Mercom: Smart grid, storage and efficiency firms raised $1.3B in VC funding in 2016

Dive Brief:

Companies focused on smart grid, energy storage and energy efficiency raised $1.3 billion in venture capital funding in 2016, according to Mercom Capital Group.
Energy efficiency companies led the field, raising $528 million, followed by smart gird firms, which raised $389 million, and battery storage companies, which raised $365 million.
Overall, however, VC funding for the three sectors was down compared with 2015, when $1.67 billion in venture capital funding flowed into those three sectors. Debt and public market funding for the three sectors, on the other hand, was up in 2016, hitting $4.58 billion, compared with $2.8 billion in 2015.

Dive Insight:

Mercom’s full year results reflect a trend noted when the consulting and communications firm reported on third quarter funding for smart gird, battery storage and energy efficiency companies.

In that report, Mercom noted that funding activity slowed to $102 million, from $433 million in the second quarter.

Mercom’s findings are similar to those in the third quarter U.S. Energy Storage Monitor from GTM Research and the Energy Storage Association that found that corporate investment outpaced venture capital funding. Matt Roberts, executive director of the Energy Storage Association, attributed the shift to a maturing of the industry away from early stage venture capital funding.

That shift can also be seen in Mercom’s 2016 report, particularly in the energy efficiency sector.

VC funding for energy efficiency fell in 2016, to $528 million, from $852 million in 2015. But corporate funding, including debt and public market financing, hit $3.8 billion compared with $2 billion in 2015.

Mercom also noted that financing in energy efficiency is moving toward project funding. The consulting firm noted that Property Assessed Clean Energy (PACE) financing totaled $2.3 billion in 12 deals in 2016 compared with $1.1 billion in seven deals in 2015. Additionally there were nine securitization deals in 2016 for nearly $1.8 billion compared to seven securitization deals for $802 million in 2015.

Corporate funding, including debt and public market financing, for smart grid companies also rose, Mercom said, hitting $613 million in 2016 compared with $527 million in 2015.

Debt and public market financing for battery storage companies, however, fell to $175 million from $279 million in 2015, Mercom noted.