Mercom: VC funds are increasingly investing in energy storage

Dive Brief:

Corporate funding for energy storage, including venture capital (VC), debt and public market sources, doubled from 2018 to 2019, according to a report from Mercom Capital Group, a clean energy research and communications firm.
While lithium-ion batteries dominated overall global VC investment in the sector, Energy Vault, a company developing gravity-based storage, made it into the report’s top five biggest VC-funded storage deals in 2019.
The report indicates a relatively high reliance on VC funding for storage, smart grid technologies and energy efficiency compared to other clean energy sectors. Another recent Mercom report showed the rising role of debt in financing the global solar energy sector.

Dive Insight:

VC funding of battery storage companies increased 103% from $850 million in 2018 to $1.7 billion in 2019, according to Mercom’s report. The sector received $2.8 billion in total corporate funding last year, including debt and public market financing, up from $1.3 billion in 2018.

In an email to Utility Dive, Mercom CEO Raj Prabhu noted that VC funding has been rising for three years. The 2019 increase follows a 96% increase from 2016 to 2017 and a 20% increase from 2017 to 2018, he said.

VCs contributed nearly 61% of total corporate funding for energy storage, compared to about 12% of the total corporate funding for solar, according to Mercom.

The report also looked at corporate funding for the energy efficiency and smart grid sectors, such as technologies that allow utilities to automatically deal with distribution grid problems. For smart grid companies, VC funding was down from $530 million in 2018 to $300 million in 2019, and total corporate funding for the sector was down from $1.8 billion in 2018 to $372 million in 2019.

Funding for energy efficiency dipped more dramatically. VC funding for energy efficiency was $1.5 billion in 2018, thanks to a $1.1 billion deal from Silicon Valley-based company View, which designs "smart" windows to allow more daylight into buildings like office spaces. In 2019, VC funding fell to $298 million, while total corporate funding for the sector falling from $1.7 billion in 2018 to over $670 million in 2019.

"Funding for the smart grid sector has been inconsistent but the funding decline in 2019 has been the steepest in the past five years," Prabhu said. "Financing for energy efficiency companies has been on a downward trend over the past five years except for 2018, when one large billion-dollar deal skewed the numbers."

Lithium-ion batteries, the most popular form of battery storage by far, accounted for $1.4 billion of the $1.7 billion in VC funding for storage, but Mercom noted that many other forms of storage received funding, including flow batteries, compressed air energy storage, fuel cells, liquid metal batteries, thermal energy storage, solid-state batteries, sodium batteries and zinc-air batteries.

The storage companies bringing in the most VC investment in 2019, according to the report, were Northvolt, a Swedish designer and manufacturer of lithium-ion batteries and battery systems, with a $1 billion deal, followed by the U.S. firm Sila Nanotechnologies with $170 million and $45 million in two separate deals. Energy Vault had the fourth-biggest deal with a $110 million investment from SoftBank’s Vision. Based in Switzerland, Energy Vault’s technology uses the force of gravity generated by lowering concrete blocks from a tower as a form of energy storage.