A California energy
storage startup has raised $5 million to fund projects that it will
sell to businesses under long-term contracts, a model that resembles the
leases that have made rooftop solar installations popular.
Stem plans to use the money from Clean Feet Investors to finance up
to 15 megawatts of lithium-ion battery systems. Stem is targeting
hotels, chain stores, fast restaurant and light industrial companies,
said Prakesh Patel, vice president of capital markets and strategy at
the startup.
Stem is one of a growing number of energy storage system and service
providers that are gunning for California as their primary market. The
state last week passed the country’s first mandate
that will require its utilities to buy energy storage to help them
manage the growing amount of solar and wind electricity that flows into
the grid.
Investors such as Clean Feet Investors will be the first wave of
money managers who are willing to take big risks. Given that the energy
storage market is so new, major banks are watching to see whether
various types of storage equipment will deliver the promised performance
over time and how money can best be made. Right now, many of them aren’t so willing to invest in what they consider to be unproven technologies.
The new fund enables Stem to market to a broader set of customers.
Businesses would sign contracts in which they pay a monthly fee for
using the energy storage and Stem’s software, which collects and
analyzes onsite energy use and other data in order to control how
frequent and how much the electricity should flow in and out of the
batteries throughout the day.
The idea is to use computers and software to learn when, say, the
electricity use at a hotel is lower and therefore it’s a good time to
charge the batteries. And when it’s busy, then it’s time to dispatch the
energy from the batteries. The software also takes into account a fee,
called “demand charge,” that a utility typically tags on to help pay for
running its transmission and distribution networks. The demand charge
rate varies throughout the day and could account for 30% to even 50% of a
monthly electric bill, Patel said.
Stem’s software could control that micro-charging and discharging
throughout the day to reduce the power taken from the grid when the
demand charge rate is high, Patel said. The company’s technology also is
kinder to the health of the batteries, which suffer a shorter life span
if they have to go through deep charging and discharging often,
something that an electric car battery system typically goes through. He
expects the lithium-ion batteries used by Stem to last longer as a
result.
“That’s our secret sauce: you can make the battery last longer if you
are able to forecast the customer’s (electricity needs),” Patel said.
“It’s a real-time decision engine.”
Stem’s technology could reduce a customer’s utility bill by 10% to
40%, Patel said. But the upfront cost of installing a lithium-ion
battery system is expensive. A 54 kilowatt-hour system with Stem’s
analytics service will set a business owner back hundreds of thousands
of dollars, Patel said. The expenditure could require too much cash for a
small and medium-size business.
So here is where the $5 million fund will come into play. Stem would
sell contracts, which usually last 10 years, to customers who will pay
for using the batteries but won’t get to own the equipment. The model is
similar to the leases or power purchase agreements that have propelled the residential rooftop solar
market. Incidentally, one of the executives at Clean Feet Investors is
Jigar Shah, who started solar project developer SunEdison.
Stem’s customers could pay extra fees to receive regular forecasts of
their energy needs and alerts from Stem on when to dial up or down the
use of their air conditioning and other equipment. The startup is
working on software that could control those equipment remotely by Stem
and enables the company to more closely manage its customers’ energy
use.
Stem already has 6 megawatts of projects under contract, and it
expects to use up the new fund next year. The company has installed
three energy storage projects totaling 100 kilowatt hours so far — at
two Intercontinental hotels in San Francisco and at Stem’s headquarters
in Millbrae. Stem programs its batteries to discharge 1 megawatt of
power in one hour, so 6 megawatts of batteries will store 6 megawatt
hours of electricity.
Founded in 2009, Stem raised a $10 million Series A in 2011 and is
the process of closing a B round. Patel declined to disclose the amount
of the B round.
http://www.forbes.com/sites/uciliawang/2013/10/24/how-5m-will-help-a-startup-tackle-the-energy-storage-market/?ss=business%3Aenergy
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