Back in February, Greentech Media took a look at 2012 investment trends
across a broad range of technologies and businesses that could be
considered part of the smart grid. Amidst a general decline in
post-stimulus utility spending and shrinking venture capital investment,
we observed two key emerging trends:
1)
VC funding for companies reliant on big utility capital spending (smart
metering, distribution automation, etc.) has gone away, and unless
there’s some huge government stimulus or regulatory push to reboot that
market, it’s not likely to return anytime soon. That, in turn, will put
pressure on the remaining VC-backed hardware and equipment vendors to
find exits, whether through public offerings or acquisitions.
2)
Future smart grid investment will be focused on managing the emerging
challenges on the grid. That includes software and data analytics to
integrate smart grid systems at the utility level, as well as energy
storage, efficiency, energy management, building automation and other
technologies that offer benefits not only to utilities, but also to
their customers.
It looks like the past twelve months have proven
out these premises. According to a GTM Research tally of smart grid VC
and corporate M&A activity for the year, 2013 saw a big drop in
investment across both categories, as well as a shift from traditional
definitions of what’s part of the smart grid and a new focus on
investments into what more properly belongs in a new category that we’ve described as the “grid edge.”
Here’s a tally of 2013’s venture capital investment into a set of
grid-related technology sectors, which reveals the shift in emphasis
from utility-centric technologies.
Smart Grid VC Funding, 2013
Also notable is the drop in both funding amounts and number of investments compared to 2012:
Meanwhile,
merger and acquisition activity in the smart grid space saw a decline
in deal count and valuations from 2012 to 2013, as this chart indicates:
Smart Grid M&A Activity, 2012-2013
Over
the past several years, we’ve seen global companies such as Siemens,
ABB, General Electric, Alstom, Toshiba, Schneider Electric, Honeywell,
Johnson Controls, and others busily snapping up startups to fill out
their portfolios. But the biggest deal of 2013, Schneider Electric’s purchase of Invensys, doesn’t match the scale of 2012 deals like Eaton’s $11.8 billion purchase of Cooper Industries.
A Narrowing Field for Smart Grid Tech, With Breakouts on the Horizon
On
the VC investing front, it’s noteworthy that smart grid communications
and smart metering, a sector that saw immense investment in years past,
saw only $15 million raised in 2013, compared to $102 million raised in
2012. The only communications company with a significant VC investment
in the sector was On-Ramp Wireless, a San Diego, Calif.-based startup with technology that promises significant advances on the wireless mesh and cellular systems that now dominate the utility landscape.
In
the meantime, 2013’s sole smart grid IPO marked the emergence of a
preeminent smart grid networking startup, Silver Spring Networks, into a
class of its own. The Redwood City, Calif.-based company’s $81 million March public offering
remains a standout exit in a field that has otherwise yielded
less-lucrative exits by way of acquisition for other grid communications
and networking contenders.
Distribution automation saw a bit more
VC attention, with $49 million invested through 2013, compared to $39
million in 2012. This year’s funding was focused on startups that are
promising significant advances on existing technologies for monitoring
and controlling the distribution grid. Two startups receiving
significant funding -- Varentec and Gridco Systems -- are developing power electronics systems that are as yet untested in the distribution grid space today, while the third, Utilidata,
is applying integrated sensor and software control systems for volt/VAR
control in ways that also challenge existing methods on the low- and
medium-voltage grid.
In the meantime, consolidation remains the
name of the game on the DA side of the grid, with several smaller-scale
acquisitions, such as Qualitrol’s purchase of BPL Global and Ormazabal’s acquisition of Current, narrowing the competitive field in the sector.
Beyond
these few fundings, the bulk of 2013’s smart grid VC investments were
aimed at three key sectors: energy storage; demand-side energy
management; and grid software, analytics and security services that fall
under the umbrella of “soft grid.” Let’s break down both categories to
see where the action was.
Energy Storage on the Verge of New Markets, Increased Competition
Looking
at the size and scope of deals, it’s noteworthy that energy storage -- a
technology group that includes fuel cells as well as batteries,
compressed air and thermal energy storage -- has consistently landed the
largest investments over the past two years. Energy storage garnered
$231 million in VC investment in 2013, compared to $302 million in 2012,
and also includes the single largest funding of the year, the $130 million put into fuel cell maker Bloom Energy.
Other energy storage startups landing significant investments include fuel-cell maker ClearEdge Power, compressed air energy storage startup LightSail Energy, and four battery storage vendors. The first, Xtreme Power, has installed nearly 100 megawatts of its battery technology in grid-scale deployments. But it has also shifted away from making its own batteries
to supplying the software systems to integrate other batteries into the
grid, indicating the challenges involved in scaling up untested
technologies in competition with established lithium-ion vendors.
The other three battery startups that landed VC investment in 2013 -- Eos Energy, Aquion Energy and Gridtential -- are promising innovative battery chemistries but still have years ahead before reaching scale.
Demand-Side Energy Management Growing, From Homes to Portfolios
Monitoring
and managing energy within buildings is an integral part of the smart
grid equation, and 2013’s VC investment record shows how this linkage is
growing. Demand-side management startups raked in $52 million in
venture capital investment in 2013, compared to $117 million in 2012.
Companies winning investment in 2013 included GreenWave Reality, EcoFactor, Bidgely and Tado on the home energy management side, and FirstFuel, Optimum Energy, EnTouch, Aircuity and Building Robotics on the building management side.
Demand-side management also saw some significant acquisitions, including Toshiba’s purchase of Consert for home energy management, and NRG Energy’s acquisition of Energy Curtailment Specialists for demand response aggregation.
At
the same time, many of the biggest investments into the building energy
management space -- and one of the notable IPOs of the year -- stand
out as being only tangentially linked to grid integration. Blackstone
Group’s $2 billion acquisition of Vivint,
a company that has bridged from home security into rooftop solar,
energy management and internet service, stands out as centered on
homeowners, rather than utility needs. And Control4, the home energy
management company that raised $64 million in its August IPO, did so after specifically backing away from its utility-connected business efforts.
The Soft Grid: Connecting the New World of Grid Data
With
the first wave of smart grid deployments now in the field, the utility
industry is turning to software providers large and small to help make
use of all this new technology. Startups in this space raised a
collective $159 million in VC funding in 2013, marking a significant
increase from $44 million in 2012.
But while some of the companies
on this list are specifically focused on the utility and energy sector,
many are applying their big-data analytical chops to a much broader set
of industries. Two significant investments -- General Electric’s $105 million investment in Pivotal, a provider of cloud-based analytics, and the $66 million raised by TOA Technologies,
a provider of mobile workforce management software -- fall into this
category. Another significant grid analytics integration player, Space-Time Insight, raised $20 million both to deepen its utility-facing operations and expand into other industries.
Other grid data analytics investments included the $15 million raised by C3 Energy, $3 million raised by WegoWise, $1 million raised by Trove Predictive Data Science (formerly named GridGlo), and an undisclosed investment in Bit Stew. Meanwhile, cybersecurity is emerging as an important focus for smart grid-enabled utilities, driving investment in startups including Cylance and GridCOM Technologies.
http://theenergycollective.com/jeffstjohn/322546/smart-grid-vc-and-ma-shifts-grid-edge-2013
No comments:
Post a Comment