Venture capital funding in energy storage increases 59% year over year

Venture capital funding in energy storage reached new heights in 2023, according to Mercom Capital, which reported that U.S. firms invested $9.2 billion in energy storage ventures throughout the year. This represents a 59% year-over-year increase. In 2023, 86 deals led to $9.2 billion, up from 2022 totals of 96 deals and $5.8 billion raised.

“Energy storage companies saw their highest VC funding in 2023, largely thanks to the Inflation Reduction Act’s Investment Tax Credit and other incentives like manufacturing credits for battery components,” said Raj Prabhu, chief executive officer, Mercom Capital.

Despite the positive trend, Mercom said merger and acquisition activity lagged due to high asset valuations, elevated interest rates, and investor caution.

Corporate funding in the energy storage sector, including venture capital and private equity funding, decreased 28% year-over-year, with $19 billion raised as opposed to $26.4 billion in 2022. LG Energy Solution’s $10.7 billion initial public offering in 2022 significantly inflated the 2022 total.

Quarter-over-quarter, corporate funding in energy storage decreased 55% from Q3 2023 to Q4 2023. In a year-over-year comparison, funding was down in Q4 by 14%.

Lithium-ion based battery technology companies remained the top VC-funded business in the energy storage sector. Other top businesses included battery recycling, nickel-based battery technology, energy storage downstream, and materials and components companies.

The top five VC funding deals in 2023 were: Zenobe, which raised $1.1 billion; Redwood Materials, which raised $1 billion; SK On, which brought in $944 million; Verkor, which raised $905 million; and Hithium, which raised $622 million.

Announced debt and public market financing for energy storage companies in 2023 decreased 52% year-over-year, totaling $9.8 billion.

Meanwhile, corporate funding for smart grid companies was 30% lower year-over-year, with $3.3 billion in deals in 2023, compared with $4.7 billion in 2022. The top five smart grid venture capital deals were Driveco with $273 million, Jolt Energy with $162 million, SPAN with $96 million, Virta with $93 million, and EO Charging with $80 million.