Grid energy storage is still pulling in big bucks, recession be damned

Source: By Julian Spector, Canary Media • Posted: Tuesday, July 26, 2022

Three recent deals showcase investor confidence in the long-term growth of the battery storage market despite near-term turbulence elsewhere in the economy.

four large white utility-scale batteries in an industrial facility
Utility-scale batteries at NextEra Energy Resources’ Wyman Station plant in Yarmouth, Maine (Derek Davis/Portland Portland Press Herald via Getty Images)

Is energy storage recession-proof?

It’s too early to know for sure, but in the span of a single week in mid-July, three different groups of investors made significant new bets on companies providing large-scale batteries for the grid. The message they’re sending is that, whatever happens to the overall economy, the grid battery market is going to keep growing.

The specific deals are as follows:

  • Oregon-based grid storage integrator Powin Energy raised a $135 million growth equity round led by GIC, Singapore’s sovereign wealth fund. The round included returning investors Trilantic Energy Partners North America and Energy Impact Partners.
  • Durham, North Carolina–based FlexGen raised $100 million for its storage integration and software business. That Series C fundraising round was led by Vitol, a European energy trading conglomerate that handles massive flows of oil and gas as well as electricity trading.
  • Pioneering clean energy investor Generate Capital outright acquired esVolta, a battery developer, owner and operator that boasts 900 megawatt-hours of operational or utility-contracted capacity. The companies did not disclose the purchase price, but they did note the deal marks Generate’s first entrance into the grid-scale storage space after years of investing in smaller, distributed batteries.

These kinds of investments would have been truly groundbreaking for the industry just a few years ago. They’re becoming increasingly commonplace now as the long-awaited uptake of battery technology for on-demand grid power becomes a tangible reality. Indeed, Powin raised $100 million in February 2021, and FlexGen raised $150 million just last September.

Why are investors bullish on storage?

The storage industry has a few things going for it that appeal to investors at a time when Bitcoin, 10-year bonds and tech stocks look dicey.

Perhaps the main driver is that there’s no longer much of a question about whether the world needs more grid batteries as renewable generation increases. The technology has graduated out of the risky phase it started out in back when it was a relatively new and untested type of power plant. Now demand is spiking across geographies, regardless of whose projections you look at.

That long-term view is what drove Generate to invest now, even as other investors pull back from once-hot sectors of the economy.

We believe strongly that energy storage will be a critical enabler of a zero-carbon future and that the storage market overall is poised for significant growth as more renewable energy is deployed across the U.S,” a spokesperson told Canary Media Friday.

That sounds like buying storage in spite of the economy. But there’s also an argument for storage as an antidote to the current energy price spikes.

Energy inflation and price volatility are hurting businesses all across the economy — but it has also opened a lot of eyes to the importance of clean energy and energy storage,” FlexGen CFO Yann Brandt said Friday. ​Every smart utility, co-op, [municipal utilty] and business is making plans that include a massive increase in energy storage. FlexGen is incredibly well positioned to capitalize on this opportunity.”

If fossil-fuel price fluctuations are a pain point, companies can reduce their exposure by locking in lower-cost renewable power. But to ensure they have cheap power at the exact right times, they need a means of storing clean energy — and right now batteries are the go-to option.

Powin and FlexGen are both in the business of sourcing batteries and turning them into power plants, with all the engineering and controls required to reliably operate the systems for years. They supply the metaphorical picks and shovels to the developers out there building power plants, as FlexGen investor Orme Thompson of Apollo Global Management told Canary Medialast year.

EsVolta, on the other hand, is a battery project developer that got in early on the California market back in 2017. It has several projects operating and more on the way. In buying the company, Generate got itself a proven team with a sizable pipeline — an increasingly hard thing to acquire as independent storage developers get snapped up by global energy companies or private equity firms.