Sustainable Investment News Briefing: VC Funding Pours into Battery Storage Companies; Vertical Farms Raise Cash; Shell-backed Solar Developer Raises $200M for Asian Expansion; Distributed Generation Gains Interest From Institutional Investors

Installed energy storage capacity is forecast to soar in the coming decades, as consumer demand and a continued fall in lithium-ion battery prices makes widespread energy storage ever more affordable. Meanwhile, vertical farming companies are closing nine-figure funding rounds.

In this news briefing, we take a look at several aspects of both of those sectors. We also take a look at some recent cleantech fund-raising activity, new technologies, and how renewables are starting to outpace coal in the energy generation mix.

Energy Storage Capacity to Skyrocket by 2040: Energy storage installations worldwide will expand dramatically over the next two decades, BloombergNEF says, from 9GW/17GWh deployed as of last year to 1,095GW/2,850GWh by 2040

The exponential growth of storage will be made possible by a continued sharp fall in the price of lithium-ion batteries, which had already fallen by some 85% from 2010 through 2018. Prices could fall another 50% by 2030, driven by demand for both electric vehicles and stationary storage.

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The growth in storage installation will require about $662 billion worth of new investment, BNEF estimates.

VC Funding Pours into Battery Storage Companies: Battery storage companies raised a record $1.4 billion in venture capital funding in the first half of the year, data from Mercom Capital Group shows. That’s up from $543 million in the same period of 2018

Much of the increase came from a single deal, Sweden’s Northvolt raising $1 billion to help finance Europe’s biggest lithium-ion battery plant. In fact, the total number of funding deals fell from 30 in H1 of 2018 to 17 during H1 of this year.

Still, the numbers should continue to climb, Mercom CEO Raj Prabhu says. He also notes that a growing number of oil and gas companies are investing in battery storage, smart grid and energy efficiency companies.

PE Firm Acquires Energy Storage Developer: Private equity firm Energy Capital Partners has acquired Convergent Energy + Power, an independent developer of energy storage across North America with about 120 MW of energy storage projects. Terms weren’t disclosed. Convergent received a strategic investment from the venture capital arm of oil and gas industry giant Statoil, now Equinor, in 2016.

Convergent says it developed and operated the largest behind-the-meter energy storage system in North America and was also “the first to develop a non-wires-alternative for utility infrastructure.” And its increasingly focusing on coupling energy storage with solar PV in its distributed generation projects, said COO Frank Genova during a recent CleanTechIQ forum.

Energy Capital Partners oversees about $19 billion in capital commitments.

Meanwhile, in the world of vertical farming:

Vertical Farms Raise Cash, Grow Stronger Worldwide: Vertical farming company AeroFarms raised $100 million in late-stage funding last month, marking the latest vertical farming group to raise big money. Investors in its latest funding round include Ingka Group, part of multinational retail corporate IKEA.

In June, Berlin-based vertical farming startup Infarm raised $100 million in a Series B round via a mix of equity funding and debt financing.

Other recent big vertical farm fundraises include Bowery’s $90 million Series B round in 2018 and Plenty’s $200 million Series B in 2017, which is still the largest-ever funding round in the vertical farming sector and included notable investors such as Softbank Vision Fund and founder Jeff Bezos.

The AeroFarms financing was arranged by JPMorgan and values the company at $500 million, which is reportedly the same valuation attached to Plenty.

Vertical farming is also taking off in Singapore. The land-scarce city state currently gets most of its food via imports from Malaysia and other countries, and has announced a goal to have 30% of its food supply come from local vertical farms and from “sky farms” atop Singapore’s many skyscrapers by 2030.

In June, 2018 Singapore-based Sustenir Agriculture made its locally grown strawberries available to groceries around Singapore, among the first produced commercially by a vertical farm. Sustenir has raised $22 million in venture capital funding from investors including Singapore’s $220 billion sovereign wealth fund Temasek.

Other cleantech & sustainable investing news:

Renewable Energy Investments Fall So Far This Year: Renewable energy investments in China fell by a sharp 39% in the first half of the year compared to the same period of 2018, BloombergNEF says. Such investments also fell 6% in the US and 4% in Europe.

Investments in renewables totalled $28.8 billion in China over the period, $23.6 billion in the US and $22.2 billion across Europe.

While the drop in China was real, it was probably also an aberration, BNEF head of Asia Justin Wu says. “We expect a nationwide solar auction happening now to lead to a rush of new PV project financings. We could also see several big deals in offshore wind in the second half,” he says in a statement.

The drop comes after global clean energy investments fell 8% in 2018 compared to 2017, totalling $332 billion, BNEF said earlier this year. However, venture capital and private equity investments in the sector grew 127% last year over 2017 to total $9.2 billion. That was the highest total since 2010.

Shell-backed Solar Developer Raises $200M for Asian Expansion: Cleantech Solar, an India-focused solar developer that’s 49% owned by Shell, will raise $200 million over the next half-year through an Indian funding mechanism called external commercial borrowings, or ECBs. Cleantech Solar will use the money to expand its solar capacity from 200 MW to 500MW.

About 75% of the firm’s existing capacity is in India, with the rest across Southeast Asia.

Shell paid $100 million for a 49% stake in the company in January. It’s the oil giant’s first investment in an alternative energy platform in Asia.

Breakthrough Energy Leads A-Round for Gasification Company: Sierra Energy raised $33 million in a Series A funding round led by Breakthrough Energy Ventures. The Davis, Calif.-based company will use the money to further develop and commercialize its gasification technology. Sierra says its FastOx process using extreme heat to turn waste into syngas and molten metal, without producing any process emissions.

Other investors in the Series A round include Cox Investment Holdings, BNP Paribas, Twynam Investments, Formica Ventures and The March Fund I.

Shell, Sumitomo Back Blockchain Energy Company: Shell Ventures and Sumitomo Corp. have invested in Brooklyn-based LO3 Energy, which will help LO3 develop its blockchain-based community energy networks, such as microgrids.

LO3 says it was the first company to enable peer-to-peer energy sharing and has developed a “transactive energy platform” that makes it easier to integrate distributed energy resources (DERs) into supply networks.

Terms of the Shell Ventures and Sumitomo investments weren’t disclosed. Existing corporate backers of LO3 include Braemar Energy Ventures, Centrica and Siemens.

Another microgrid innovator that raised capital is Opus One Solutions, which closed its Series B funding in June led by MacKinnon, Bennett & Company and Export Development Canada alongside Renewal Funds, which join strategic investors Energy Impact Partners and Engie in the round. Opus One develops software that integrates distributed energy resources to better manage the grid, and has been working with National Grid to test how microgrids and distributed energy resources can integrate with grid operations.

Aberdeen Standard to Manage $500M in ESG Bonds: Aberdeen Standard Investments is pairing up with the Asian Infrastructure Investment Bank to develop debt capital markets for infrastructure across Asia, as well as encourage responsible investing in fixed income and build an ESG “ecosystem” in Asian emerging markets, the entities announced.

Under the terms of the partnership, Aberdeen Standard will manage the $500 million AIIB Asia ESG Enhanced Credit Managed Portfolio, which mostly comprises Asian infrastructure-related bonds; the investment process will fully integrate ESG factors.

Distributed generation gaining interest from institutional investors:

Capital Dynamics Pairs with Sol Systems: Capital Dynamics, an asset manager with $5.9 billion under management by its Clean Energy Infrastructure team, has formed a joint venture with solar finance and development company Sol Systems. The new entity, Sol Customer Solutions, will provide institutional investors with direct exposure to the distributed generation (DG) market.

Term of the JV weren’t disclosed. It will offer customers an “integrated suite of renewable energy and storage solutions,” Sol Systems says.

Separately, Capital Dynamics has purchased a 180 MW solar project in Boulder City, Nev., that includes a 90 MW energy storage facility. Two municipalities and a cooperative have secured power purchase agreements for the project.

Sunnova Goes Public at Lower Price than Expected: Rooftop solar company Sunnova went public last month in an IPO that brought in far less than anticipated. The Houston-based company raised $168 million in the float, nowhere near the $300 million it had expected.

The outcome suggests that the bankruptcy of SunEdison in 2016 has left investors wary of rooftop solar developers, Bloomberg says. Also not helpful were charges just before the IPO from a rival developer, Sunrun, that some of Sunnova’s financials were misleading.

Sunnova offers solar leases and loans, as well as standalone energy-storage services and has more than 63,000 customers. Last year it reported $104 million in revenue and a net loss of $68 million.

Credit Suisse Backs CleanCapital Debt Financing: Clean energy investment platform CleanCapital and funds overseen by Cargill’s CarVal Investors received $300 million in debt financing from Credit Suisse, funding that helped the company buy its biggest solar portfolio.

After securing the debt-warehouse facility, New York-based CleanCapital acquired a 75 MW solar portfolio in New Jersey from KDC Solar. It’s the fourth deal that CleanCapital has made through its partnership with CarVal.

The company says it wants to add another $1 billion of assets by the end of 2020.

New Infrastructure Investment Vehicle for U.S. Distributed Solar Projects: In July, distributed solar developer Soltage and infrastructure equity investment fund manager Basalt announced the launch of a new funding vehicle, Helios Power, which is expected to fund the construction of 200 MW of solar assets across the United States.  Helios Power will focus on distributed solar asset investment in the commercial and industrial, utility, community solar, municipal and corporate PPA markets, while also expanding the investment mandate to include solar plus storage, stand-alone storage and operating solar investment, according to a statement.

Compressed Air Energy Storage Moves Ahead in Australia: Canada’s Hydrostor has received approval to move ahead on a $20 million advanced compressed air energy storage (A-CAES) facility in South Australia.

The project will use excess electricity from wind and solar to run a compressor that  produces heated, compressed air that is then stored in an old zinc mine. The compressed air can be released to drive a generator and produce electricity during times of high grid demand.

South Australia now gets nearly half of its electricity from renewables.

Renewables Overtake Coal for US Electricity Generation: More electricity in the US came from renewables than from coal in April, for the first time ever, the Energy Information Administration says.

Solar, wind, hydro and other renewables made up 23% of total generation that month, while coal accounted for 20%. EIA says solar, wind and other non-hydro renewables will be the fastest-growing sources of electricity for at least the next two years.

Coal is slipping even in Texas, the country’s largest consumer of the black rock. Wind created 22% of the state’s electricity in the first half of the year, slightly more than coal did. Falling prices for both renewables and natural gas have contributed to coal’s decline in the Lone Star State

Carmakers, California Regulator Agree on Fuel Standards: Four major automakers have reached an agreement with California regulators to improve the fuel efficiency of the vehicles they produce. It’s seen as a move that undercuts the Trump administration’s plan to roll back fuel efficiency standards.

The deal was struck between the California Air Resources Board and Ford, Honda, Volkswagen and BMW. Even though he White House is looking to relax efficiency standards, the California deal could have a far-reaching effect, since the more-efficient cars that are made to meet the California standards will also be sold across the country.

California regulators also hope the deal will push the Trump administration to rethink its overall approach to fuel efficiency.

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