Behind-the-meter battery startup Stem has raised $80 million in a Series D round, with three new investors -- including one that’s helping bring the company’s lithium-ion battery systems to a new international market.
The oversubscribed round was led by growth equity firm Activate Capital. It was joined by Singapore-based investment firm Temasek and the Ontario Teachers’ Pension Plan, which manages about CAD $180 billion Canadian (USD $145 billion) in Canada’s largest single-profession pension fund.
The Ontario Teachers' Pension Plan is interested in projects serving the province’s unique renewable energy integration needs, Stem CEO John Carrington noted in an interview. While he wouldn’t provide specific details, he did say that Stem is deploying systems in Canada, making it the company’s third international market, after the United States and, more recently, Japan.
“We are growing very, very fast, and I would say, exceeding [expectations] in a variety of areas,” Carrington said of the company’s recent metrics. In the past six months or so, Stem has grown its portfolio of energy storage systems from 150 megawatt-hours in August to more than 200 megawatt-hours as of this week, with 1,100 sites “operational or in construction.”
The company now has hundreds of systems under management across five states, mainly in California, where state incentives and high demand charges have aligned to create the country’s largest market for behind-the-meter energy storage. Stem also has its 85-megawatt capacity contract with utility Southern California Edison, part of the utility’s groundbreaking distributed energy resource (DER) procurement in 2014, to provide it a steady pipeline of business.
Stem is also active in Hawaii and New York. It has a 1-megawatt pilot project with utility Hawaiian Electric on the island of Oahu. And it's working with utility Con Edison and other utilities to deploy 14 megawatt-hours of batteries across 80 locations in New York. More recently, Stem expanded into Massachusetts, with a $1.25 million grant to pilot distributed energy storage under the state’s newly created energy storage target, alongside Constellation Energy.
“We’re focused on growth capital, both expanding from a geographic footprint standpoint and also investing in the team,” Carrington said. “We have a need to enhance our software development side. We also have a need to invest in deployment."
Stem’s new investment brings the company’s total funding to just north of $200 million.
The business case for behind-the-meter energy storage in Ontario centers on reducing big industrial or commercial customers’ exposure to the province’s Global Adjustment Charge, which is calculated based on their peak usage during five 1-hour periods throughout the year. Stem’s job is to prepare batteries to inject power during those hours, reduce the facility’s draw on the grid, and shave overall energy costs, Carrington explained.
This is a slightly more complex task than the typical daily peak-shaving that Stem provides its C&I customers, which include hotels, Wells Fargo bank, Safeway and Whole Foods grocery stores, and Reliance Steel. On the utility side of things, Stem has working relationships with eight utilities at present, and expects that number to grow significantly.
Stem, which uses batteries from Samsung, Panasonic and Tesla Energy, continues to refine its software to learn each site’s energy usage patterns, manage each battery’s charge-discharge cycling to mitigate costly peaks, and return the savings to customers.
The Ontario Teachers’ Pension Plan isn't the first investor interested in utilizing Stem’s technology for its own purposes. The company’s 2015 $27 million Series B round included a $12 million investment from Constellation Technology Ventures, the venture arm of major U.S. utility and Stem partner Exelon Corp., and Total Energy Ventures, the venture arm of French oil giant Total. The round also brought in existing investors, including Angeleno Group and the venture arms of GE and Iberdrola.
Also in 2015, Stem opened its Series C financing with a $12 million tranche led by Mitsui & Co., its partner in a pilot project in Japan. Another $45 million tranche led by RWE Supply & Trading, the energy trading arm of German utility RWE Group, came later that year. In 2016, Stem brought in another $15 million from Mithril Capital Management to bring the total to $68 million.
Stem has partnered with Constellation Energy on projects in Massachusetts, and the two are looking at opportunities in other markets, Carrington said. “We’re looking at things with Total, RWE and Iberdrola in Europe,” he added, though he wouldn’t give details.
In 2017, Stem also started bundling energy storage with demand response from CPower, and solar-plus-storage systems with SunPower. It also invested time and talent into improving its software platform, dubbed Athena, which it calls “the first artificial intelligence for customer-sited energy storage.”
Stem has been dispatching batteries into California’s wholesale energy markets, and responded to more than 600 calls from state grid operator CAISO last year, noted Carrington.
Stem was also one of the first behind-the-meter battery providers to raise a pool of financing resources to allow customers cheaper access to its equipment and services. Its financing resources have since grown to $500 million.
All told, this represents more than half a billion dollars aimed at a nascent energy storage market. Other behind-the-meter battery startups have been acquired, as Green Charge Networks was by French energy services giant Engie in 2016. Others have faltered, as with Coda Energy’s failed attempt to pivot from electric cars to energy storage, or electrical equipment distributor Gexpro’s attempt to partner with LG Chem, Ideal Power and Geli to bring a commoditized behind-the-meter battery system to market.
Other startups with significant shares of distributed energy storage include Advanced Microgrid Solutions, which has contracted for more than 100 megawatts of capacity for utilities and customers in California and lined up $200 million in financing from Macquarie Capital. Sunverge is another California startup with megawatts of solar-integrated behind-the-meter systems rolled out in partnership with utilities in California, Arizona, Vermont and Tennessee.
Amid this highly competitive landscape, “I think you have to be relevant by getting out of a single market or a single country,” Carrington said. “And the way you do that is raising funds and enabling your growth trajectory into those markets.”
This article was amended to note that Stem has more than 1,100 sites currently operational or under construction. The original article stated that there were more than 1,500 sites. Stem also clarified that its financing resources now amount to $500 million, rather than the $350 million originally stated.