Private equity and venture capital investments in the battery energy storage system, energy management and energy storage sector so far in 2024 have exceeded 2023's levels and are on pace to reach one of the highest annual totals in five years.
In the year to Aug. 20, aggregate deal value stood at $17.86 billion globally compared with the $16.17 billion recorded during full year 2023, according to S&P Global Market Intelligence data.
The number of announced deals totaled 151 transactions as of Aug. 20.
Falling battery costs and growing demand for renewable energy were key factors sustaining investment momentum amid higher capital costs, said Arun Mani, a principal with KPMG's US power and utilities strategy practice.
"The major driving force behind this investment trend is the market itself," Mani said, citing growth in electric vehicles, increased demand from AI-driven datacenters and a growing recognition of battery energy storage systems in addressing renewable energy needs.
For the year through Aug. 20, global deal value was the highest at the end of the second quarter, at $9.91 billion, up from $3.15 billion for the same quarter in 2023.
However, the deal count in the same period fell 27% to 64.
– Download a spreadsheet with data in this story.
– Catch up on venture capital funding rounds in August.
– Read about the fall in private equity investments in agriculture.
IRA spurs US battery production
The 2022 Inflation Reduction Act (IRA) introduced tax incentives that prompted an expansion of US battery production. Battery production set up close to EV assembly plants is essential for reducing shipping time and transport costs for car manufacturers. High pricing has been a factor in declining consumer demand for EVs.
Global battery manufacturers are leading an expansion of US production facilities, spurred by the IRA's incentives, according to a report by S&P Global Commodity Insights. US battery manufacturing capacity is expected to grow to 1,169 GWh by 2030 from 93 GWh in 2023, the report said.
Largest battery energy storage system deals
The industrial sector secured the most battery energy storage system deals, followed closely by the energy and utility sector.
In the largest transaction, battery storage company NineDot Holdings Inc. raised $225 million in a round of funding led by Manulife Investment Management Ltd., with participation from existing backer The Carlyle Group Inc.
The second-largest deal was the $78 million funding round for rechargeable battery developer Alsym Energy Inc., led by General Catalyst Group Management LLC and Tata Ltd., alongside Thrive Capital Management LLC, Thomvest Ventures Inc. and Drads Capital.
Outlook for the sector