Investments in Storage Grow as Project Costs Come Down

Venture capital investments in battery storage companies and projects rose significantly year-over-year through the first six months of 2019, according to a report from Mercom Capital Group. That level of activity is consistent with the growth in energy storage noted by speakers on July 24 at the Storage Week Plus conference in San Francisco, California.

“We will be 100% renewable by 2045, that is our goal,” said Carlos Fandino, city administrator for the City of Vernon, a Los Angeles suburb. Fandino was part of a panel that discussed the procurement of storage by utilities, municipalities, and electric cooperatives. “The way we will get there is through battery storage and other technologies,” he said.

Mercom, a global clean energy communications and consulting firm, on July 22 released its report on funding and mergers and acquisitions activity for global battery storage, energy efficiency, and smart grid sectors. The data covers the first quarter of this year, along with the April–June period.

Mercom said funding for battery storage companies jumped 139% year-over-year in the first half of 2019 compared to the first half of 2018. Mercom tracked 17 deals worth $1.4 billion in 2019, compared to $543 million for 30 deals in the first six months of 2018. Battery storage technology continues to evolve, with developers of storage systems increasingly focused on reliability.

Northvolt, a Swedish company, received $1 billion of that 1H2019 funding to complete what is considered Europe’s largest lithium-ion battery plant. The company in mid-June announced that automakers Volkswagen and BMW were among the investors in the facility. “Today is not only a great milestone for Northvolt, it also marks a key moment for Europe that clearly shows that we are ready to compete in the coming wave of electrification,” Northvolt CEO and former Tesla executive Peter Carlsson said at a June 12 news conference announcing the deal.

Municipalities Look at Costs

Mercom said 41 venture capital investors participated in funding battery storage in the first half of this year. Along with the Northvolt deal, other top funding went to Sila Nanotechnologies ($170 million); Romeo Power ($88.6 million), Zenobe Energy ($32.3 million); and LivGuard Energy Technologies (about $32 million).

The cost of storage is key for project development, according to Fandino and the other panelists. “We look at capital costs and infrastructure costs,” Fandino said. Vernon is home to many industrial sites, and Fandino said their needs are important for decisions the city makes about energy.

“The business community that I serve, they want predictability,” Fandino said. “There is nothing that upsets a business owner more than not knowing what the cost [of power] is going to be five years down the road.”

Kevin Short, general manager of Anza Electric Cooperative, a small co-op in Riverside County in Southern California, agreed that cost is important to his group.

“If Thomas Edison were alive today, he would recognize about 90% of what we do,” said Short. “The utility industry has been slow to adopt [new] technology in some respects. From the cooperative perspective, reliability is number one, followed by cost. We’re very similar to municipals, we have board members who are elected by members. We’re a nonprofit, so that bottom line is important for sure” when considering storage projects.

Short was asked about the importance of storage in meeting targets for renewable energy production. “Absolutely it will [be important],” he said. “Moving very rapidly toward the [California] goal of 100% carbon-free, this is absolutely something we need to adopt.”

Carbon-Free, and Reliable

Tara Fowler, manager of renewable energy power purchases for Xcel Energy, said her task is always “keeping [ratepayers’] bills low and enhancing the customer experience. Our customers want renewable power, they want carbon-free power, but they don’t want power outages,” so reliability is a key component of Xcel’s strategy.

“How do we do that to meet our ’80 by 30′ goal?” Fowler asked, referring to Xcel’s stated goal of reducing its carbon emissions 80% by 2030, as it looks to be carbon-free by 2050. She said storage has a role, but other resources will be needed as well.

“We need natural gas, and we will need battery storage,” Fowler said, noting gas-fired generation will continue to be important to ensure reliability. “We need innovative technology, and that will need to come in that 2030 to 2050 period to meet our goal.”

Fowler said Xcel sees “the real value” in storage as being able to capture generation from wind power to use during peak demand periods. Though Xcel is procuring storage through power purchase agreements, Fowler said the utility will likely “see some ownership opportunities later on.”

LADWP Embraces Storage, Moves on from Gas

James Barner, manager of long-term strategic planning for the Los Angeles Department of Water and Power (LADWP), the nation’s largest municipal utility, said, “We have a big push internally to eliminate our gas-fired generation. We have three facilities along the coast, [a total of] 1,660 MW, and the mayor (L.A. Mayor Eric Garcetti) said we won’t re-fire them.” Garcetti earlier this year said the utility would not be able to make life-extending investments in the Scattergood, Haynes, and Harbor gas plants.

“We’re under pressure to replace that [gas generation] with renewable energy,” Barner said, noting his group is using innovative techniques to increase its use of renewable energy. “And it’s important to keep our rates low. We have a lot of low-income customers and it’s important to keep rates low for them. Location [of storage facilities] is most important—where do we locate storage on our system—and then price.”

Barner said California is likely seeing the end of gas-fired generation. “The last gas-fired generators that we’ll probably see are replacing coal generation,” he said. “We don’t really see any repowering with gas-fired generation. It will mainly be storage.”

Barner said LADWP’s long-term storage strategy includes pumped hydro storage. “We have 1,250 MW of pumped hydro in our territory,” he said, which includes a system that uses the excess wind and solar power from the city’s renewable energy sites during the day to pump water from Castaic Lake uphill more than 7 miles to Pyramid Lake. After sunset, as the city’s power demand rises, the water gets run downhill through hydroelectric generators at Castaic Lake.

“We are looking at other pumped hydro storage as well,” Barner said. “You need to have these long-term storage resources.”

Fowler agreed. “We still need more surety to go forward with storage,” she said, referring to storage that can serve the grid for more hours at a time. “We don’t feel that four hours is going to be sufficient,” she said. “We’re right there with PJM and think 10 hours will be needed.”

PJM is a regional transmission organization that oversees the power grid in parts of the Northeast and Midwest. The group has insisted on a 10-hour duration requirement for batteries to participate in its capacity market. The Federal Energy Regulatory Commission’s oft-debated Order 841 mandates the integration of energy storage into the nation’s wholesale energy markets.

Funding for Smart Grid Falls

The Mercom report said total corporate funding—which includes venture capital funding, public market, and debt financing—for battery storage, smart grid, and efficiency companies in the first half of 2019 was about $2.3 billion, compared to $2.4 billion raised during the first six months of 2018. Mercom said the 4% decrease was due to lower investment in smart grid companies, as funding for battery storage and energy efficiency increased.

Mercom said VC funding for smart grid companies dropped 11% year-over-year in the first half of 2019, to $120 million, compared to $135 million in the first six months of 2018. The top deals included $32 million raised by SmartRent, and $20 million raised by CleanSpark. CleanSpark COO Bryan Huber recently talked to POWER about his company’s work, which includes the design and operation of microgrid projects.

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).