Fluence, one of the largest suppliers of large-scale energy storage for the grid, is not a startup. It was formed as a joint venture between two massive global energy companies, power producer AES and German energy equipment giant Siemens.
As such, Fluence never needed to chase outside investment. But it capped off 2020 with what appears to be the single largest investment in a pure-play grid storage company: a $125 million private placement from the Qatar Investment Authority, a sovereign wealth fund.
That's bigger than SoftBank's 2019 investment of $110 million in block-stacking storage startup Energy Vault, or storage software company Stem's nearly $110 million Series D in 2018. Companies have raised larger sums as project finance vehicles to support the build-out of battery fleets, and several electric car battery companies have raised more in direct equity investment. But the latest Fluence deal sets a new bar for corporate investment into companies dedicated to grid batteries.
The deal also confers something that the company's initial backers could not: an independent market valuation. The $125 million, in exchange for a 12 percent stake, values Fluence at more than $1 billion, a rare achievement for the energy storage sector (AES and Siemens each retain 44 percent ownership).
"They did a lot of due diligence on the business and got comfortable around everything we have to offer," said Marek Wolek, Fluence VP for strategy and partnerships, in an interview this week. "This hopefully supports the direction we are on to be a leading player driving innovation."
This deal alone might presage a higher volume of investment in grid storage companies to come this year. But President-elect Joe Biden won after campaigning on ambitious climate action, and Tuesday's election in Georgia gave Democrats control of the Senate, creating more room for legislative action on clean energy deployment. For storage and grid edge companies, there's never been a more auspicious time to raise money.
Fluence had a product roadmap based on the capital it had raised from its two initial backers. But the company saw an opening to move faster with new capital, said Wolek, who previously worked on strategic partnerships for AES and helped establish Fluence. Expanding the investor base also creates more options for future fundraising.
The new cash will go primarily to technological innovation, Wolek said. Fluence does not manufacture batteries; rather, it packages them into complete power plants with power electronics, safety equipment, energy management systems and digital controls. Fluence recently expanded its digital offerings when it acquired startup AMS, which built algorithmic trading software to increase power plant profits in wholesale markets.
"A lot of the future innovation, which will bring storage as a more central part of the overall grid, is happening on the digital side, where we’re just scratching the surface," Wolek noted.
Fluence launched a more compact and modular storage product last year, designed to speed up installation and improve safety compared to an earlier product generation, which was involved in a 2019 fire in Arizona.
The Qatar Investment Authority private placement comes after several other storage companies, like Stem and zinc battery startup Eos Energy Storage, have opted for public markets via special-purpose acquisition companies. Fluence could head to public markets eventually, but that would be up to shareholders, Wolek noted.
"Our job is to grow the business as fast as we can and hopefully as broad as we can, so we can invest much more capital in it," he said.
Investor sentiment does seem to be warming up to the power sector, just as long-discussed trends toward decarbonization and decentralization start to pick up speed.
"There’s a broad belief in the investment community that the energy grid is at the edge of disruption," Wolek said. "That is being reflected in the numbers being raised."