Venture Capitalists Inject $27 Million Into Stem's Distributed Energy Storage Tech

Fueled by power market reform and technological advances, investor enthusiasm regarding the commercial prospects of advanced energy storage technology is on the rise. A study by the Electric Power Research Institute and the U.S. Department of Energy determined annual savings of $50 billion could be realized by deploying energy storage systems across the U.S. power grid.

Savings of this magnitude, along with market researchers predicting rapid growth in revenues, is stoking investors' appetite for pioneering young companies that have proven their advanced energy storage solutions commercially. Among this small but growing set is Millbrae, California-based Stem, whose technology is capable of managing fleets of distributed energy storage systems so as to meet or exceed grid operators' needs and yield attractive financial returns and environmental benefits.

On Jan. 7 Stem announced it had closed a $27 million equity financing round. Constellation Technology Ventures and Total Energy Ventures joined earlier investors, including GE Ventures, that see energy storage playing a growing role in the U.S. power grid, both in front of and behind the meter, and Stem's technology helping drive that growth.

Integrating energy storage into the grid

Integrating energy storage systems distributed across multiple customer sites, Stem's predictive analytics software platform optimizes charging and discharging of battery storage capacity. This is a defining attribute that can enhance grid power reliability and resiliency -- and do so even more more efficiently than conventional fossil fuel-fired reserve generation capacity, proponents contend. Conducting their own research, power industry and market regulators in states such as California, Hawaii, New York and Texas have instituted market reforms that open the door for energy storage providers to gain a foothold in local and regional markets.

Back in November, Stem was one of three pioneering power technology companies awarded contracts by Southern California Edison (SCE) to deploy advanced energy storage systems “behind the meter” at utility customer sites. SCE's solicitation to include distributed energy storage solutions as a means of meeting forecast local capacity requirements marked a milestone in U.S. power industry history.

Kicking off California investor-owned utilities' drive to acquire 1.325 gigawatts of energy storage capacity by 2020, SCE awarded Stem a multi-year contract to deploy 85 megawatts of power storage capacity. Commenting on SCE's distributed energy storage contract awards, California Energy Storage Alliance Executive Director Janice Lin stated: “This is a major win for behind-the-meter storage, demonstrating that this technology is a valuable tool for both utilities and their commercial and industrial customers ... SCE is a pioneer in leveraging customer-sited storage for local capacity requirements and should be commended for its efforts to make storage an integral part of its operations.”

Growing investor enthusiasm

With their equity investments, Constellation Technology Ventures and Total Energy Ventures join Angeleno Group, Iberdrola (Inversiones Financieras Perseo) and GE Ventures in funding Stem's ongoing technology R&D and its geographic expansion. Michael Smith, vice president and leader of Constellation Technology Ventures (the venture capital arm of Exelon Corp.) commented:

“Energy storage is becoming an increasingly important energy and demand management solution for customers and utilities. We view Stem among the leaders in this market and look forward to taking an active role in facilitating Stem's nationwide expansion.”

Similarly, in addition to injecting equity capital, Total Energy Ventures, the venture capital arm of France's Total energy group, affords Stem the opportunity to expand by working through its extensive renewable energy and energy storage project development channels. As Bernard Clément, senior vice president of business operations for Total Energy Ventures, elaborated:

“Total is always looking for ways to optimize its operations, and smart energy solutions like Stem's play an important role in strengthening the service we offer our customers. We believe Stem's combined storage and software system adds considerable value to our offering and that of our affiliates.”

*Images credit: 1) Stem; 2) Eos Energy Storage