National Grid’s venture capital arm, National Grid Partners, announced investments Thursday in three new companies focused on operational improvements as the utility seeks to enhance its core functions while also stepping further into the clean energy sector.
The latest round includes startups CNIguard, SparkCognition and Uniphore, which specialize in artificial intelligence and internet-of-things solutions that will enable National Grid to automate customer processes and secure its assets.
While National Grid Partners (NGP) cast a wide net in looking for companies to invest in, it’s fitting that the three newest portfolio companies are focused on improving utilities' day-to-day operations in the near term, said Lisa Lambert, chief technology and innovation officer at National Grid and founder and president of NGP.
“Quite a lot of our focus is on operational improvement,” she said in an interview. “How do we improve our workflow management? How do we automate processes that are manual? How do we better predict and prescribe asset management activities? […] We need to provide that support because that’s where the need is in the immediate term.”
It’s a stretch to draw a direct connection between improved workflow management or process automation and the deployment of distributed energy resources (DERs) or other decarbonization solutions, Lambert added. However, enhancing the utility’s core capabilities “prepares us for going after those businesses,” she said.
Funding recipient CNIguard builds ruggedized IOT cloud sensors, delivering asset protection and management solutions for utility-critical infrastructure. SparkCognition offers an advanced platform that enables customers to weave artificial intelligence into the fabric of their organizations. Uniphore offers a twist on the customer-service experience through AI-enabled Conversational Service Automation.
“Right now utilities are under a microscope. Especially with what’s happening with PG&E, it feels like there’s no room for error,” said Elta Kolo, grid edge research manager at Wood Mackenzie Power & Renewables, referring to the California utility’s exposure to $30 billion in wildfire liabilities. “I think they’re hyper-sensitive, so they’re looking to invest in the next thing that will keep them competitive.”
National Grid’s regulated business is already under pressure. The utility is currently under investigation by state regulators in Massachusetts over a controversial "cluster study" that could delay deployment of a gigawatt of distributed solar. The Massachusetts Department of Public Utilities said in a filing that the probe will “address the efficiencies of operations and productivity of National Grid’s management and personnel.”
While there’s a lot of buzz around grid modernization, battery storage, solar and DER management software, having equipment and processes in place to understand and react to what’s happening on the grid is critical to setting utilities up for the future, said Kolo, “because you have all of these touchpoints to have that better management.”
Investing in an efficient and renewable future
Today’s announcement brings NGP’s portfolio to a total of 18 companies. The VC arm has invested $102 million in emerging technology companies and funds since it launched in late 2018. The entity is scheduled to invest $250 million through 2021, with additional capital to be added after, said Lambert.
While not reflected in the latest round, many of NGP’s investments to date have been focused on enabling a more efficient and renewables-centric future.
In June, the VC arm invested in Carbon Lighthouse to leverage that firm's building efficiency solution for commercial and industrial property owners. NGP also invested in AutoGrid because of its C&I demand response capability, which Lambert said could form a “core building block” of National Grid’s DER management program.
Another of NGP’s earlier investments was in DER marketplace startup Leap, with the aim of bringing more flexibility to the grid and more value to customers through the purchase of these technologies. National Grid’s customer group is also looking at how energy marketplaces could offer the utility new business opportunities. At the same time, the company is increasing the monetization of grid services through its partnership with Sunrun and others.
“The effective monetization of grid services is a future bid for our business,” said Lambert. “So bringing flexibility to the grid is one of our core features for decarbonization and distributed energy.”
Cybersecurity technology is another strategic area for National Grid. In recent months, NGP has invested in cloud security company Aporeto and industrial cybersecurity firm Dragos, which is in the process of deploying a pilot project with National Grid in the U.K., where it owns and operates electricity and gas transmission networks.
An "awakening" in the energy sector
While National Grid is based in the U.K., most of NGP’s deal flow so far has come from the U.S., where National Grid operates as a utility in the Northeast. But the venture arm is also looking for startups abroad. NGP is a limited partner in a strategic utility technology fund organized by Energy Impact Partners, which recently expanded into Europe. National Grid is also a limited partner with IQ Capital Fund based in the U.K. and Jerusalem Venture Partners in Israel.
Once NGP makes an investment, the company’s dedicated business development team steps in and looks for opportunities to place the startups within National Grid’s various lines of business. This team is critical, said Lambert, “because if we’re not getting strategic value out of these investments, we’re not doing our job.”
Earlier this year, NGP also expanded its presence in Silicon Valley and its capabilities by opening an office in San Francisco to incubate and accelerate early-stage technology companies.
“Building out our organization at National Grid Partners — which has all of these capabilities from innovation to incubation to corporate venture capital to business development and a culture acceleration program — is a pretty big undertaking,” said Lambert. “It’s a massive investment.”
“There’s a risk to it, but I think that speaks to the awakening of the utility sector and the energy sector as a whole to the fact that they’re not going to be able to hide behind their strong balance sheets,” she added. “There are too many examples of other industries that had the same defense mechanisms and were breached.”
National Grid isn’t the only big energy player on a startup investment spree. Last month, U.S.-based utility Exelon launched a $20 million Climate Change Investment Initiative to cultivate startups working on new technologies to reduce greenhouse gas emissions and mitigate climate change.
European utilities such as Enel, Engie, Centrica, EDF and E.ON, as well as oil giants Total, Shell and BP have also been investing in grid edge startups at a rapid clip.
Energy companies are realizing they need a defense, said Lambert, which is one of the reasons why National Grid brought her over from Intel Capital.
“They needed to future-proof the business…and develop a capability for innovating,” she said. “A lot of it is cultural but some of it is just hard skills: Do we know how to do it?”
“I think, frankly, National Grid had a lot of foresight. […] A lot of utilities are dipping their toes in but haven’t gone in full bore like we have here.”