Dive Brief:

• Energy storage company Stem has secured $100 million in financing from Starwood Energy Group Global.

• The financing gives Stem a pool totaling $350 million that it plans to use for building out its storage projects and providing customers with no-money-down financing options. 

• Stem hopes to build on its ability to source financing from a private equity firm and from business relationships with Starwood, which has roots in the hotel industry.

Dive Insight:

Borrowing a page from the financing models that have helped propel solar power growth, some energy storage companies are using financial engineering to offer customers no-cost-down financing options for battery storage. 

Stem, which started using its project financing model for energy storage in in 2013, says it has been used at more than 450 commercial facilities across the U.S. for companies such as Safeway, Wells Fargo and Adobe.

“This financing vehicle gives our customers access to capital and allows them to achieve the benefits of intelligent energy storage without making a major investment,” John Carrington, CEO of Stem, said in a statement.

Carrington says Stem plans to use its pool of capital to support project finance deals for its projects. Each project is set up as a special purpose entity that is funded through non-recourse project financing. The project company then signs a lease for Stem’s “storage as a service."

The customers tend to be large corporations looking to control the energy costs of their buildings, such as hotels, corporate headquarters or corporate operations centers.

Using Stem’s integrated storage and software systems, building owners “can turn energy spend into and energy revenue stream,” Carrington said.

Stem also contracts with utilities to provide energy services.

Stem was one of 10 winners of an auction to supply demand response to Consolidated Edison. Under the agreement with Con Ed, Stem will install up to 857 kW of battery storage in New York City by 2018.

Last November, Southern California Edison awarded Stem a contract to provide 85 MW of distributed behind-the-meter storage for buildings in the West Los Angeles Basin.

For customers, Stem’s battery systems are similar to a demand response service. It can shave peak load and capture savings from avoided demand charges. Aggregating its grid management tools across multiple customers, Stem can then turn around and offer to help utilities manage their gird.

“We inject batteries into load and utilities see it as generation,” Carrington said.

As Stem brings on more storage projects, Carrington hopes to further reduce the firm’s cost of capital by adding economies of scale and demonstrating the validity of its business model to a wider array of investors. Stem has already cut is cost of capital in half over the last year and a half, he said.