Funding round puts Sonnen on course to take home battery crown from Tesla

Could Sonnen pose a challenge to Tesla's dominance in the residential battery storage market? Pic: Sonnen

Could Sonnen pose a challenge to Tesla’s dominance in the residential battery storage market? Pic: Sonnen.

By Jason Deign

A cash injection from investors including Shell has put the German residential energy storage firm Sonnen a step closer to challenging Tesla’s home battery dominance.

Wildpoldsried, Bavaria-based Sonnen last week announced the closing of a €60m (USD$71m) financing round led by Shell Ventures and “significantly supported by all existing investors.”

The company said the money would be destined towards helping Sonnen expand in Australia and the US, both markets where the vendor already has a presence.

“Growing faster than the energy storage market and establishing new technologies such as energy sharing and our virtual battery pool requires continued investments,” said Christoph Ostermann, CEO, in a press note.

“We’re very happy to receive the backing of all our investors and the commitment of a major global player like Shell to follow our vision of clean and affordable energy for everyone.” 

Strategic cooperation agreement

Sonnen said Shell’s investment would be accompanied by a strategic cooperation agreement between the battery company and the oil firm’s New Energies division.

The agreement would focus on areas that “offer synergies between the two companies,” said Sonnen.

These could include integrated energy offerings, electric vehicle charging systems and the provision of grid services.

Shell’s New Energies business was created in 2016 and focuses on new fuels for transport, including advanced biofuels, hydrogen and electric charging, and power, including wind, solar and energy storage.

Within the power portfolio, New Energies is actively pursuing investments that meet the needs of commercial, industrial and residential customers. 

Sonnen has raised $180m

Greentech Media reported that Sonnen has raised about $180m in five funding rounds to date.

The company pulled in $3m in 2013, $9.4m in 2014, $12m in 2015 and $85m in 2016, with the latter round featuring GE Ventures, Germany’s eCapital and MVP, Dutch firm SET Ventures and Czech Republic’s Inven Capital.

This month’s financing round will give Sonnen a war chest aimed at fighting Tesla in two of the Californian manufacturer’s most important markets.

And although the two companies have not publicly locked horns, Sonnen clearly seems bent on snatching residential battery storage leadership from the firm that more or less established the market with the launch of the Powerwall.

Sonnen, still named Sonnenbatterie at the time, was one of the first companies to ape Tesla’s strategy of offering a low-cost, highly integrated, design-led lithium-ion battery product for residential customers in 2015. 

Peer-to-peer energy trading

But the company, already the leader in the buzzing German residential storage market, offered an extra twist: a residential peer-to-peer energy trading platform that customers could use to swap electrons.

Since then, Sonnen, which was established in 2010, has expanded operations across Europe, encompassing Austria, Italy and the UK, and launched into the key Australian and US markets.

The company appears to have benefited from a single-minded focus on the residential market.

Thus, for example, while Tesla has at times struggled to find product to satisfy residential sales while at the same time stocking electric cars and grid-scale battery plants in Australia, Sonnen has had no apparent supply problems.

And the German firm scored a coup last October when it signed a contract to supply around 3,000 batteries for a residential development being built by Mandalay Homes in Arizona. 

Batteries from Tesla

It later emerged that Mandalay had originally tried to source the batteries from Tesla but had failed to get a response.

More recently, Sonnen, which has ex-Tesla executives among its leadership, unveiled moves to improve its peer-to-peer energy trading capabilities with blockchain technology, adding a further asset which Tesla does not possess.

In fairness, though, Tesla has hardly been resting on its laurels. In February it announced plans to install Powerwalls in 50,000 homes in Australia.

And in its latest quarterly results, Tesla claimed to have installed “a record number” of residential Powerwalls. “In spite of the significant growth of Powerwall deliveries, our backlog in Q1 continued to grow,” it said.

Brett Simon, a senior energy storage analyst with GTM Research, told Energy Storage Reportthat Tesla didn’t publish standalone figures for residential sales but nevertheless appeared to have a grip on the US market. 

Residential storage applications

In 2017, 82% of residential storage applications that got funding in the California Self-Generation Incentive Program were from Tesla, he said. This compared to 15% from LG Chem and 2% from Sonnen.

Nevertheless, “Sonnen is certainly a player that can’t be overlooked, given the company’s success in its home market of Germany and consequently significant experience deploying residential storage,” Simon said.

“The US market is still young, so there’s an opportunity for Sonnen to carve out a niche.

“I expect Sonnen will continue to focus on opportunities [to] deploy multiple systems via one contract, such as the recent deal with Mandalay Homes, an alternative route to the solar installer focused channel strategy of Tesla.”

Ultimately, though, what may count in Sonnen’s favour is the fact that it is not trying to commercialise an electric car at the same time as building a presence in energy storage. 

Serious cash burn

Continued delays with Tesla’s long-overdue Model 3 sedan, coupled with serious cash burn at the company, have seen already-jumpy Tesla watchers inching towards the panic button.

“Investors should be very concerned at this point,” wrote trader Bill Maurer on the financial analysis website Seeking Alpha last week.

It’s still too early to say whether, or how, Tesla will emerge from its current financial challenges.

But if it does end up vanishing from the residential energy storage scene, then there is a fair chance its successor could be a German company backed by an oil major.

Be the first to comment on "Funding round puts Sonnen on course to take home battery crown from Tesla"

Let us know what you think. Please leave a comment.