Viridity Energy, the startup with well-connected founders that sought to break open the business of aggregating distributed energy resources into virtual power plants, has been acquired by a company that offers it a lot of opportunity to expand. But the sale price, at least at first blush, doesn’t appear to be very good news for its investors.
Geothermal and renewable energy company Ormat Technologies announced Tuesday that it has agreed to “acquire substantially all of Viridity’s business and assets” in a cash transaction starting with “an initial consideration of $35 million at closing.”
That’s less than the $40+ million in venture capital the Philadelphia-based startup has brought in since its 2008 founding. Viridity raised about $8 million in 2009 from initial investor AltEnergy, which also led an $8.5 million investment in the company last year. In 2011 it raised $14 million from Intel Capital and Braemar Energy Ventures, and in 2012 it raised $15 million from Japan’s Mitsui.
Tuesday’s announcement did note, however, that Viridity shareholders could see more money from the sale, in the form of “additional contingent consideration…payable in two installments upon the achievement of certain performance milestones measured at the end of fiscal years 2017 and 2020.” The announcement didn’t disclose how much more money Viridity could hope to see from these future payouts, or details on the performance milestones it would have to meet to earn them.
Ormat did say that it expects Viridity to generate a positive operating income this year. Viridity will “continue operations and retain current management and staff, as well as maintain all customer relationships and agreements,” under the acquisition, which is expected to close in early 2017.
Over its eight years in business, Viridity has been involved in a variety of projects, tied together by the startup’s VPower software. The startup, co-founded by former PJM COO and current New York Public Service Commission Chair Audrey Zibelman, has specialized in software to put the energy flexibility of batteries, on-site generators and demand-side flexibility to use in capturing financial opportunities in customers’ utility bills or grid energy markets.
Viridity’s earliest work was focused on grant-funded microgrid projects at university campuses in Pennsylvania and California. In 2012 it launched a project with the Southeastern Pennsylvania Transit Authority (SEPTA) to use 300 kilowatts of batteries to capture regenerative braking power from trains and sell it into PJM’s frequency regulation market, and recently expanded the scope of that project to 8.5 megawatts with partner Constellation Energy.
It’s also been building up a significant portfolio of battery-based energy storage projects serving the PJM frequency regulation market. That portfolio stood at about 23 megawatts as of early 2016, according to CEO Mark Treece. It includes one of the country’s largest solar-storage projects, a 7.5-megawatt battery array linked to a 4.2-megawatt solar system installed and integrated by S&C Electric for the municipal utility in Minster, Ohio.
More recently, Viridity has been growing a separate line of business as a provider of white-labeled software to energy retailers such as Constellation, ConEdison Solutions and Engie Resources. These channel partners have about 3,000 commercial and industrial sites that are using Viridity’s software, representing about 850 megawatts of controllable load, according to Tuesday's announcement.Engie’s VRewards program
uses Viridity’s software to help its C&I customers “facilitate curtailed energy usage and lower total energy costs,” for example. ConEdison Solutions, which sold its retail business to Constellation last summer, has been working with Viridity since 2012, including on a Department of Energy-funded project to enable 24 commercial buildings in New York to respond to grid needs.
This mix of software capability and business lines will now belong to Ormat. Founded in 1965, Ormat is a major geothermal energy developer, and also specializes in waste heat recovery -- a valuable source of distributed energy at industrial sites that could be targets of Viridity’s software. It has developed more than 2,000 megawatts of projects for customers, and holds a 710-megawatt generating portfolio in the U.S., Caribbean, Central America and Kenya.
Its acquisition of Viridity “marks Ormat’s entry into the rapidly growing energy storage and distributed generation markets,” company CEO Isaac Angel said in Tuesday’s announcement. “Ormat intends to use the Viridity platform to accelerate growth, expand its market presence, and further develop Viridity’s demand response VPower software platform and energy storage services.”
Plenty of other companies are competing with Viridity in aggregating and managing distributed energy assets for grid needs, and linking partnerships with energy giants. A few noteworthy startups in the field include Enbala, which is working with GE Energy Ventures and Edison International; Blue Pillar, which is working with NRG Energy; and Tangent Energy, which has a joint venture with backup generator company Cummins.
On the microgrid side of the equation, grid giants like General Electric, Siemens, Schneider Electric and ABB are deploying projects that tie on-site generation, load controls and grid services. Demand response providers such as EnerNOC and CPower are also important players in this space, with thousands of megawatts of commercial-industrial load under management. Meanwhile, utility-owned energy services companies are also getting into the game, as Southern Company’s $431 million acquisition of Power Secure and Edison International’s launch of its acquisition-built Edison Energy indicate.