Artificial intelligence requires a staggering amount of electricity — and that fact has absorbed an enormous amount of attention from the energy industry in recent months.

According to the International Energy Agency’s latest outlook report, however, air conditioning is even more demanding. And in a warming world, the urgency of its adoption makes innovation in the century-old sector key for the communities on the frontlines of climate change — and appealing to both startups and their investors. 

Transaera, a startup developing energy-efficient AC units, was founded in 2018, but just today announced that it closed an oversubscribed $8.2 million in seed funding led by Clean Energy Ventures, which adds to the $2.3 million in Department of Energy grant funding that the company had already secured. The round’s investors also include Energy Impact Partners and MassMutual Ventures. 

The company is manufacturing units equipped with a novel technology that can reduce an AC’s overall electricity consumption by up to 40%, which can be easily installed in place of traditional air conditioning. Its main focus is commercial AC at the moment, though the tech can be applied to residential units as well. These two traits give it the potential to scale up quickly, a fact which caught the eye of major investors even in a market that’s crowded with incumbents.

David Miller, co-founder and managing partner at Clean Energy Ventures, told Latitude Media that the number of heating, ventilation, and air conditioning companies and technologies he’s looked at “is in the triple digits.” 

“You need the combination of a technology and an approach that’s going to save a very significant amount of energy and with that a very significant amount of cost,” he said. “But beyond just cost, it has to be easy to adopt, easy to install, easy to maintain, because we want technologies that are going to go far beyond a niche and become globally adopted at scale.”

Sorin Grama, CEO and co-founder of Transaera, calls it “a plug-and-play solution” that allows the installer to just remove the old air conditioning unit, and replace it with a new, more energy-efficient one with no need for new hardware or skills. Before founding Transaera, Grama founded a company in India developing a technology for food refrigeration in areas without regular power; he also was a co-founder of Greentown Labs. 

“You have to make these systems fit within the confines of the customers’ infrastructure,” Grama said. “Engineers can come up with all kinds of crazy, amazing ideas, but [if they] never have practical uses…they’ll never be adopted.”

Inside the new air conditioning system is a novel, absorbent material — “kind of like the one you’d find in a shoebox,” Grama said — that’s key to Transaera’s promise of energy savings. The material is a metal-organic framework: a powder that works as a “desiccant on steroids” and absorbs humidity, he added.

It’s the humidity that makes heat particularly difficult to bear, and air conditioning’s job is to suck it out of a room. To do so, traditional air conditioning cools the air until the moisture becomes water, a temperature that’s too cold for comfort and requires the AC unit to then heat the air back up to an agreeable temperature. 

With the powder absorbing the humidity instead, the AC unit does not need to lower the air’s temperature nearly as much. Transaera then recycles some of the AC unit’s waste heat to “dry” the absorbent material. 

The technology is particularly suited to commercial buildings with “high usage of humans,” Grama said. Transaera is currently in the pilot phase with several customers, including one large online retailer, though the company isn’t ready to disclose who. Its current revenue model is based on selling the hardware, though its long-term plans also include selling the components that handle the dehumidification process to major HVAC manufacturers. 

‘Fundamental hardware innovation’

Transaera’s hardware component is key to its interest from Clean Energy Ventures, an investor with expertise in helping startups develop hardware. The VC, which held a $305 million close of its second flagship fund earlier this year, is focused especially on companies with technologies “with the potential to mitigate 2.5 gigatons of carbon emissions” by 2050.

“At the end of the day, it’s very challenging for a software-only solution to do that in a unique way,” Miller said. “Usually, you need some type of fundamental hardware innovation.”

Grama said there is only a small subset of VCs that understand hardware, and that air conditioning is a particularly difficult subset — and a particularly difficult market to break into. 

“Air conditioning is a difficult market and difficult equipment to build and install,” he said. “It’s a 100-year-old industry that has been innovating and increasing efficiency over time.”

That said, energy savings like the ones Transaera’s promises could put a major dent in the sector’s emissions, especially given increasing global electricity demand. According to the IEA, “the combination of rising incomes and increasing global temperatures generate more than 1,200 terawatt hours of extra global demand for cooling by 2035,” which is “an amount greater than the entire Middle East’s electricity use today.”

For Grama, that’s an important story that needs to be highlighted as much as possible, especially as AI electricity demand swallows up a lot of the media coverage. 

“This incoming wave of air conditioning demand is going to put additional stress on the grid,” he said. “In India, there are ten new air conditioners sold every second. It’s a staggering amount of demand, especially in the developing world, where the world is getting hotter and people need air conditioning to live comfortably. It’s no longer a luxury, it’s a necessity.” 

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