Dive Brief:
- The global energy storage industry saw $11.7 billion in total corporate funding during the first quarter of 2024, marking a 432% increase over the first quarter of 2023, according to clean energy industry consulting firm Mercom Capital Group.
- The vast majority of the increased funding — 83% of the total raised in Q1 — went to two battery manufacturers that recently closed multi-billion dollar debt financing deals, according to Mercom. Northvolt closed a $5 billion debt financing deal and Automotive Cells Company closed a $4.7 billion deal.
- Although inflation and high interest rates have muted investor interest in solar, the promise of new battery technologies continues to attract venture capital to energy storage, Mercom CEO and co-founder Raj Prabhu said.
Dive Insight:
First-quarter funding for the global energy storage industry looked a lot like the figures once seen by solar companies about ten years ago, Prabhu said. That's probably indicative of the relative maturity of the two industries, he said.
At the beginning of the last decade, startup solar companies were raking in venture capital, Prabhu said. Most of the funds went to companies that aimed to develop new kinds of solar panels in pursuit of a lower-cost generation technology. But PV panels ultimately reigned supreme, as did manufacturing from China, which caused many early solar companies to go bankrupt and soured investors on solar for years, Prabhu said.
It's now clear, Prabhu said, that energy storage represents the key to the next wave of the energy transition. Lithium-ion currently dominates the market, he said, but a need for utility-scale, long-duration energy storage remains unmet. That has created an opening for all kinds of startup companies looking to develop new kinds of storage technologies.
“We can only go so far with the intermittent [energy resources] we're depending on right now, which is a lot of solar and to some extent wind,” Prabhu said. “The market recognizes that, and when the market looks this big, and there is policy support behind it, investors get behind it.”
Prabhu cautioned that the relatively small size of the energy storage industry means a handful of deals, like the Northvolt and Automotive Cells deals in Q1, still have an outsized impact on industry-wide data, making it difficult to know exactly what direction the industry is really headed.
But even without these deals, Prabhu said, investment in energy storage appears to be experiencing an upward trend. Overall venture capital raised by enegy storage companies increased 9% year over year to $1.2 billion, according to Mercom’s data, while debt and public market financing — including the Northvolt and ACC funding deals — totaled $10.5 billion.
It remains to be seend, Prabhu said, whether energy storage will see a single technology come to dominate the market as solar ultimately did. The absence of a clear solution to the long-duration problem leaves the door open to multiple storage solutions, he said.
The IRA's support for domestic manufacturing is also encouraging, he said. China may dominate solar supply chains, but battery manufacturing is newer and much less settled. American companies still have a chance to corner the battery market, Prabhu said.
