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Following the Money – Energy Storage Funding and Trends

SolarCity and SunEdison are among solar's big players upping their involvement in storage. Image: SunEdison.

Venture capital funding into smart grid, storage and efficiency sectors reached US$394 million in the first quarter of this year with smart grid accounting for US$184 million. VC funding in smart grid jumped this quarter, mostly due to one large deal from SIGFOX, a smart grid communications company, which raised US$117 million. The energy efficiency sector raised US$140 million in Q1 with the help of a solid policy boost as supportive energy initiatives were announced around the world in Q1.

Battery/storage companies raised US$69 Million in VC funding and an additional US$130 million in debt. Compared to Q1 of last year, large VC funding deals were absent this quarter with the exception of Bloom Energy which raised US$130 million in convertible notes.

One M&A deal of note was the strategic acquisition of Solar Grid Storage by SunEdison as solar plus storage solutions gain momentum. While SunEdison adds storage to its portfolio through this acquisition, Solar Grid Storage gets access to the all important low-cost capital. We expect to see similar deals in the future with large solar integrators acquiring storage solutions beyond just strategic partnerships to capture market share in states like California where demand charges are high.

Another reason for the storage momentum is the California Public Utilities Commission’s (CPUC) passage of the first energy storage mandate in the United States, requiring the state’s largest utilities, Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric, to collectively buy 1,325 MW of energy storage by 2020.

Though there were no residential/commercial storage funds announced in Q1 2015, we have already tracked US$172 million in such funds raised by Stem, Green Charge Networks and Coda Energy in 2014. These funds give these companies a strategic advantage, but solar plus storage might be a better and easier way to access large funds as solar is much more mature compared to standalone storage systems and the economics are generally more attractive for a solar-plus-storage system. Solar plus storage systems used to reduce energy and demand charge, can receive the investment tax credit for both storage and solar on top of local incentives.

Though there were no residential/commercial storage funds announced in Q1 2015, we have already tracked US$172 million in such funds raised by Stem, Green Charge Networks and Coda Energy in 2014. These funds give these companies a strategic advantage, but solar plus storage might be a better and easier way to access large funds as solar is much more mature compared to standalone storage systems and the economics are generally more attractive for a solar-plus-storage system. Solar plus storage systems used to reduce energy and demand charge, can receive the investment tax credit for both storage and solar on top of local incentives.

SolarCity, a solar installer third-party finance company, announced last week US$1 billion to finance commercial solar energy systems, including battery storage. Though the fund is primarily targeted towards financing solar systems, the inclusion of storage is a very big deal. According to Mercom’s Q1 2015 Solar funding report, solar residential/commercial funds raised about US$4 billion last year and have already raised US$1.9 billion in the first quarter of 2015. It would be a game changer for storage companies to gain access to these large pools of capital through partnerships, mergers and acquisitions.

The battery/storage sector is where solar was six-to-seven years ago, when venture capital was focused on solar technology companies in CIGS, CdTe, A-Si, CSP, CPV and others. The market and “China” ended up picking C-Si as the winner in terms of technology. With prices continuing to drop  due to increased efficiencies and the eventual commoditization of solar panels, most of the attention is now concentrated downstream on project developers and integrators along with companies that are adopting innovative financing solutions to gain access to large pools of capital and lower the cost of capital to make economics work for end-users. Energy storage is on a similar path and on its way.

"...solar residential/commercial funds raised about US$4 billion last year and have already raised US$1.9 billion in the first quarter of 2015. It would be a game changer for storage companies to gain access to these large pools of capital through partnerships, mergers and acquisitions."

Following the Money – Energy Storage Funding and Trends

Though there were no residential/commercial storage funds announced in Q1 2015, Mercom tracked US$172 million in such funds raised by Stem, Green Charge Networks and Coda Energy in 2014. Image: Stem.

Tags: finance, solar-plus-storage, pv, investment