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Zenobē, Redwood Materials top Mercom’s list of VC-funded energy storage deals

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UK-headquartered developer-investor Zenobē Energy and US recycling specialist Redwood Materials made the biggest VC-funded deals for energy storage companies in the first nine months of 2023.

That’s according to Mercom Capital, which has just published its latest report into energy storage funding and mergers and acquisition (M&A) activities. The Q3 2023 report from the research firm also rounds up deals in the space in the year so far up to the end of the quarter.

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Overall, Mercom found that corporate funding for energy storage companies was down year-on-year for January to September (9M 2023) by 31%: in the equivalent period of 2022, US$22 billion was raised across 93 separate deals, but although there were 94 deals this time around, they added up to a total of US$15.2 billion.

This likely comes as little surprise given that the Q2 edition of the report found that activity had bounced back after a quiet first quarter this year. At that time, figures for corporate funding were 55% lower for the first half of 2023 than they had been in 2022, albeit 2022 had been a big year in which the preceding year’s record was smashed with three months still left to go.

In Q1 2023, Mercom had recorded US$2.2 billion-worth of corporate funding deals in the sector, and US$4.9 billion in Q2, meaning US$8.1 billion of deals were signed in Q3. In 2022, the total ran to US$26 billion over the course of the whole year, the highest level recorded to date by Mercom and 55% up from the US$17 billion recorded for 2021. It should be noted however that 2022’s numbers were contributed to considerably by LG Energy Solution’s IPO, which raised US$10.8 billion at the beginning of last year.

The amount of VC funding into the space has conversely grown considerably when comparing the first nine months of this year with 2022’s.

There were 74 VC deals adding up to US$4 billion in 9M 2022, which became US$8.6 billion this year, a 115% increase. Mercom Capital CEO Raj Prabhu was quoted as saying that interest from VCs in energy storage “remains robust”.

If anything, VC appetite appears to be growing, because Mercom reported US$1.1 billion of deals in Q1, US$2.7 billion in Q2, and now US$4.8 billion in the third quarter alone.

One interesting trend there is that VC funding hit US$8.8 billion in 2021 before dropping to US$5.8 billion in 2022. In that period, Mercom CEO Prabhu said there had been a marked shift from VC activity and private equity to debt and public market financing.

Developer, recycler and battery manufacturers top VC list

Mercom provided a chart of the top five recipients of VC funding, as mentioned above.

Three out of the five are lithium-ion battery manufacturers, but the top two, UK energy storage and electric mobility infrastructure investor and developer Zenobē Energy, and Redwood Materials, led by former Tesla CTO JB Straubel, headquartered in Nevada, US, and focused on resource recovery and recycling from batteries, are not.

Both Zenobē and Redwood Materials hit the billion dollar mark with their funding rounds, as can be seen below.

CompanyAmount raised (in millions)Type Country
Zenobē EnergyUS$1,084UndisclosedUK
Redwood MaterialsUS$1,000Series DUS
SKUS$944UndisclosedSouth Korea
VerkorUS$905Series CFrance
HithiumUS$622Series CChina
Data: Mercom Capital.

Zenobē has financed, built and owns some of the UK’s biggest battery energy storage system (BESS) projects, including the country’s first BESS directly connected to the transmission network. While the company also works on fleet electrification solutions for transport, including electric buses, it was its work developing BESS assets that won it ‘Developer of the Year’ in the recent Energy Storage Awards 2023, hosted by our publisher Solar Media.

News that it had raised over a billion dollars investment emerged in September, with US private equity firm KKR investing around US$750 million and existing shareholder Infracapital raising the remainder – although some early reports had put the value of the deal slightly higher than later disclosed.

Redwood meanwhile raised its funding through a Series B round, with investors including Goldman Sachs Asset Management, Capricorn Investment Group’s Technology Impact Funds, Caterpillar Venture Capital and Microsoft’s Climate Innovation Fund. In February, Redwood Materials also secured the offer of a US$2 billion loan from the US Department of Energy’s Loan Programs Office.

South Korean battery maker SK was joined by French startup Verkor and China’s Hithium to complete the top ranking list.

Our publisher Solar Media is hosting the 10th Solar and Storage Finance USA conference, 7-8 November 2023 at the New Yorker Hotel, New York. Topics ranging from the Inflation Reduction Act to optimising asset revenues, the financing landscape in 2023 and much more will be discussed. See the official site for more details.

22 October 2024
New York, USA
Returning for its 11th edition, Solar and Storage Finance USA Summit remains the annual event where decision-makers at the forefront of solar and storage projects across the United States and capital converge. Featuring the most active solar and storage transactors, join us for a packed two-days of deal-making, learning and networking.

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