How AI is Transforming Energy & Climate Action?
by Felix Krause, Managing Partner at Vireo Ventures.
Guest post by Felix Krause, Managing Partner at Vireo Ventures.
Our power sector is undergoing a profound transformation, nuclear has been phased out, coal plants are gradually decommissioned, and natural gas is slowly following suit. As a result, baseload is slowly becoming irrelevant and fluctuating renewables combined with flexible energy generators are responsible for keeping the lights on.
This reshuffling of our power sector triggered a paradigm shift, while renewables offer significantly lower generation costs, their fluctuating output introduced new challenges that must be addressed.
Recent announcements from all over the world showed that the race to dominate the global AI revolutions is now in full swing. Trump announced a staggering $500 billion AI investment plan, China launched DeepSeek, sending U.S. tech stocks into a tailspin, and the EU unveiled InvestAI, a programme aimed at mobilising €200 billion in investments.123
Yet, despite bold initiatives, the European Union faces a formidable challenge. While the EU was an early leader in AI regulation with the Artificial Intelligence Act (EU AI Act), true value creation has taken off elsewhere and the EU needs to find a way to integrate AI into their strategic vision of being the first climate neutral continent.
However, this does not mean the EU is destined to play catch-up indefinitely. On the contrary, Europe’s AI ecosystem is more vibrant than ever. Closing the gap is not a question of possibility but of ambition, strategic foresight, and regulatory agility.
The power sector can serve as Europe’s proving ground that AI applications extend far beyond language models and image generation but can bring about systemic change by combining climate action with digitalisation. The demand is here, the challenges are clear, and AI-powered EnergyTech solutions are ready to rise to the occasion.
AI allows for complexity
AI and EnergyTech are coming together to become the transformative force our energy system urgently needs. The energy landscape is shifting towards a more decentralised model, though its final shape will vary across regions and remains uncertain. The future of energy will be a dynamic mix of photovoltaics, wind, nuclear fusion and fission, hydrogen, energy storage, and geothermal power. However, what has been missing until now is the intelligence to seamlessly integrate these diverse components into a coherent, efficient and resilient system.
The sheer volume of data required to manage this evolving ecosystem is already surpassing human and traditional computing capabilities. For example, there are ~30.243 wind turbines and 4.75 million solar plants in Germany as of 2024,45 compared to the 676 power plants (capacity >20 MW) in 2011.6 From intermittent renewables like wind and solar to flexibility solutions such as demand response, bidirectional EV charging and advanced energy storage, numerous innovations are emerging. When effectively coordinated, these elements enhance energy security and independence. Without proper orchestration, however, they risk causing grid congestion, price volatility and even brownouts or blackouts.
Consumers, both private and corporate, are no longer passive recipients of energy but active market participants. Their ability to respond to market signals is becoming crucial for maintaining system stability and economic competitiveness. Knowing who is generating or consuming energy, and when, is essential for ensuring a balanced and efficient grid.
As the energy sector grows more complex, the need for real-time analysis, planning and management becomes ever more critical. AI and EnergyTech are emerging as indispensable tools, capable of processing vast datasets, forecasting weather patterns and optimising energy generation and transmission in real time. These technologies hold the key to integrating renewables, unlocking system flexibility, reducing costs and securing a reliable, future-proof energy system.
Now, it is up to EU regulators and the incoming German government to establish the legislative framework needed to unlock their full potential.
The Future is now
To provide a few feasible examples on where AI and climate meet and bring about benefits for individuals, organisations, or the broader energy system lets highlight a few applications:
Energy Efficiency in Buildings and Industry
Approximately 30-40% of Germany’s CO₂ emissions originate from the building sector, with a significant proportion resulting from heating and cooling. Across the EU, buildings remain the Achilles’ heel of the energy transition due to the high costs of renovation and modernisation. Inefficiencies caused by outdated systems and a lack of data integration lead to substantial energy waste. AI-driven energy management systems can optimise these processes in real time, adjusting operations based on occupancy, weather conditions, and energy prices. The Germany-based company GreenFusion has developed such a system, enabling the retrofitting of existing heating units, thus avoiding costly modernisation while benefiting end consumers.
Energy Forecasting and adaptation
Rising energy prices, particularly in the day-ahead markets, are becoming an increasing challenge for German and European companies. With a significant share of fluctuating renewable generation, energy prices follow suit. During periods of “Dunkelflaute”, when photovoltaic and wind output is low, prices can soar, as seen in December 2024, when day-ahead prices exceeded €900/MWh. Exposure to these price spikes, especially without adequate preparation, can threaten a company’s competitiveness. Encentive’s holistic energy management AI addresses this challenge by shifting power consumption to greener, more cost-effective periods while avoiding high-price intervals, enabling savings of up to 20%.
Grid Optimisation
AI technologies also play a crucial role at the system level by improving the efficiency and capacity of power networks. AI tools can analyse data in real time, predict demand fluctuations, optimise load balancing, and prevent congestion. Among the most advanced solutions, Dynamic Line Rating (DLR) systems enable transmission cables to operate at higher capacities by assessing environmental conditions such as temperature and wind speed in real time. Additionally, AI-driven predictive maintenance helps detect potential faults before failures occur, reducing downtime and strengthening grid resilience. Together, these innovations enhance the reliability and efficiency of modern power grids.
These are just a few of the many potential use cases, but the direction and benefits of AI are clear: it accelerates the energy transition by improving efficiency and enabling the seamless integration of numerous components into the system, creating a harmonious network of decentralised elements.
EU uncertainty
Even before AI saw widespread adoption, the European Union had already set the wheels of regulation in motion. The specters of dystopian fiction seemed to weigh heavily on the minds of policymakers and civil society, who fixated on risks such as social inequality and over-reliance, often at the expense of recognizing AI’s vast potential for economic growth and technological disruption.
However, the release of Mario Draghi’s Report on European Competitiveness in the second half of 2024 appeared to serve as a much-needed wake-up call. Draghi astutely highlighted that the EU was not only falling behind in AI development but also in industries where AI could offer a decisive competitive edge. The reality is clear, AI has the potential to integrate seamlessly with human intelligence, driving innovation across nearly every sector.
Scale-up through private investments
AI is increasingly recognized as a transformative force in the energy sector, driving efficiency, scalability, and sustainability. Vireo Venture’s investment strategy reflects this evolution, prioritizing companies that leverage AI to optimize energy generation, enhance grid stability, and accelerate the shift to renewables.
For founders, AI integration is no longer optional but essential, enabling predictive analytics, real-time decision-making, and dynamic energy market participation. From predictive maintenance in renewable energy assets to intelligent demand-response solutions, AI provides a critical competitive edge.
Especially in the wake of the recent U.S. election and the resurgence of fossil fuel-centric policies encapsulated in the slogan "Drill Baby, Drill," the EU has a unique opportunity to position itself as the global hub for companies operating at the intersection of AI and climate solutions.
However, Europe’s ongoing budgetary constraints and the lack of additional funding until the next multiannual financial framework review in 2027/2028 further underscore the critical role of private investment. In this context, investors will be instrumental in shaping the future of the AI-driven climate and energy ecosystem, bridging the financial gap, and accelerating the continent’s transition toward a sustainable energy future.
By fostering a supportive environment that encourages EnergyTech adoption rather than restricting it with excessive regulation, the EU can unlock vast opportunities for sustainable growth and attract fresh money at the same time.
