Battery Storage Investments & Financing Show Growing Strength

So far, 2018 is proving to be a good year for battery storage as investors and project developers are seeing an increased amount of money flowing in to the space, with an increased focus on the deployment of distributed battery systems.

  • Investors — established infrastructure funds and institutional investors alike — are showing very strong interest in energy storage in
  • Driving this growth is the lower cost of batteries due to expanded battery manufacturing capacity for electric vehicles.
  • We also see an increased focus in off-grid/distributed models and in microgrids for corporate customers seeking backup power and resiliency.

 

Key Trends and Funding Data

  • Venture capital investments in battery storage companies doubled in 2017 over 2016, and interest remains strong, according to recent figures from Mercom Capital.
  • $300 million was raised in a dozen deals in Q1 of 2018, compared to $151 million in five deals in Q4 of 2017.
  • Year-over-year funding is up sharply, as $58 million was raised in eight deals in Q1 of 2017.
  • Stem has raised the most VC funding to-date this year, raising $80 million in a Series D round from Activate Capital and institutional investors Ontario Teachers’ Pension Plan and Temasek.
  • Ionic Materials secured $65 million from Dyson, Samsung, A123, Hitachi, Renault, Nissan and Mitsubishi.

 

Related Content

Besides Stem and Ionic, the top five 5 VC funding so far this year are: Durapower, $40 million; Battery Energy Storage Solutions, $39 million; and Solid Energy Systems, $34 million.

This year’s deals come after VC investments in battery storage companies hit $714 million in 30 deals last year, nearly double the $365 million raised through 38 deals in 2016.

Project financing of battery storage has also seen strong growth of late: nine battery storage project funding deals totaling nearly $2.1 billion were announced in 2017, up from just $33 million in four deals in 2016, according to Mercom.

Cheaper Batteries to Spark Massive Deployment of Clean Energy

Increasingly cheaper battery storage will help wind and solar generate a combined 50% of the world’s electricity generation by 2050, according Bloomberg New Energy Finance. It sees $11.5 trillion being invested globally in new power generation capacity between now and then, with $8.4 trillion of that going to wind and solar

As electric vehicle sales are expected to rise from 1.1 million in 2017 to 30 million  by 2025, BNEF expects even further cost declines for batteries. Already down 80% since 2010, the research unit is predicting lithium ion battery prices to fall 66% by 2030.

BNEF says $548 billion will be invested in battery capacity by 2050, with two-thirds of that at the grid level and the other third installed behind-the-meter by households and businesses.

Recent Funding and Fundraising Activity

Macquarie Capital Bets Big on Storage with New Business Unit 

Energy storage is a key focus of a new clean-energy business unit that Macquarie Capital has set up in North America. In late June the firm announced the creation of its Green Investment Group, to be led by former Tesla executive Greg Callman. He joins Macquarie as Senior Managing Director and Global Head of Energy Technology and will “lead the firm’s efforts related to energy storage and distributed solutions,” the company says in a statement.

The new unit “will focus on asset creation in the renewables sector, principal investment and financing solutions that span all stages of the project lifecycle, including development, construction and operations,” Macquarie says. The company earlier launched similar GIG platforms in Europe and Asia, aided in part by Macquarie’s acquisition last year of the UK government’s Green Investment Bank.

Macquarie Capital’s past efforts in the area of energy storage include:

  • Last year it teamed with Advanced Microgrid Solutions and CIT on a a first-of-its-kind project that financed battery-based energy storage systems, as reported.
  • Macquarie Capital is also the owner and operator of an energy storage system that is being used at the largest water recycling plant in the Irvine Ranch Water District. Macquarie and the water district announced the completion of the 2.5 MW/15MWh system in late June. It was designed by AMS and is said to be the largest energy storage system being used for on-site power in the country.
  • And earlier this year, Macquarie and ENGIE invested $4.1 million in energy storage provider Connected Energy to help fund Connected’s growth plans in the UK and abroad. Connected has developed what it says is the world’s only commercially available stationary energy storage platform, using retired electric vehicle battery packs to provide site-integrated energy storage solutions.

 

Other California Energy Storage Initiatives

Elsewhere in California, the Irvine Company and Southern California Edison said in April they launched the world’s “first fleet of hybrid electric buildings.” Using Tesla Powerpack batteries running AMS software, each of the 21 high-rise building in the fleet can “ control its demand from the electric grid and respond in unison when [the utility] signals a need to reduce load on the grid,” the companies say in a statement.

“Harnessing the power of the customer to manage demand on the grid is the next generation of grid management efficiency,” says  Robert Weisenmiller, chairman of the California Energy Commission. Such efforts represent a new way to balance the grid and can be a viable replacement for ‘peaker’ power plants.

Meanwhile, San Diego Gas & Electric announced that five new energy storage projects totaling 83.5 MW, plus one demand-response program equaling 4.5 MW, have received California Public Utilities Commission approval. The projects will help improve grid reliability and integrate more renewables by adding lithium-ion battery storage facilities in San Diego and south Orange counties.

Companies taking part in the energy storage projects include RES America, AMS, Fluence, Powin Energy and Enel Green Power, while OhmConnect will administer the demand response program.

SDG&E says that, by 2030, it will develop or interconnect more than 330 MW of energy storage.

Breakthrough Energy Ventures Backs Energy Storage Firms

Breakthrough Energy Ventures (BEV), the fund launched in late 2016 by billionaires including Bill Gates, Jeff Bezos, Richard Branson, Mark Zuckerberg, and George Soros in 2016, said last year that one of its focus areas would be energy storage. It has now now made two such investments, in Form Energy and Quident Energy, Quartz reports.

Form Energy, a spin-out from MIT, received $9 million from BEV along with Prelude Venture and other small investors. Existing investors in the company include Macquarie Capital and Saudi Aramco.

BEV, along with Evok Innovations, has also committed $6.4 million to Quidnet, which focuses on grid-scale energy storage, using pressurized water underground to store large capacities of energy. Its other investors include the Will and Jada Smith Family Foundation, the Sorenson Impact Foundation and Prime Coalition.

BEV has also listed the development of microgrids and mini-grids across the developing world as one of its top five investment themes. Other backers of the fund include Vinod Khosla (Khosla Ventures), John Doerr (Kleiner Perkins,) Jack Ma (Alibaba) Jeff Bezos (Amazon) and Masayoshi Son (Softbank).

Gore Street Capital Takes First Energy Storage Fund Public

London-based private-equity firm Gore Street Capital raised £30 million ($35.2 million) in an initial public offering of its Gore Street Energy Storage Fund. The fund will invest in large-scale grid battery projects, with a targeted dividend yield of 7% and an unlevered internal rate of return of 10% to 12%.

The company plans to have invested in a portfolio of about a dozen projects by the end of 2019, totalling more than 1 GW of storage capacity in the U.K. and another 250 MW overseas. The company is looking at projects in both California and Ontario.

NEC Energy Solutions, a subsidiary of NEC Corp., and Japanese engineering company Nippon Koei backed the IPO by investing a combined £14 million ($18.4 million) in the fund.

Stem Raises $80 Million in Series D Round

As noted earlier, behind-the-meter battery company Stem, which combines software and lithium ion batteries, raised $80 million in a Series D round earlier this year, using the proceeds to expand internationally.

The oversubscribed round was led by growth equity firm Activate Capital. Other investors included Singapore’s state-owned investment firm Temasek and the Ontario Teachers’ Pension Plan. The investment brings the company’s total private equity funding to more than $200 million.

Stem has also raised more than $350 million in project financing, including $100 million from infrastructure investors Starwood Energy Group in 2016. Stem uses the funding to finance, in the form of lease payments, its distributed energy storage systems to commercial and industrial customers.

The company’s systems use software to manage a client’s peak power, deploying stored energy during peak demand times, in order to manage demand charges. Stem had over 1,100 sites operational or in construction last year, with an average size of 500 kWh, it says.

Other Noteworthy 2018 Funding Activity:

Thermal Storage Developer Ice Energy Funding Raises $40 Million: Ice Energy raised $40 million in June through a long-term investment from Argo Infrastructure Partners. Ice says the funding will help the company deliver its thermal energy storage solutions to both residential and commercial customers. Its flagship “Ice Bear” product freezes water at night, when electricity is cheapest, and uses that ice for space cooling during daylight hours. Ice’s current projects are supported by long-term utility contracts to manage peak power demand and load shifting. 

Flow Battery Developer ViZn Raises $15 million: ViZn Energy Systems, which makes zinc redox flow batteries but which has been struggling financially, raised $15 million from an unnamed energy industry private equity fund and several existing investors. The new financing will allow the company to suspend a 10-week long furlough of employees. ViZn says its flow batteries, designed for use in microgrids, experience no capacity fade over 20 years.

Battery Software Developer Voltaiq Raises $6.6 Million in Series A: Battery software developer Voltaiq closed a $6.6 million Series A funding round that was led by Anzu Partners. Other investors include Bee Partners, SJF Ventures and UL Ventures. Voltaiq, based in Brooklyn, offers an analytics platform that it says can predict the performance of batteries and battery-powered systems. The platform is intended to increase productivity and improve performance and reliability.

Shell Ventures Leads $70 Million Investment in Sonnen: German energy storage system company Sonnen raised €60 million ($70 million) in an investment round led by Shell Ventures. The funding will help the company expand further internationally, especially in the U.S. and Australia. Alongside the funding, Sonnen and Shell’s New Energies division have also launched a “strategic cooperation agreement” that includes a focus on integrated energy propositions, enhanced EV charging solutions and grid services based on Sonnen’s virtual battery pool, the company says. Earlier this year, Sonnen unveiled an electric vehicle charger that can integrate with the company’s network of battery systems in Germany, Australia and the U.S.

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