Green Charge Networks Bags $56M to Expand Smart Battery Market

7/30/14Follow @mlamonica

Traditionally, batteries have had few uses in commercial buildings. But a handful of companies are reinventing batteries, making them connected devices that can cut utility bills without an upfront investment.

Santa Clara, CA-based Green Charge Networks said Tuesday it has raised $56 million from K Road DG, a private equity firm focused on distributed energy, to scale up its business. The company intends to expand from operations in New York and California into Texas and Hawaii, a company representative says.

Green Charge Networks, along with a few other startups including Milbrae, CA-based Stem and San Francisco-based SolarCity, are creating a new market for distributed energy storage. This technology is cost-effective in only a few states now, but it’s a sign of innovation that’s happening at the intersection of cloud computing and energy storage.

These companies install and operate large lithium-ion battery packs (a single 30-kilowatt Green Charge battery is bigger than a refrigerator) equipped with software and controls that monitor how a building uses energy. By analyzing power usage trends, the systems decide the best times for charging the battery from the grid or powering a building off the battery. The key is to lower consumption during so-called peak hours—typically in the late afternoon and early evening—when utilities charge commercial and industrial customers fees for the maximum amount of power they use.

In the case of Green Charge Networks, business customers, such as hotels or apartment buildings, don’t need to purchase the equipment. Instead, the battery provider owns the equipment and can finance the installation through the power savings. This is a business model often used by energy efficiency companies that fund equipment upgrades, such as heating or lighting, in buildings through ongoing energy savings.

One of the challenges that the early entrants into this market face is differentiating their products. The batteries themselves are commodity products, albeit relatively expensive ones, but the algorithms for saving money and complementary software to help building managers manage energy could provide a way to stand out. Getting access to capital to finance new installations is also a challenge all these companies will need to address.

In many ways, the battery industry is following the same trajectory as solar energy. The prices of products are coming down; in the case of lithium-ion batteries, this is aided by economies of scale from the electric vehicle industry. More important, though, is the emergence of financing options, which allow people to lower their energy bills without any initial investment. In the case of solar, financing in the form of leases helped fueled the rapid growth in residential solar over the past few years and is now more common than customer purchases.

Smart batteries in buildings can only be financed in states that have relatively high peak-hour rates. But if distributed storage startups can figure out how to make the economics work in other states, many more building owners will have a reason to look at batteries.

Martin LaMonica is a national correspondent for Xconomy covering energy and technology. You can reach him at mlamonica@xconomy.com or @mlamonica. Follow @mlamonica

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