Corporate funding for energy storage companies surged to $15.4 billion across 64 deals in the first half (1H) of 2024, reflecting a 117% increase from the $7.1 billion in 59 deals in 1H of 2023.

The top five energy storage VC funding deals in the first half of 2024 were Sila $375 million; EnerVenue $308 million; Natron Energy $189 million; Ascend Elements $162 million; and Antora Energy $150 million.

Lithium-ion-based battery companies received the highest VC funding in the first half of 2024. Other leading funded categories included battery recycling, metal-hydrogen batteries, materials and components providers, and sodium-based battery companies.

There were 14 M&A transactions in 1H of 2024, an increase from the eight recorded in 1H of 2023.

Conversely, the 1H of 2024 saw 13 energy storage project M&A transactions, a decline from the 19 transactions during the same period in 2023.

Raj Prabhu, CEO of Mercom Capital Group, stated, “The significant increase in corporate funding, despite high interest rates and uncertain macroeconomic conditions, reflects the critical importance of energy storage and its role in the transition to sustainable energy.”

He attributed the growth to the Investment Tax Credit (ITC), part of the Inflation Reduction Act (IRA), which remains a major driver of corporate funding.

Additionally, California, a significant U.S. market, has seen its Net Metering 3.0 program become a positive force for energy storage.

“Overall, the Inflation Reduction Act has been a significant catalyst, creating a substantial pipeline for energy storage projects in the U.S., with about 1 GW in the interconnection pipeline,” Prabhu said.

In 1H of 2024, venture capital (VC) funding for energy storage companies amounted to $2.4 billion across 48 deals, a 37% decrease from the $3.8 billion in 43 deals during the same period in 2023.

Prabhu explained, “Overall, we are heading in the right direction in terms of VC funding. Q1 was down, but funding in Q2 has bounced back.”

With inflation in the U.S. trending down over the last month and a half, the chances of the Fed cutting interest rates in September are very high. Once the market has a clear view of the interest rate trajectory, dealmaking will increase as lower borrowing costs will likely spur more investments.

He added, “There’s also some uncertainty surrounding the U.S. elections right now. Investors might take a wait-and-see approach for more clarity before making decisions.”

Smart Grid

In 1H of 2024, corporate funding for smart grid companies reached $1.6 billion across 36 deals, an 11% decrease from the $1.8 billion raised in 33 deals during the first half of 2023.

Venture capital (VC) funding across all Smart Grid companies in the first half of 2024 amounted to $1.2 billion across 29 deals, a 22% increase year-over-year from $986 million raised in 26 deals in the first half of 2023.

Prabhu noted, “Among smart grid technologies, smart charging is the sub-sector experiencing significant growth. All aspects of smart charging, from hardware to software, are seeing increased financing due to incentives for electric vehicles (EVs) under the IRA, necessitating adequate charging infrastructure.”

“There’s a bit of optimism entering the market. Despite the uncertainties we’ve discussed, there is more positive sentiment compared to two quarters ago. We’re hopeful for the future based on the latest inflation readings, which were lacking in Q1. The investment community was disappointed as interest rate cuts expected in March did not materialize, and inflation numbers began to rise,” he said.

The top five Smart Grid VC funding deals in the first half of 2024 were Electra, which raised $330 million; Powerdot, which raised $108 million; FLO, which raised $100 million; Monta, which raised $87 million; and Battery Smart, which raised $65 million.

In 1H of 2024, there were three smart grid M&A transactions, down from six transactions in the same period of 2023.

To obtain a copy of the report, please visit: https://mercomcapital.com/product/1h-q2-2024-funding-ma-report-storage-grid/