Swell Energy raises $120 million to expand deployment of virtual power plants


Swell Energy announced today that it has raised $120 million to further expand its virtual power plant (VPP) programs. The round was led by SoftBank Vision Fund 2 and Greenbacker Development Opportunities Fund I, LP, with participation from Ares Management Infrastructure Opportunities Fund.

Santa Monica, California-based Swell is developing 350 MWh of VPPs that leverage 16,000 battery storage systems located at homes and businesses.  The company provide a variety of grid service capabilities in territories including Hawaii, California and New York.

The company said that VC funding will support existing VPP development and the deployment of an additional 200 MWh of contracted capacity through approximately 10,000 energy storage systems that will integrate into new VPPs across the United States.

Swell creates VPPs by linking utilities, customers, and third-party service providers together and aggregating distributed energy resources. In particular, working with utilities to compensate customers for operating their batteries for savings and security helps create a cohesive network of solar-powered batteries that supports overall grid reliability, stability and sustainability.

As explained in a recent article by Jigar Shah, director of the U.S. Department of Energy Loan Programs Office, a VPP is a virtual aggregation of distributed energy resources (DERs) like solar, energy storage, electric vehicles chargers and demand-responsive devices (such as water heaters, thermostats, and appliances). The benefits of VPPS is more than just providing decarbonization and grid services. VPPs offer grid operators a large-scale and utility-grade alternative to new generation and system buildout through automated efficiency, capacity support, and non-wire alternatives. Shah noted that by deploying grid assets more efficiently, an aggregation of distributed resources lowers the cost of power for everybody, especially VPP participants.

VPPs are relatively new in the United States, having been established in 2020 under FERC Order 2222, which opened the door for VPPs in the United States. “To truly unlock VPP’s potential, wide reaching deployment at the national scale is needed,” said Shah.

“Swell’s business model is an innovative application of existing technology directly solving two large issues plaguing the grid and renewable energy adoption: transmission and load shifting,” said Ben Baker, Managing Director and Principal of Greenbacker Development Opportunities Fund. “We couldn’t be more pleased to partner with Swell, its impressive management team, and the existing investor base. The company’s three business verticals—Grid Services, Finance, Development—are mutually beneficial, and together will swiftly expand the proliferation of renewable resiliency, providing value to both customers and utilities.”

Swell is also pursuing development in underserved markets where critical grid services are necessary to strengthen and modernize infrastructure. For example, in New England, the Mid-Atlantic, and key western and southern states, local grids must evolve to accommodate more renewable energy and electric vehicle adoption. VPP programs can help provide grid flexibility without forcing utilities to invest in new fossil fuel generation.

“Swell is at the forefront of executing on the promise of virtual power plants, which we believe can be one of the most important and necessary advancements in smart grid service technologies available,” said Keith Derman, Partner and Co-Head of the Ares Infrastructure Opportunities strategy. “Ares has been working with Swell since its Series A raise in 2019, and we are excited to continue building upon that relationship with this follow-on investment.”

Swell is working with multiple California utilities to help expand residential participation in capacity bidding programs. Through a VPP, homeowners with solar and energy storage systems support the reliability of their local grids while reserving battery power for personal emergency use. The efforts are part of the California Public Utility Commission’s goals to reduce the state’s load during California Independent System Operator emergency power events.

Formed in 2014, Swell Energy has raised $582 million in funding to date and counts CIT Group, For Good Ventures, Aligned Climate Capital and Third Sphere as investors in the VPP business.

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