Battery storage systems outpacing smart grid projects, says report

Business news | October 26, 2016

By Rich Pell

Smart grid, battery and energy efficiency companies raised $102 million in venture capital funding last quarter, according to the report from Mercom Capital Group, while battery storage systems saw a boom to $625m (see graph above).

VC funding for smart grid companies collapsed to $11 million in seven deals in the third quarter of 2016, the lowest amount of VC funding for a quarter since Mercom began tracking funding activity. In Q2 2016, $222 million went into 15 deals. In a year-over-year (YoY) comparison, $81 million went into 12 deals in Q3 2015. There were just seven VC investors that participated in Smart Grid deals in Q3 2016, compared to 46 in Q2 2016, with eight M&A transactions compared to three a year ago.

The top funded company in the sector was ecobee, a manufacturer of a Wi-Fi-enabled smart thermostat, with $35 million raised from Amazon Alexa Fund, Thomvest and Relay Ventures. Skeleton Technologies, a developer and manufacturer of ultracapacitors, raised $14.5 million from FirstFloor Capital, UP Invest and Harju Elekter in the second largest deal. Sense, a developer of a home energy monitoring system, rounded out the top three, with $14 million raised from Shell Technology Ventures, Energy Impact Partners, Capricorn Investment Group, Prelude Ventures, CRV and Bolt.

VC funding for battery storage companies declined sharply with $30 million in nine deals compared to $125 million in 10 deals in the revious quarter and $96m from nine deals a year ago as significant funding activity this quarter shifted to storage project funds this quarter. The funds were spread across six sub-technologies: supercapacitor, lithium-based batteries, energy storage management software, energy storage systems, thermal energy storage and flow batteries with backing from 22 investors, up from 20 in Q2 2016.

Debt and public market financing for battery storage technologies totaled $51.6 million in three deals this quarter, compared to $40 million in one deal in Q2 2016. FuelCell Energy raised $40 million through the sale of shares and warrants. Electrovaya secured a loan of $10 million, and Ixous raised $1.6 million in debt funding.

However, it was a record quarter for residential and commercial storage project funds which raised $625m in four deals, compared to $175m raised in two deals in Q2 2016. Tabuchi America raised $300 million in project financing for residential solar-plus-storage installations in the residential sector’s only project fund.

On the commercial side, Advanced Microgrid Solutions secured $200 million in funding from Macquarie Capital. Stem, a provider of commercial behind-the-meter energy storage systems, announced an investment of up to $100 million from Starwood Energy Group. Sharp’s Energy Systems and Services Group and a developer of a behind-the-meter energy storage system for peak demand reduction for commercial and industrial building owners announced $25 million in funding for solar coupled with its SmartStorage energy storage solution.

Since 2013, $1.1bn has been raised for these battery storage projects.

VC funding for Energy Efficiency technology companies fell again this quarter with $61 million in five deals compared to $86 million in nine deals in Q2 2016. In a YoY comparison, VC funding for Efficiency companies in Q3 2015 was much higher with $316 million in 17 deals. Seventeen investors participated in Energy Efficiency VC deals in Q3 2016 compared to 18 in the previous quarter.

To get a copy of the report, visit bit.ly/MercomSGQ32016