Dive Brief:

• Battery storage companies have raised a combined $1.4 billion in venture capital funding during the first six months of 2019, up from $543 million during the same time period last year, according to a new report by Mercom Capital Group.
• The lion's share of the record-setting figure came from one deal alone — Northvolt's $1 billion fund for a 16 GWh project. The number of funding deals decreased to 17 during the first half this year, down from 30 during the same time in 2018.
• The uptick in VC funding for battery storage companies comes amid an increased focus on the technology, which enables the integration of more renewable energy and has the potential to replace gas-peaker fleets around the country. 

Dive Insight:

For the third year in a row, VC funding in battery storage companies increased as the industry grows and costs fall, Mercom Capital Group CEO Raj Prabhu told Utility Dive. 

"We should be seeing more and more investments going forward," he said. 

Most of the battery storage funding comes from the U.S. and Europe, according to the report. 

"We see constant deals, almost every quarter, going into lithium-ion based technology," Prabhu said. "Other than that, we also see quite a bit of funding going to energy storage systems, these integrated types, like the Stems of the world that actually use somebody else's battery." 

The report said a total of 41 VC investors participated in battery storage funding in the first half of 2019. 

"We've been tracking these numbers since 2014," Prabhu said. "The [$1.4 billion] number is the highest ever."

While he acknowledged that Northvolt's $1 billion funding round skewed the numbers somewhat, Prabhu called attention to the fact that many oil and gas companies, as well as utilities, are actively investing in battery storage, smart grid and efficiency companies.

"Utilities are investing as a way to understand the technology and possible acquisitions in the future," Prabhu said. "Oil and gas companies are thinking about diversifying into renewable energy."

The main reason for the continued growth in battery storage funding is the falling technology cost, Prabhu said. However, the increased adoption of solar and storage means having battery storage becomes more vital.

"People are looking beyond some of the technologies we already have," he said. "So while lithium-ion is [the] oldest and most widely used technology right now, people are going to look at other technologies, where we need investments to speed it up. Because this is not a one-size-fits-all kind of technology."

According to the report, the top 5 VC funding deals during the first six months were: Northvolt’s $1 billion, Sila Nanotechnologies' $170 million, Romeo Power's $88.6 million, Zenobe Energy's $32.3 million and Livguard Energy Technologies' approximately $32 million.

The report states that there have been four battery storage project funding deals so far this year for a combined $499 million, compared to $34 million in four deals during the first half last year.

In addition to battery storage funding, the report also looked at the funding raised by smart grid and efficiency companies.

Global VC funding — venture capital, private equity and corporate venture capital — for all three categories grew 102% to $1.7 billion this year, compared to $843 million in the first six months of 2018.