In a recent report on quarterly VC funding and M&A activities in energy storage from Mercom Capital, two names stood out in a chart of top five deals over the third quarter of this year. One was Arnold Schwarzenegger, the all-action former ‘Green Republican’ governor of California, and now an action movie star once again. ‘Arnold’ invested in Advanced Microgrid Solutions for the second successive quarter (more on that later).
The other big name was venture capital (VC) firm DBL Partners, which invested in two of those top deals, contributing to expansion plays by flow battery maker Primus Power and, again, Advanced Microgrid Solutions. DBL is led by founders Nancy Pfund and Ihra Ehrenpreis and has become well known for seeking not just a healthy return on investment but also delivering a positive social impact, creating the ‘double bottom line’ that DBL is named after.
Pfund and Ehrenpreis are also two of the earliest backers of Tesla before it floated and have invested in numerous solar and related companies, including installer SolarCity and PV tracker company NEXtracker, sold recently for US$330 million.
Formerly at JP Morgan, from where DBL was spun off, Nancy Pfund spoke to PV Tech Storage about what it means to be an investor in energy storage and why it can be a “very, very, tricky field” in which to make the right call.
What’s the best way to pick out successful technologies to help commercialise in energy storage?
Some things are quick and some take longer. In a portfolio you can have both, you wouldn’t want all your companies to take forever to exit but sometimes the big wins do take longer or do require technology. So, lithium ion is here and now and doing great, but there are flow batteries, fuel cells, storage is not going to have just one solution and so there are a lot of companies people have invested in for four or five years now that are actually becoming commercial, at a time when the customers really need a solution.
[For example] you look at all of these tech companies that are going 100% renewable (including Google and Apple), well, they’ve got to have storage in the design, and lithium-ion is not the universal solution. It’s a very powerful solution, but there’s going to be needs for other modalities and we’re seeing that now, we’re seeing some of these younger companies, like we have Primus Power coming out with a flow battery, we’re demonstrating it in the field and that’s generating a new class of interest from commercial and government kinds of customers. And Primus is not alone – there are a lot of companies out there.
That’s a part of the investment portfolio that is pretty ‘heavy lifting’ in terms of technology and getting that right. It’s a very, very, tricky field. But you want to diversify portfolio so you place bets across the spectrum. It’s higher risk, because not everything is going to pan out, but it’s our job! It’s not our job to have every single company be successful because then they’re not moving the needle, they’re just incremental.
Jigar Shah said a while ago that he is more comfortable funding storage than perhaps more mainstream lenders might be, because as someone who’s gone through the early years of solar, he’s a lot more comfortable with the cost curves and technology involved and in taking manufacturers or developers’ assurances that it will work. Do you agree and will that change with time as happened with solar?
Certainly, there are lots of ways to play storage, just as there are lots of ways to play solar. It’s kind of like 10 years behind solar but it’s exhibiting similar trends and you can do a technology play, you can do a financing play, a microgrid play – Advanced Microgrid Solutions has a 50MW contract with (US utility) SoCal Edison to create hybrid buildings that basically combine the Tesla battery with solar, with sophisticated software for real-time demand adjustments, so that you can pull your power from the grid, the battery, the rooftop solar, or you can change your demand curve based on what’s cheapest or what’s best for the grid at that moment and do all of this in an extremely interdependent, interconnected way.
All of a sudden you don’t have to build as many peaker plants, you don’t have as much transmission and distribution (T&D) expense because you’re really optimising your consumption and supply in real time.
And interestingly enough, it’s led by Susan Kennedy, who has got all of these great technologies that she’s assembling and improving with software, but she also knows policy. She was Governor Schwarzenegger’s chief of staff, she was assistant chief of staff to Governor Gray Davis. She’s also a former Public Utilities’ Commissioner for the state of California. I think she wrote the net metering bill regulation when she was there. She can not only read 800 pages of regulations and understand [them], she has had a hand in writing them! So she’s very knowledgeable and able to translate for the utilities: “this is what the regulation means to the utilities. Here’s how you can comply with it and also help your own business as well”.
It seems that to lead these tech companies that have overarching goals, reducing carbon emissions and deploying more flexible energy network technology while creating a business you need to be a polymath and expert in so many things. It shows you how much these issues of solar and storage impact on peoples’ lives across the board...
Yeah, it’s so true and she’s assembling a team there that’s incredibly diverse, from policy to software to storage to financing, there’s all kind of innovative financing approaches and that’s another thing that’s really different this time. Compared to 10 years ago, the quality of the entrepreneurs in this business, their experience, their track record, their ability to grow companies, is just getting better every day. That’s been helpful. You know, 10 years ago Susan Kennedy wasn’t starting a company, she was writing path-breaking policies that helped to create these industries, that’s just another fascinating element is the talent pool is getting better.
So many people, not just millennials but baby boomers want to do something that changes the world, they want to work in a place where they can make a good living of course, but that’s not enough. They really do want to have a social impact and we’ve seen that in our practise. Instead of it being a ‘nice to have’, entrepreneurs do see it as a fundamental part of their identity.
So many people, not just millennials but baby boomers want to do something that changes the world, they want to work in a place where they can make a good living of course, but that’s not enough. They really do want to have a social impact and we’ve seen that in our practise. Instead of it being a ‘nice to have’, entrepreneurs do see it as a fundamental part of their identity."