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VCs supercharged energy storage last year

Jan 25, 2024
Illustration of a battery icon with hundred dollar bills as the bars indicating that it's full.

Illustration: Aïda Amer/Axios

While venture capital funding across sectors dropped last year, energy storage saw a substantial jump.

Why it matters: Investing in energy storage is having a moment, as governments globally provide support and companies deploy batteries for grid storage and electric vehicles.

Details: According to a report from research and communications company Mercom Capital Group, VC firms funneled $9.2 billion into 86 deals in energy storage, which was a "historic high" and a 59% increase from 2022.

  • Out of those 86 deals, 33 deals were for battery tech, including 18 deals, and $2.6 billion, for lithium-ion batteries. Other novel forms of energy storage that brought in funding include thermal batteries and gravity-based storage.
  • The biggest VC-funded energy storage deals of 2023 were $1.08 billion for London-based energy storage and EV fleet developer Zenobe; $1 billion for Carson City, Nev.-based battery recycling and components maker Redwood Materials; $944 million for Korean EV battery maker SK On; $905 million for French battery maker Verkor, and $622 million for Chinese grid battery storage company Hithium.
  • At the same time that VC funding for energy storage soared, total overall "corporate" funding — which includes VC, private equity, public market, and debt financing deals — dropped by 28% from 2022 to $19 billion raised in 120 deals.

Zoom in: Mercom's CEO Raj Prabhu explained the discrepancy between the VC growth and the corporate dollar drop as: "public market and debt financing are typically a lot more sensitive to interest rates than VC funding."

  • In addition, one large public market deal, LG Energy Solutions' $10.7 billion IPO, skewed the 2022 data to make corporate energy storage funding particularly high that year.

Big picture: Incentives from the Inflation Reduction Act and the Bipartisan Infrastructure Law helped juice the U.S. market for energy storage and bring private funding off the sidelines.

  • As one investor put it: the IRA cannon was pointed at all things batteries and EVs last year.
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