This week’s Grid Edge Innovation Summit 2019 conference in San Diego covered a broad range of technologies that are changing the nature of the electricity system, from distributed energy resources (DERs) like rooftop solar PV, behind-the-meter batteries and plug-in electric vehicles, to the software, systems and services meant to optimize and orchestrate their operations for end customers, utilities and grid operators alike.
Over the past decade, the appetite of investors for these broad technology sectors has grown, albeit at different paces. Some sectors, such as energy storage, EV charging and mass-market smart home technologies, have brought in hundreds of millions of dollars from venture capitalists and private equity firms.
Others, like utility-specific technologies to manage distributed energy resources (DERs) at scale, have tended towards smaller and more focused investments. Increasingly over the past several years, they’ve been led by strategic utility and energy infrastructure investors with an eye on using the technologies being developed themselves, as well as fostering them through the potentially decade-long process of winning commercial deployment in the slow-moving utility field.
These were some of the high-level trends laid out in a Wednesday presentation by Elta Kolo, grid edge research manager for Wood Mackenzie Power & Renewables. They're built on data collected by WoodMac's Grid Edge Data Hub, covering sectors including advanced metering infrastructure (AMI), utility network operations, utility back-office software, distribution automation, grid edge network analytics, customer analytics, and the aforementioned DER categories.
From 2010 through the first quarter of 2019, total venture capital and private equity investment across these sectors has added up to $11.5 billion. This figure is dominated by the three big categories of energy storage, EV infrastructure and customer energy management, which have garnered more than $5 billion, nearly $1.5 billion, and more than $2.8 billion of that total, respectively.
Last year’s venture capital and private equity investment into these categories broke a new record, with $2.5 billion invested over 85 deals.
Some of the bigger ones included Amazon and others putting a combined $155 million into two Alexa-enabled smart thermostat startups, ecobee and Tado, and electric vehicle charging network provider ChargePoint raising $240 million from investors including Chevron, Daimler and American Electric Power, to name a few showcase deals.
Kolo also focused on the smaller subset of venture and private equity investments, as well as merger and acquisition (M&A) activity, in the realm of “DERMS, DRMS and DER services.” The first two acronyms stand for a distribution energy resource management system and a demand response management system, respectively — two categories of software that can each be subdivided, based on distinctions such as whether they’re operating from the utility side or the customer side, or the extent to which they tackle DER management from a centralized versus distributed approach.
Over the past 10 years, these companies have brought in $1.9 billion in disclosed value in VC and PE investment, according to WoodMac data. But compared to sectors like energy storage or EV charging, these DER services deals have tended to be much smaller in size, Kolo noted.
Only two of the 102 deals tallied over the decade have raised more than $100 million — behind-the-meter battery startup Stem and its $106 million Series D round in 2018, and Alarm.com’s $136 million round from Technology Crossover Ventures in 2012. Another 26 deals raised between $36 million and $10 million, while the majority of deals, 55 in all, were for under $5 million.
For the most part, that’s because many of these startups are focused on the software layer of the DER integration challenge, she said.
“Having that optimization layer is key” for the utilities in states with fast-growing amounts of rooftop solar to manage, such as Hawaii, California and Arizona. But it’s also a core aspect of other utility efforts, such as microgrids for storm and flood resiliency along the East Coast and Gulf Coast, or using residential water heaters and commercial refrigerator loads to balance out intermittent wind power in Canada’s Maritime Provinces.
As for mergers and acquisitions in the DERMS, DRMS and DER services space, WoodMac has tracked 38 deals since 2010, only 12 of them with disclosed values.
Of those, the biggest all happened in 2017, when Italian utility Enel bought U.S. demand response leader EnerNoc, EV charging startup eMotorWerks and battery-microgrid developer Demand Energy, Centrica bought Belgian DERMS provider REstore, Itron bought U.S. demand response provider Comverge, Ormat bought energy storage developer Viridity Energy, and Shell bought MP2 Energy.
The $665 million in total value of these disclosed deals makes the rest of the period’s annual totals look paltry by comparison — an impression that shouldn’t be taken to heart, Kolo noted, given the lack of disclosed dollar values for most of the deals in previous years. it's unclear, for example, how much LS Power paid to buy U.S. demand response provider CPower last year.
Still, 2017 was a banner year for big acquisitions, coinciding with the start of what Kolo calls the “grid edge shopping spree” for European utilities such as Enel, Engie, Centrica, EDF and E.ON, and energy “majors” such as oil giants Total, Shell and BP.
Acquisitions and investments from this group have grown from 13 in 2017 to 21 in 2018, and 7 in the first quarter of 2019, including Shell’s acquisition of Sonnen, Greenlots and Limejump, Engie’s majority stake in Tiko, and Centrica’s investment in Greencom Networks and Mixergy.
The latest addition — Centrica acquiring U.S. energy services company SmartWatt for $37 million — came on this week, too late for it to be included in the current tally.
Other acquisitions in the space, such as Engie’s purchase of Genbright, a U.S. solar, storage and demand response startup, or Tendril’s acquisitions of startups EEme, EnergySavvy and most recently FirstFuel, have come without publicly disclosed price tags attached.
Learn more about WoodMac's Grid Edge Research Service here.