Is storage getting easier to invest in?

Energy storage investment was discussed at the World Bank Innovate4Climate event in Barcelona last week. Pic: Energy Storage Report.

Energy storage investment was discussed at the World Bank Innovate4Climate event in Barcelona last week. Pic: Energy Storage Report.

By Jason Deign

The possibility that energy storage could be gaining credibility among investors has been reinforced by a rash of announcements in the last week.

On Friday, Bloomberg reported that GSR Capital, a local government-backed Chinese private equity firm, was poised to pay around USD$1bn for a battery business owned by carmaker Nissan.

“The firm is in advanced talks with Nissan about buying a stake in Automotive Energy Supply Corp, which makes the lithium-ion cells for the Japanese company’s Leaf electric car,” said Bloomberg.

The news emerged amid a raft of gigafactory headlines around the world. Last week alone:

  • A US-Australian consortium unveiled plans for 15GWh-a-year-capacity gigafactories in New York, USA, and Townsville, Australia. The Australian factory would employ 1,000 people, the Townsville Bulletin said.
  • Thailand’s leading renewable energy company, Energy Absolute, was said to be eyeing locations for a $2.9bn, 1GWh-capacity gigafactory in Asia. “Funding isn’t an issue,” Bloomberg reported.
  • Accumotive, a subsidiary of automaker Daimler, invited German chancellor Angela Merkel to lay the first stone for a €500m lithium-ion battery factory in Kamenz, near Dresden in Germany.
  • The South China Morning Post claimed lead-acid battery maker Johnson Controls was planning two plants with a combined annual capacity of 13.5m batteries. The first plant would cost $250m, the Post said.

Elsewhere, vanadium redox flow battery company Pu Neng, formerly called Prudent Energy, on Friday said it had attracted “a major investment” from mineral exploration firm High Power Exploration.

The backing is thought to be in the region of $9m, bringing Pu Neng’s total invested capital to more than $90m. 

Flood of deals and announcements

The flood of deals and announcements last week follows months of acquisition activity across the energy storage sector. A year ago, the French utility Engie snapped up Green Charge Networks.

This was followed in July by Doosan, the South Korean industrial giant, buying 1Energy Systems. In September, DK Energy, part of another French utility, EDF, bought Groom Energy Solutions.

In January, Italy’s Enel picked up Demand Energy. And earlier this month Wärtsilä, a marine and energy markets player, acquired Greensmith Energy Management Systems “to position itself as a global energy systems integrator.”

This process of consolidation and scaling up could signal that battery storage is poised to become more acceptable to large investors, which have so far shied away from backing the technology.

Last week, at the Word Bank’s Innovate4Climate conference in Barcelona, Spain, Jonathan Taylor, vice president of the European Investment Bank (EIB), told Energy Storage Report that financing energy storage was still tricky. 

Proposals but no movement

“We have had detailed proposals put to us on a couple of things,” he said, but “I can’t recall any recent projects which we have moved ahead on, where we’ve been able to take it to a point where it’s a project worth funding.”

Part of the problem for funding bodies such as the EIB, which has backed mega-projects such as the such as the Noor Ouarzazate solar power complex in Morocco, is energy storage has traditionally been a very fragmented market.

The same goes for institutional investors and large investment funds.

Energy Storage Report understands that major investors have been circling the energy storage market since at least 2013, but have had problems finding the kinds of $100m-plus deals that are available in other sectors.

Instead, most energy storage companies have been seeking sub-$100m venture capital funding for products or business models which have had scant market validation.   

Venture capital funding has dropped

Venture capital funding for energy storage has in fact dropped this year, according to figures from Mercom Capital.

In the first quarter, venture capital funding for battery storage companies came to $58m across eight deals, compared to $156m over nine deals in the last quarter of 2016 and $54m raised in 10 deals in the first quarter of 2016.

The fall came as venture capital investments into allied segments, such as smart grid and efficiency, increased.

The fact remains that energy storage investing remains a risky business, as evidenced by the recent collapse of saltwater battery maker Aquion Energy. 

Wider attention from investors

At the same time, though, a rapid ramping up of lithium-ion battery production, primarily to serve the electric vehicle and energy storage markets, could serve to give the battery sector the scale it needs to get wider attention from investors.

At the very least, the advent of multiple global gigafactories is likely to increase price competition in the lithium-ion battery segment, making it even more difficult for other chemistries to achieve market share.

This may not be good news for start-ups, but it might be a welcome development for investors currently fazed by the range and variety of options available under the energy storage banner.

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