The transformation from a centralized to a distributed electricity system is fueled by activity at the edge of the grid.

Companies making this transition happen raised $1.3 billion from private equity firms and venture capitalists in 2014. This ranks ahead of grid-edge investments in 2013 and 2014, but down from a high of $1.4 billion in 2011, according to the latest report from GTM Research, The Grid Edge 100: M&A and VC at the Grid Edge.

FIGURE: Grid Edge M&A Value and Deal Count, 2010-2014 (click to enlarge)

"In 2014, investments became more diversified as an all-time high of 83 grid-edge vendors received funding, topping a previous record of 70 vendors," writes report author Andrew Mulherkar. Energy storage was a clear leader last year, attracting more deals and funding than both of the runner-up segments of demand-side management and data analytics. The report also tracks deals across AMI, distribution automation, communications, grid support, network operations, and utility investment insolarphotovoltaics.

While generally keeping pace with the overall market between 2010 and 2013, year-over-year deal-count growth for grid-edge investments outperformed overall U.S. venture capital growth in 2014.

Investments in Boston-Power, Bloom Energy and Stem led financing in 2014, with a reported $250 million investment, $130 million investment and $100 million in project financing, respectively. A number of notable exits occurred in 2014, including major acquisitions such as Schneider Electric's $5.2 billion acquisition of Invensys and Google's $3.2 billion acquisition of Nest. In April 2014, Opower’s IPO became the largest in the grid-edge market since 2010.

"More vendors received funding in 2014 than in any of the previous four years, creating the largest opportunity yet to demonstrate the value of investment in grid-edge solutions," writes Mulherkar.

Additional findings from the report include:

  • M&A activity gradually increased from 2010 to 2012 as consolidation occurred among vendors in more mature markets like AMI, demand response, and distribution automation.
  • Within the demand-side management segment, home automation has seen a number of large recent funding rounds, including those for Alarm.com, Nest, iControl, and Control4.
  • Power electronics firms have made several strong exits through acquisitions and IPOs, including Converteam, Power-One, Luminous, Enphase, and Ideal Power.
  • The energy storage market segment has seen many acquisitions driven by bankruptcy; however, investments in storage companies reached a new peak in 2014.

For more information on the report, visit http://www.greentechmedia.com/research/report/the-grid-edge-100-ma-and-vc-at-the-grid-edge.

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