Stem, a behind-the-meter energy storage startup, just closed on a $100 million fund to finance distributed energy storage at commercial and industrial customers. The fund is provided by B Asset Manager, a New York City-based investment adviser in the insurance industry, according to a release. Stem has also received venture funding from Angeleno Group, Iberdrola and GE Ventures.
As the energy storage industry matures, the need to scale up requires increased amounts of capital. The market environment has parallels to the residential solar industry of eight years ago, when companies such as SolarCity and Sunrun were starting to raise capital for leased solar systems. That leasing model initiated a furious amount of growth that continues to this day in the residential solar space.
Is leasing the direction for behind-the-meter energy storage?
"This is a very big vehicle, and it will enable us to have as much as we would need over the next...twelve months. As we expand into more markets, we're going to need more of that financing. We're in Hawaii, New York, and we're winning in California," John Carrington, CEO of Stem, told GTM on Monday.
This substantial piece of funding comes about a year after Stem closed its first $5 million project financing fund to install energy storage systems with no upfront costs. That funding was backed by Clean Feet Investors and has been a platform for projects at the three major investor-owned electric utilities in California.
The Stem storage device combined with analytics is sited behind the meter and keeps demand charges in check for the customer. The utility benefits if the storage fleet can be aggregated and networked, responding to the grid, and deferring the need to build new transmission or generation. Stem has installed about 6 megawatts of its systems, which can scale up to 1 megawatt-hour.
Armed with the new $100 million finance war chest, "The value proposition to the customer is a lease structure where we roll up the hardware and software into one number at a monthly level," Carrington told GTM, adding, "This turns the discussion into an operating expense as opposed to a capital discussion."
"It's really helped us drive throughput quickly. It's an easier, quicker discussion with CSOs, CFOs, facility managers and energy buyers, because it's not going in for large capital acquisition. It's all about 'X amount per month saves you Y per month,'" added the CEO.
Source: GTM Research
He continued: "When we think about our hardware strategy...we're always C&I and behind the meter. Our focus isn't residential at this point, because there's just not an economic value proposition that I can make pencil out. We'll stay doing what we're doing unless there are some fundamental changes in rate structures." He added, "When you talk about sizes, we're ranging anywhere from 60 kilowatt-hours (which is ideal for SGIP), but in New York, we've closed a deal [larger than] 1 megawatt. I don't see us doing 5-megawatt substation types of applications."
Regarding batteries, the CEO said, "We're always looking at different suppliers. There's a lot going on in the battery world right now. We're excited about some of the bigger-tier [manufacturers] that are really engaged in this long-term and have made it a strategic pillar of their companies. [We're] staying with lithium for now."
Carrington suggested that the price of batteries was set to plummet: "[It's] analogous to solar, when you were a module manufacturer and the Chinese decided to go all-in on solar. It's a massive amount of deflation, and being agnostic is exactly what we like to be, as long as it's the safest, most efficient chemistry for our product. There's a lot of great innovation going on at tier-one battery manufacturers right now."
Stem VP Tad Glauthier noted in a previous interview that the company's product is made to be installed in the built environment along with a ten-year warranty, as required by California's SGIP initiative. Stem is "battery-technology-agnostic," but Glauthier said the firm "likes lithium-iron-phosphate." The VP cited Ambri and Aquion as new battery vendors with potential price-competitiveness.
Hawaiian Electric recently picked Stem for a 1-megawatt pilot project on the island of Oahu. It’s a relatively small project, compared to the up to 200 megawatts of utility-scale storage the utility intends to procure. Stem has already been bidding aggregated battery capacity into a California demand response pilot program. Carrington said the startup is working on solar-related projects, with some news on that front expected soon, as well as scaling up its hardware for larger deployments.
Green Charge Networks, a startup also deploying energy storage equipment for commercial customers, recently raised $56 million from K Road DG to expand its no-money-down energy storage program. Green Charge owns and operates the energy storage assets deployed at customer sites, with zero capital or maintenance costs for the customers.
“Our view is that solar enables storage, and storage enables solar,” said Stem's CEO. That’s a view shared by distributed storage players like SolarCity, Greensmith, Green Charge Networks, Sunverge, Coda Energy and Solar Grid Storage, as well as industry analysts who see solar paired with storage as a threat to utility business models.