Funding for battery and energy storage providers dips in Q3

Energy storage is an increasingly popular industry. Prices are falling, technology is improving, and the need to pair wind and solar with storage is getting closer in more markets.

You wouldn’t necessarily know this from Mercom Capital’s Q3 report on funding and mergers and acquisitions in the smart grid, battery/storage and energy efficiency fields. Despite ongoing improvement in market prospects, venture capital (VC) funding for energy storage companies fell 24% sequentially to US$96 million in nine deals during the quarter.

Over first three quarters of 2015 the trend is no more promising. Funding has also fallen 24% compared to the same period in 2014, with $290 million raised.

Mercom Capital CEO Raj Prabhu cautions observers to not read too much into this, noting that fluctuation in funding is normal.

“There were 29 funding deals in the first three quarters compared 33 all of last year and we expect funding deals to exceed last year’s numbers,” explains Prabhu. “We have not seen many large deals this year and consequently we are behind by $140M going into the fourth quarter.”

The top VC deals were a $33 million round for behind-the-meter energy storage company Stem with the energy trading arm of RWE Group as the sole investor, and a $25 million round for zinc flow battery maker Primus Power.

Of the top five VC deals, all were U.S. companies. And while Mercom covers other energy storage technologies such as flywheels and ultracapacitors, the top five were either technology-agnostic service and system companies or battery providers.

Prabhu also notes that despite Primus Power’s promising round, the bulk of funding for battery technologies is going to lithium-ion makers.

In addition to VC funding, Mercom reports four debt and public market financing deals for energy storage companies during the third quarter. None of these were IPOs, and the total of $48 million is a decline from $69 million in seven deals during the second quarter.