Market Insight

STEM receives a further $27 million in funding from investors, including energy majors Total and Exolon.

January 13, 2015

Sam Wilkinson Sam Wilkinson Associate Director, Solar & Energy Storage
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Stem, a leading supplier of behind-the-meter energy storage in the USA, has announced that it has raised a further $27 million in funding. Investors include the venture capital arms of both Exolon Corporation and Total. The investment will be used to continue the development of its energy management software and expand the company.

Key Points

  • Stem provides behind-the-meter energy storage systems for commercial buildings in the USA. Its business model is based around reducing demand peaks in order to reduce the demand charge element of customers’ electricity bills, and is offered to customers with no upfront cost.
  • In its latest round of funding, it has recently secured a further £27 million of capital. This takes the total capital raised by Stem to over $37 million.
  • Total Energy Ventures (venture capital arm of Total) and Constellation Technology Ventures (venture capital arm of Exelon Corporation ) contributed a combined total of $12 million.
  • Source: Stem, Inc. to Close Out a $27 Million Equity Financing Round

IHS Insight

Stem is one of the leading players in the behind-the-meter energy storage market in the USA, having deployed a significant proportion of systems to date, and raised a total of $37 million in capital and $100 million in financing agreements for its ‘no money down’ energy storage model. This significant injection of capital from notable investors will allow it to continue expanding its operations, cementing a strong position for further future success.

Stem also notes that the investment from Total will allow it access to ‘channel partners and several international opportunities’. Total is one of the largest oil and gas companies in the world, and is a major shareholder in US-based SunPower, which is a leading global PV cell manufacturer and system developer, with operations in all key PV markets. This may prove to be a valuable vehicle for Stem’s expansion in the future. Total has also invested a smaller amount in Pennsylvania-based battery start-up Aquion, signalling a strong interest in the energy storage space.  

Stem’s target market is commercial buildings in the USA, and to date its business has centred around California and Hawaii. In November, it was awarded an 85 MW contract by Californian utility, Southern California Edison (SCE).  It develops an energy management software and integrates this with batteries and power conversion systems that are sourced through partnerships with third parties. Stem’s customers do not pay any upfront costs, and sign a lease agreement. The system makes significant reductions to customers’ electricity bills by reducing peaks in demand, which can have a major impact on commercial electricity bills in most states in the USA. These savings are shared between the customer and Stem.

Similar business models to Stem’s have been central to almost all of the energy storage installed in the commercial sector in United States to date. IHS predicts that annual behind-the-meter energy storage installations in USA will more than double in 2015, and will account for almost half of global installations.  Double-digit annual growth is forecast to further continue every year over the coming five years, placing Stem and other players in this space (such as Green Charge Networks, Coda etc.) with a strong growth opportunity. Although the economics of this business model are compelling to many potential customers, in reality the savings that are possible depends on the load profile of the customer, which varies with every unique system. A vulnerability of the business model, which is completely reliant on the high peak demand charges that are seen in most areas of the USA, is the restructuring of electricity tariffs. Whilst IHS does not see this as an imminent threat, it will be become increasingly likely as more and more systems such as Stem’s are deployed, and the income of utilities is further reduced.

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