Corporate funding for energy storage rose 15% year-over-year (YoY) in the first nine months (9M) of  2024, while it decreased 33% for smart grids globally.

Corporate funding for energy storage companies in 9M 2024 reached $17.6 billion in 83 deals, a 15% YoY increase from $15.2 billion in 94 deals, according to the 9M and Q3 2024 Funding and M&A for Storage and Grid Report by Mercom Capital Group.

Raj Prabhu, CEO of Mercom Capital Group, stated, “The overall financial conditions in the U.S. are not favorable, as reflected in the trends highlighted in our report. Interest rates remain high, and there’s significant economic uncertainty due to the upcoming elections. Both the market and investors are in a ‘wait and see’ mode, unsure of what will happen post-elections with the new administration and potential policy changes. While we had a strong Q1 and funding for the first nine months appears solid, recent trends have been negative, as seen in the Q3 funding activity.”

He noted that the U.S. Federal Reserve recently cut interest rates by 0.5%, but the changes will take time to materialize. The Inflation Reduction Act (IRA) is a significant driver for the installation of solar and energy storage in the U.S.

“The IRA offers significant incentives and subsidies for manufacturing battery components and installations. However, there is speculation that if Trump wins the upcoming elections, he may attempt to roll back parts of the IRA. Although it can’t be completely repealed due to its passage through Congress, there could still be some policy adjustments. Since the IRA was announced, there’s been a surge in solar and energy storage projects, leading to interconnection backlogs. This has delayed permits and licensing by one to two years. Additionally, shortages of critical components, like transformers, have further contributed to project delays. As a result, market conditions are not ideal for investors, who are waiting for more clarity before committing to investments,” Prabhu said.

Venture capital funding decreased 69%, reaching $2.7 billion in 61 deals in 9M 2024 from $8.6 billion in 68 deals in 9M 2023.

In 9M 2024, lithium-based battery companies received the most VC funding ($778 million) among different funded categories.

Prabhu pointed out that lithium-ion batteries dominate the market. “Currently, there isn’t any other competing technology in advanced commercial stages. However, many technologies are knocking on the door. This trend will eventually shift as there’s a growing push toward long-duration energy storage solutions. The IRA also provides incentives in various other battery storage areas.”

The top five energy storage VC funding deals in 9M 2024 were secured by Sila Nanotechnologies, which raised $375 million; EnerVenue Holdings, which raised $308 million; Natron Energy, which raised $189 million; Ascend Elements, which brought in $162 million; and, Antora Energy, which raised $150 million.

Announced debt and public market financing for energy storage companies rose 125% in 9M 2024 to $15 billion in 22 deals, from $6.6 billion in 26 deals in 9M 2023.

“It has been easier for public companies to raise money through debt and in the public markets. Companies are finding these options to be better under current market conditions,” said Prabhu.

Energy storage merger and acquisition (M&A) transactions also increased in the first nine months, with 18 transactions announced in 9M 2024, up from 11 in 9M 2023.

The number of project M&A transactions remained the same at 9M in 2023 and 9M in 2024, reaching 22 in both years.

Smart Grid

Corporate funding for smart grid companies decreased 33% year over year to $2 billion in 53 deals from $3 billion raised in 48 deals in 9M 2023.

Regarding the upward trend in smart charging, Raj Prabhu noted, “There have been substantial subsidies and incentives for electric vehicles (EVs) in the U.S., Europe, and globally. Since EVs rely heavily on charging infrastructure, a significant amount of investment is being directed toward charging technologies. However, other segments within the smart grid are not performing as well.”

VC funding for smart grids rose by 13% to $1.4 billion in 43 deals from $1.2 billion raised in 37 deals in 9M 2023.

The top five smart grid VC funding deals in 9M 2024 were finalized for 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.

Announced debt and public market financing for smart grid technology companies fell to $568 million in 10 deals in 9M 2024 compared to $1.7 billion in 11 deals in 9M 2023.

There was no considerable variation in smart grid M&A transactions, with seven transactions in 9M 2024 compared to eight in 9M 2023.

Raj Prabhu expects greater market clarity by 2025. “We are currently waiting for the elections to conclude in less than two weeks, and the Federal Reserve may provide more signals regarding potential rate cuts in November. Greater clarity on rate cuts will likely unleash more deals. By the end of Q4, the market should have more clarity as we move toward 2025.”

This report covers 229 companies and investors. The report is 114 pages long and contains 80 charts, graphs, and tables.

To learn more about the report, visit: https://mercomcapital.com/product/9m-and-q3-2024-solar-funding-and-ma-report/