VC investment in storage, smart grid and energy efficiency is down significantly in 2020

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According to a new report from Mercom Capital Group, venture capital (VC) investments into the battery storage, smart grid, and energy efficiency sectors fell to $858 million across 42 VC funding deals during 1H 2020, a significant decrease when compared to $1.8 billion raised from 44 deals in 1H 2019.

When all funding into the three sectors is considered, which includes debt and public market financing, we still see a significant fall off, with $1.5 billion in 51 deals in 1H 2020, compared to $2.4 billion across 52 deals in 1H 2019.

The award for the hardest-hit sector belongs to battery storage, which saw total VC funding fall to $536 million across 14 deals in 1H 2020, which is just over a third of the $1.4 billion raised in 17 deals in 1H 2019. When all corporate funding is considered, the gap narrows, marginally, as 1H 2020 saw $716 million in 19 deals, compared to $1.9 billion in 22 deals in 1H 2019.

Yet while these figures are down significantly in comparison to what was happening a year ago, they aren’t nearly as paltry in a historical context, as 2019 saw unprecedented levels of funding.

Image: Mercom Capital

At the same time, the relatively similar levels of funding across 1H 2017, 1h 2018 and 1H 2020 is also not necessarily a positive. For a technology quickly rising in commercial viability and deployment, one would expect incremental increases in annual funding, not three years of relative similarity and an exponentially high outlier.

Smart grid stays strong

The bright spot of the three sectors came courtesy of investments in smart grid technology, which actually saw an increase in 1H 2020, the only sector to do so.

Smart Grid VC funding in 1H 2020 came to $275 million across 21 deals, compared to $154 million in 22 deals in 1H 2019. When all corporate funding is considered, smart grid still improved on 2019, posting $285 million in 24 deals, compared to $155 million in 23 deals in 1H 2019.

While smart grid investments have been the only sector  to see growth across the board, in comparison to last year, it’s also the smallest sector of the three, in terms of money invested.

Fluctuations in efficiency

While battery funding was down across the board and smart grid funding was up across the board, funding for energy efficiency has been its own beast. VC funding raised by energy efficiency companies in 1H 2020 came to $47 million in seven deals, which is just over 20% of the $207 million in five deals raised in 1H 2019, an incredibly steep loss. While VC funding is down, total corporate funding more than makes up the difference. Total corporate energy efficiency funding in H1 came out to $547 million in eight, compared to $264 million in seven deals in 1H 2019.