Advanced Microgrid Solutions, the California startup with a fleet of behind-the-meter batteries that can shape load to help meet building and grid energy needs, has raised a $34 million Series B round from some key utilities and corporate investors trying to break into the distributed energy business.
Monday's round was led by previous investor DBL Partners, utility-funded investment firm Energy Impact Partners (EIP), and Southern Company, a founding member of EIP, which last month announced it was partnering with Advanced Microgrid Solutions through its PowerSecure subsidiary.
Other participants in the round included Macquarie Capital, the investment firm that last year pledged $200 million to finance Advanced Microgrid Solutions’ projects, and two new investors: GE Ventures and Australian utility AGL, another EIP member. Other early investors joining the new round include former California Gov. Arnold Schwarzenegger, an early supporter of the company through his connection to CEO Susan Kennedy.
The new round brings AMS' total funding to date to $52 million. That's not a lot, compared to the costs of financing its 100-megawatts and growing backlog of projects. But AMS isn't using the new capital for project finance -- that’s being covered by Macquarie Capital under its $200 million financing.
Instead, the San Francisco-based company intends to use the new financing for two main purposes -- to expand into new markets outside California, and to scale up its Armada software, the "building-to-grid DER optimization platform" that it's used to design, implement and operate its current fleet of battery-equipped buildings.
On the market expansion front, AMS is one of the largest behind-the-meter battery operators in its home state, with its first 50-megawatt contract with Southern California Edison in 2014, and last year's wins of another 40 megawatts with SCE, a 4-megawatt project with San Diego Gas & Electric, and a 3.65-megawatt project with the Inland Empire Utilities Agency. On the building and load side, it has aggregated multiple commercial sites for The Irvine Company and Kilroy Realty, as well as multi-site deployments with customers including the Irvine Ranch Water District and Walmart, among others.
Outside of California, AMS is working on a multi-megawatt partnership in Maine and a Department of Energy-funded pilot project in Texas. But its partnership with PowerSecure, which operates about 1.5 gigawatts of backup power systems across much of the country, could open up other states and grid regions -- and AGL’s participation in the new round indicates potential in the Australian markets as well.
As for its Armada software, CEO Susan Kennedy said in a recent interview that it's a key differentiator between AMS and the other distributed energy resource management system (DERMS) providers out there. “What we have that is different, that they don’t have, is the economic optimization at the portfolio level to provide grid services,” she said.
AMS isn’t an expert in integrating and controlling hardware such as batteries, inverters, building energy management platforms, and other load-side energy resources -- “If you want to turn things on and off, there are a lot of players to do that,” she said. Instead, AMS focuses on "the algorithms that perform the economic optimization of distributed energy resources, using energy storage as the key technology that allows load control."
That’s because energy storage -- in AMS’ case so far, lithium-ion batteries supplied by Tesla -- can both shape a building’s hour-by-hour load profile, and respond immediately to a utility’s grid needs. This combination of flexibility and dispatchability, properly analyzed and utilized, can yield a lot more revenues than just using batteries for backup power, demand charge management, or other single-purpose functions, she said.
“We use the battery to completely reshape the customer’s load, so you get maximum savings," she said. "There are 10 different ways you can create savings on the customer side of the meter,” from demand-charge management and price-responsive load shaping, to offering load flexibility to meet local or systemwide grid needs.
AMS is also flexible in how it structures the financing and ownership models for the different distributed energy resources (DERs) going into its projects, she said. In some cases, it's financing solar installations along with batteries. In other cases, it's tapping into customer-owned backup generators or building energy control platforms.
"There’s a pretty broad range of models for financing and ownership structures,” she said. “We’re working with a number of energy services companies to tap into those savings, and it’s extremely valuable for our end-use customers.”
AMS is also working with an increasing number of customers seeking to integrate on-site solar PV, she said. That makes sense, given Walmart's leading role in corporate solar deployments. But it's also of huge importance to utilities seeking to manage the growing amount of DERs being installed by their customers.
Utilities consider DERs to be one of their most critical challenges in the coming years, and have been responding in different ways, from seeking to limit their growth to investing in companies that serve the market. "Certainly the vision of connecting customers and leveraging storage to optimize is a very important one," Hans Kobler, Energy Impact Partners' CEO and managing partner, noted in a recent interview. "That’s something that many of our partners are thinking about -- and AMS is on to a very good start, in terms of how to put that all together. We like them, and we’re very happy that two of our partners are co-investors in the deal. So far that’s a first for us."
AMS also fits well into the DERMS software being deployed by utilities today, including two EIP portfolio companies, Opus One and AutoGrid, Kennedy noted. The company has already partnered with Opus One on some projects, including its microgrid pilot with Maine utility Emera, and “AutoGrid is a DERMS layer that we can plug and play with. If I’ve sized the battery appropriately, I can tell the utility, 'This customer, this service account, has this much load if you need it' -- in real time.”
One important difference between AMS and many of the other behind-the-meter battery companies out there is that AMS hasn't built its business around designing and selling a particular combination of technology to its customers, she noted. "That was a huge go-to-market strategy that differentiates us from companies like Stem and Green Charge Networks and others. They had a great idea, but they basically designed a turnkey system to be installed, and to us that was the wrong business model."
At the same time, "We’re designing systems to take advantage of future opportunities," she said. That's an important consideration in California, where DERs are starting to gain access to grid markets run by state grid operator CAISO, and take a role in utilities' multibillion-dollar distribution grid investment plans. "If I can respond in two minutes -- if I can respond in two seconds -- I can provide a full range of ancillary services that’s not here today, but coming tomorrow," she said. "If I put in the wrong telemetry, I’m locked out of a lot of future revenues."