VC in Storage

With A123's recent and relatively successful IPO fresh in investor and entrepreneurial memories – it looks like batteries and energy storage are going to continue to be a hot sector. 

VCs invested more than $114 million in the third quarter in 11 energy storage in their ongoing quest for the energy storage grail. Investments were in technologies ranging from fuel cells to lithium-ion batteries to compressed air to flywheels to EEStor's supercapacitors. 

Q3 VC Investment in Batteries, Fuel Cells and Energy Storage
Intelligent Energy (UK)	$30M	Meditor European Master Fund, F&C Investors, et al.	Fuel cell and hydrogen generation technologies
Powercell (Sweden)	$27M	Volvo Technology, Midroc, OCAS	PEM fuel cells
ClearEdge Power	$15M Round E	Applied Ventures, Big Basin Ventures, Kohlberg family, et al.	Fuel cell-based CHP powered by propane or natural gas
Solicore	$13.3M Round D	Rogers Corp, DFJ, Rho Ventures, Braemar Energy Ventures, OPG Ventures, Firelake	Thin, flexible lithium polymer batteries
Seeo	$8M	Khosla Ventures, et al.	Rechargeable li-ion batteries based on solid polymer electrolyte technology licensed from LBNL
CFX Battery	$5M of a $27M Round B	CMEA Ventures, Harris & Harris, USVP	Primary and rechargeable lithium ion batteries
EEStor	$5M	Zenn Motor Compnay	Ultracapacitors with mythical performance
Blue Spark Technologies	First close of $5M Round B	Early Stage Partners, SunBridge Partners, et al.	Thin, flexible, printed industrial batteries
SustainX	$4M	Polaris Venture Partners, RockPort, NSF, Angeli Parvi	Compressed-air storage systems
Pentadyne Power	$2M Debt	Undisclosed	Flywheeel energy storage
Pragma (France)	$600K	Finaqui, Oséo Capital, et al	PEM hydrogen fuel cells

Speedbumps for Energy Storage

Energy storage applications vary widely in their requirements. Portable, electric vehicles and utility-scale storage all have their own needs for power density, energy density, and cycling characteristics and no single technology or materials system is going to meet all needs.



Energy Storage VC and entrepreneurs still have a few speedbumps in their path to the grail:

Capital intensive operations like A123 which have taken hundreds of millions of funding over many years, even after a decent IPO, do not seem to have the traditional home-run multiples that VCs have bench marked in the past.  The days of 10X returns, at least for massive factory-driven companies like A123, or Solyndra, or Nanosolar, or Tesla for that matter, might be over. 

Energy storage is fundamentally a materials play and the laws of physics tend to be stubborn.  It's difficult to wring 2X or 3X performance out of existing and mature materials systems. EEStor is making bold claims of this nature and it will be disruptive if they prove out - but for now we wait and see.  Raj Atluru, a partner at DFJ, has long claimed that in batteries – a 1.3X improvement in performance is worth investigating.  None of the expectations of 10X performance at a tenth the price that are de rigueur in IT deals.

And utilities and energy regulators like the California Public Utilities Commission (CPUC) still haven't gotten their collective minds around how storage fits into the grid.  Ed Cazalet of Megawatt Storage Farms, a start-up that aspires to be an Independent Storage Operator, knows this all too well. Merchant storage – owned by the customer or independent parties is a "substantial regulatory challenge," according to Cazalet. Is it transmission? Generation? Distribution?

Like transmission, storage moves energy from one place to another with some losses. Is energy storage a transmission asset?  Storage competes with generation. Is is a generation asset?  Is it a distribution asset?  Or is it a fourth category?

The problem is, according to Cazalet, "If a utility doesn't  know whether to call it transmission, distribution, or generation – they're not going to use it." And that debate is going on right now in the California PUC and at the FERC.

Those are some of the challenges faced by storage – market, technological and regulatory.

Storage and The Grid

Most explorations of the smart grid look at smart meters or home area networks.  But the smart grid extends into better utilization of renewables and that means both intelligence and energy storage – as well as incorporating Electric Vehicles into the intelligent grid.  Our Networked Grid event in San Francisco on November 4 will cover AMI, HANs and the potential of energy storage in integrating renewables into the smart grid. 

GTM Research has a new report on Grid Scale Energy Storage available here.     

And download our free report on the Smart Grid here.