical mineral recovery rates. A focused 40-60 hours of literature review per technology vertical almost always surfaces evidence missing in vendor data but critical to project viability.
Why sector-specific models matter
Generic frameworks fail because each technology has different physics. Carbon capture energy penalties rise 40% in cement versus natural gas. Hydrogen needs you to differentiate alkaline, PEM, and solid oxide electrolyzers, each with their own efficiency curves and degradation profiles. Critical minerals require modeling ore body heterogeneity, processing chemistry, and environmental limits rather than treating resource recovery as uniform. These technical realities shape commercial outcomes from cost curves to offtake structures.
| Technology | Technical Focus | Business Model Question | Primary Consideration |
|---|---|---|---|
| CCS | Solvent performance, parasitic load | Who bears capture costs? | Higher penalties in cement vs gas facilities |
| Hydrogen | Electrolyzer efficiency, degradation | Export vs domestic pathways? | Distinct degradation curves by technology type |
| Critical Minerals | Processing recovery rates | Offtake security? | Ore grades and impurities cap feasibility |
Technical detail drives financial reality. A diligence process that fails to ask engineering questions will continue to miss the true determinants of success. Combine physics with markets and you get capital allocation with more confidence and fewer surprises.