How Do Investors Evaluate AI in Clean Tech Startups in 2025?

Source: Anna Demeo | · ENERGY CHANGEMAKERS · | February 22, 2025

Clean tech startups can no longer get by offering just enough AI to pass the "straight face" test, writes Anna Demeo in this guest post.

In the competitive investment landscape of clean tech, startups are vying for attention. For years, AI has been the ultimate buzzword for those seeking to raise funding. Investors have been inundated with pitches promising “AI-driven” solutions, making it increasingly difficult to separate true innovation from optimistic branding. 

Artificial intelligence is a powerful enabler in clean tech sectors such as virtual power plants (VPPs), distributed energy resource management systems (DERMS), electric mobility and vehicle-to-grid (V2G) solutions. When applied correctly, AI can optimize resources, drive efficiency and make systems smarter for the mobility, utility and building/home energy management industries. However, not every company claiming AI is building it in a meaningful way. 

In the previous decade, many clean tech startups felt compelled to claim that their solutions were AI-driven even when they were not. Exaggerating their AI capabilities, many companies invested in just enough AI to pass the “straight face” test. This created the illusion of technical innovation when companies were actually relying on basic algorithms or glorified spreadsheets that were neither novel nor scalable. This illusion was not necessarily nefarious but rather a gross underestimation of what it takes to develop and scale a truly robust AI platform. 

However, the landscape has shifted dramatically in the past year. The rapid advancement of AI, particularly with the emergence of large-scale foundational models from OpenAI and others, has changed the game. Today, many startups no longer need to develop AI from the ground up. Instead, they can integrate powerful, pre-trained models with minimal effort, making AI more accessible. This democratization of AI has both leveled the playing field and made it harder than ever for investors to assess which companies are truly differentiated.