Dive Brief:
- Battery storage, smart grid and energy efficiency companies raised $252 million in venture capital (VC) funding in the first quarter of 2020, according to a new report from Mercom Capital Group, a 20% increase over the first quarter of last year.
- Total corporate funding for these sectors — which includes debt and public market financing — amounted to $337 million, slightly more than the $317 million that was raised as part of 27 deals for the same period in 2019 but much lower than the $1.1 billion recorded in the fourth quarter of last year.
- Overall, it was not a bad quarter for the battery storage industry, Mercom CEO Raj Prabhu told Utility Dive. These numbers do not show a lot of the effects of the COVID-19 pandemic, since they represent deals that were probably in the works six months to a year before the outbreak, "but it's going to be very crucial to see what happens in Q2, Q3, Q4," he said.
Dive Insight:
Funding levels tend to be "lumpy" from quarter to quarter and it's difficult to say something's wrong with just one quarter, according to Prabhu. "As the year progresses, we get to see how the funding environment is a little bit more broadly," he said.
Corporate funding of these sectors should continue as long as there are good deals and good technologies out there, Prabhu added. "We may see reductions going forward, but it's still very speculative at this point," he said.
In the first quarter of 2020, a total of $244 million in corporate funding was invested in battery storage — a reduction from the $635 million invested in the fourth of quarter of 2019, but 88% higher year-over-year compared to $130 million in Q1 2019.
The energy efficiency sector saw $7 million in corporate funding — down from $155 million raised in the first quarter of 2019, while smart grid investments totaled $86 million, compared to $32 million in Q1 2019, according to the report.
Energy efficiency funding has been weak over the last year because it's generally influenced by government programs that mandate efficiency deployments, according to Prabhu.
Looking to the future, "we're going to be watching solar closely, because a lot of these storage deals that are happening are solar-plus-storage," Prabhu said.
Additionally, he mentioned the possibility of a recession in the U.S. and abroad. During the last recession, even companies that were sitting on money tended to freeze and wait on investments, and that kind of thinking could cause delays, Prabhu said.
"Once we get back to work, if that rebound is also pretty quick, then the confidence is going to be back in the markets to go, you know what, let's get back and invest," he said. "Fundamentally, there's nothing that's changed, whether solar or storage — it's really solid business and technology, and we know where the future is going."
Another area of focus is job losses in the renewables and storage sector, Prabhu said. According to a report from Environmental Entrepreneurs, the American Council on Renewable Energy, E4TheFuture and BW Research Partnership, more than 106,000 clean energy workers lost their jobs in March — erasing all job gains that took place in 2019. Without legislative intervention, the analysis predicted that number could rise to 500,000 workers in the coming months.
But while a lot of people are talking about jobs lost in the sector, Mercom isn't seeing that with some of its clients, so it could be temporary, Prabhu said.
"If anything, the industry's looking at it as 'Okay, we've got a blip right now, how fast can we get back?'" he said.
Catherine Von Burg, CEO and president of SimpliPhi Power, thinks that investments will increase in energy storage and renewable energy .
"Even before COVID and the plummeting of gas and oil stocks, gas and oil were underperforming in the market. I do think that investors, if they make a choice on where to invest, where they start investing will be in renewables and storage," Von Burg said.
