The importance of strategic investors in cleantech has been evident to both venture capital investors and those tracking the cleantech VC market over the past few years. 2015 is proving to be a decisive confirmation of this trend.
So far this year, corporate investors from vendors to utilities have been involved in 40 percent of grid-edge venture capital deals -- and in 60 percent of deals worth more than $3 million. Here’s a look at where the investments are coming from and where they’re going.
Vendors
Five primary conglomerates that serve electric utilities -- ABB, Alstom, GE, Schneider Electric and Siemens -- are actively involved in venture capital investing. Of the five, GE has been the most active so far in 2015, investing in PingThings, for its transmission grid data analytics, and Enbala, for its distributed energy resource (DER) management software. GE has invested in a host of grid-edge companies over the past five years, with a particular focus in software and data analytics. Fellow conglomerate Mitsui joined GE as an investor in Viridity and SCIenergy (both of which GE has since exited), and recently became an investor in Stem as well.
Figure: GE’s Grid Edge Venture Investment Portfolio, 2010-Present
Source: GTM Research
Note: GE acquired FMC-Tech in July 2011; Landis+Gyr acquired Consert in February 2013; Opower went public in April 2014; SustainX announced plans to merge with General Compression in March 2015
The consistent interest of conglomerates in grid-edge startups isn’t exactly a surprise. As demand-side solutions continue to rival utility-side solutions in driving the transformation of the electric power industry, companies like GE and Mitsui are positioning themselves to take advantage of both opportunities. But the corporate investment trend isn’t limited to the industry’s very largest players. In one notable example from earlier this year, AMI metering and solutions provider Itron invested in Trove Predictive Data Science, marking what appears to be a first foray into venture investment for Itron. Prior examples include SunPower’s investment in Tendril and EnerNOC’s investment in Genability.
Utilities
Utilities are also investing heavily in a variety of startups. Last month, European utilities E.ON and EDF participated in a funding round for C&I customer data analytics provider FirstFuel. In February, GDF SUEZ similarly invested $7.2 million in Tendril, a provider of residential customer data analytics and engagement. Meanwhile, RWE has invested in Conergy, joining a long list of utilities (E.ON, GDF SUEZ, Exelon, Edison International, Duke Energy) that have invested in solar companies. AES, Duke and NRG have gone a step further this year, acquiring Main Street Power, REC Solar and the Northeast sales and operations business of Verengo Solar, respectively.
Figure: Utility Investments and Acquisitions in Distributed Solar, 2011-Present
Source: GTM Research
Note: This list includes both distribution and retail utilities.
Corporate-utility investment synergy
In a sign that vendor and utility venture capital investments are highly complementary, many of this year’s strategic investments have involved one of each type of investor. Edison International joined GE in the Enbala funding, and Avista joined Itron in funding Trove. NEC Corporation and E.ON co-invested in grid data analytics and visualization vendor Space-Time Insight in February. And energy company Total has joined Constellation Technology Ventures to invest in both Aquion and Stem over the past six months.
Corporate investors, in comparison to VCs, have a better handle on the risks -- and a vested interest in the development -- of grid-edge technologies. However, as we’ve pointed out before, a corporate partner is no guarantee of success.
***
*For the purposes of this article, grid-edge markets include AMI, communications, demand-side management, distribution automation, energy storage, grid support, network operations, cybersecurity and utility-financed distributed solar.
GTM Research’s Corporate Activity Database tracks venture capital, private equity, mergers and acquisitions within grid edge markets. The Database is available to Grid Edge Executive Council members. Learn more here.