- Mercom Capital Group says companies focused on smart grids, batteries and energy efficiency, raised $2.8 billion in venture capital funding in 2018, an 86% increase over the $1.5 billion they raised in 2017.
- Much of the steep increase came from the energy efficiency sector, which saw funding jump almost four-fold. According to Mercom's new report, VC funding for efficiency companies jumped to $1.5 billion in 23 deals last year, compared to $384 million in 38 deals in 2017.
- This is the second year in a row that Mercom has reported increased investment in the trio of sectors, and reflects a growing consensus that efficiency and energy technologies will be key to reducing carbon emissions.
The rise of VC funding for energy efficiency companies reflects a growing focus on the sector, and its potential to fuel economic growth while also reducing greenhouse gas emissions. The 390% increase Mercom identified may not be sustainable, but the International Energy Agency (IEA) is recommending a rapid increase in efficiency investment.
Last year, the IEA called for a doubling of global annual investment in efficiency through 2025 — and then doubling it again between 2025 and 2040. The agency believes improvements in efficiency by 2040 could allow the world to double the value of the energy it uses today.
Other sectors saw increases in investment as well, but not as much
VC funding for battery storage companies increased by 19% to $850 million in 49 deals, compared with $714 million in 30 deals in 2017. Mercom said total corporate funding, including debt and public market financing, increased to $1.3 billion in 2018 compared to $890 million in 2017.
In the storage arena, most of the interest is focused on lithium-ion based battery technology companies, which received $236 million in funding last year. Companies developing energy storage systems followed, attracting $193 million.
Smart Grid companies raised $530 million in VC funding last year, a 26% increase over 2017 levels, though the number of deals fell. There were 29 deals in 2018, compared with 45 in 2017, according to Mercom's data.
According to Mercom, investment in the three energy sectors has fluctuated in recent years, falling from $1.67 billion in 2015 to $1.3 billion in 2016 before its rise in 2017 and 2018.