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Lux Research: smart grid, energy storage, and EV M&A hits $2.4B in 1H 2011; start-ups selling at bargain prices

Merger and acquisition (M&A) deals in the smart grid, energy storage, and electric vehicle (EV) sectors during the first six months of 2011 already totaled twice those made during all of 2010, and many more cash-starved start-ups are due for the auction block, according to a new report from Lux Research.

After reaching an all-time six-month high of $1.79 billion in H1 2010, venture funding for these start-ups had all but dried up in the subsequent twelve months. From July 2010 to June 2011, the three sectors landed only $1.54 billion from venture capitalists (VCs)—72% of which was channeled into Series D and later-stage rounds.

M&A transactions totaled $2.42 billion in all three sectors during the first half of 2011—more than double the $1.20 billion exchanged during all of 2010. Two deals comprised most activity in each year: ABB’s acquisition of Ventyx in 2010 ($1 billion), and Toshiba’s acquisition of Landis+Gyr in 2011 ($2.3 billion). All told, the electric vehicle, smart grid, and energy storage sectors saw a total of thirteen transactions in 2010, and another twelve during the first half of this year.

As VCs have withdrawn from the smart grid, energy storage and EV sectors, they’ve left a crowded landscape of stranded, early-stage ventures without any means to finance demonstration pilots or manufacturing scale-up. Not surprisingly, well-capitalized competitors and corporate players have swept in, looking to acquire valuable intellectual property, manufacturing capabilities, and client lists at bargain valuations.

—Steve Minnihan, a Lux Research Analyst and the report’s lead author

Among the report’s key findings:

  • Late stage deals overshadowing early seed funding. Seed funding and Series A deals have virtually disappeared for smart grid, energy storage, and EV start-ups as VCs focus their efforts on maturing companies in their portfolio rather than seeking new opportunities.

  • Acquirers prefer early-stage companies. Companies that received no outside funding accounted for 44% of all M&A transactions, while companies that completed a Series C round or later account for only 28% of acquisitions.

  • Overall, acquirers in the smart-grid space are favoring low-value acquisitions of small companies with a technology or product that supplements their existing product portfolio and has some proven commercial adoption.

  • Automotive and fuel cell companies have drawn the most VC attention. The automotive and fuel cell segments combined represented 66% of all VC spending in 2011. Automotive continues to thrive thanks to six vehicle start-ups that have claimed $664 million since the beginning of 2010. Meanwhile, fuel cell companies raised $371 million over 39 transactions since the start of 2010.

The report, titled “Bargain Shopping—Acquisitions are Crucial as VCs Pass-Over Grid, Storage and Vehicle Ventures,” tracks trends in six key technologies: automotive, batteries, capacitors, fuel cells, non-electrochemical energy storage, and smart-grid technologies. Its analysis is based on more than 712 VC, M&A and IPO transactions involving more than 219 companies in 24 countries through 30 June 2011.

Comments

Reel$$

It seems the VC community has gotten the message: "smart grids" are dumb investments. The move now is to distributed energy which will decommission some of the old grid and force updating of what remains. Smart money knows there is little sense in transmitting energy from remote areas when we can make it locally far cheaper.

Batteries, EVs and electrically driven products remain excellent investments. We are simply updating how and where we make electricity - not where it is consumed. Electric motors with their torque and high efficiency are an enormous growth sectors as they WILL replace ICE.

But we can look forward to oil prices actually declining as they attempt to compete with ultra low-cost electricity of unlimited quantity. BIG disruption coming! Sell oil short. King Abdul Fassah al bin Badden - will be unloading his assets soon - making the smart grid fire sale look like a nano-event.

Bye bye centralized energy.

HarveyD

Reel$$...our highly reliable Hydro electricity is generated 24/7 at less than $0.02/Kwh and few distributed system can come under 15X that cost.

I can't find one single reason why we should change our clean/reliable energy source, specially when our hydro potential is only 50% developed and it can be combined with 40,000large wind mills to again double the total capacity.

Those two clean energy sources are enough to satisfy local/regional demand for 100++ years, even with 3+ BEVs per family.

Reel$$

Read the tea leaves Harvey... the money once slated for "smart grids" is going away. As I pointed out, where competitive, old-style electric grids will remain in business. Manitoba currently charges 6.62cents/kWh plus $82.20 annual, not incl. Provincial and Federal taxes. Customers remain subject to brownouts, blackouts, storm interruption and rising rates. The grid is highly insecure and inefficient due to line and generator losses and cost of maintenance will continue to rise.

A century ago the world seemed bigger and rerouting and blocking rivers, building huge man-made lakes and dams seemed a fair trade off for electric power. Today, high voltage transmission towers scar the landscape and once wild rivers need fish ladders for native species to reach spawning grounds. Exposure to spurious high voltage electric energy is considered a health hazard.

Needless to say these are not the best methods of stewarding the environment. Eventually pressure to return the land to better use will dismantle the last of the old grid/centralized power structure. Distributed power following the sustainable edict to "Think global, act local" will rule. The world will be better for it.

kelly

If this green tech financing seems bad, imagine if the Reagan Bush 3 'maverick' got in.

Dismantle all non-oil sources, invade remaining unoccupied OPEC, finish the 'global financial melt-down' with $7,000 billion in TARP, which would only cost 22,580 per US citizen - a pittance of of the typical 'no bid' military contract.

HarveyD

Reel$$...you remind be of the naysayers who claimed that the major hydro projects in the far North would kill the 10,000 Canadian Reindeer in the area. Some 20 years latter the local reindeer population is over 140,000 and natives have to be paid to hunt them down to try to reduce the population to a sustainable level.

Domestic 24/7 energy generation and storage is either too expensive (up to 42 cents/kwh) or too much of an eye sore or make use of unsustainable polluting fossil or bio-fuels. It will take a few more decades before solar cells and storage devices are cheap enough to compete with hydro. Meanwhile I fully support the expansion of hydro projects collocated with large wind mills for the following 100+ years or until better ways are available.

kelly

Utility power in Missouri costs more than in 44 other states.

A local engineer, through intelligent design and 'solar raising'(like community barn-raising), completed his 5KW net metering system at $1.75/watt. The utility company, by law, reimbursed him at $2/watt.

His solar system is paid-in-full plus $1250 for his efforts.

He now has nearly free electricity for twenty years.

Alternate energy can be highly affordable.

But there is a late summer development. Utility lobbyists got the rebate declared unconstitutional.

Still, technically, is twenty future years free of electric bills worth under $10,000 present value?

For your area, do the math.

In this corrupt nation, only the rich can afford laws.

Unless one believes sets of lawyers billing $100's per hour as long as possible to both sides is what "justice" means.

kelly

For equal time, when a 'government transparency', Constitutional 'expert' candidate later supports warrant-less e-taps, GPS, "Patriot Act", ALL things being "national security", etc., which are obvious 4th Amendment abuses - the definition of liar comes to mind..

HarveyD

Ontario Hydro ONE pays up to $0.42/Kwh to customers who want to produce clean solar/wind power connected to their grid. That's over six times more than we pay for our 24/7 hydro electricity. To be able to export electricity to USA, our large hydro electricity producer pays between $0.09/Kwh to $0.11/Kwh to solar/wind power producers, excluding connection cost. That is about twice the cost of the most recent large hydro plants. The NET profit at $0.06/Kwh is over 50% of which the governments get about 66% in taxes and dividends.

Running an average BEV on clean Hydro poer at $0.06/Kwh would cost as little as $0.40/day or less than 10% of current ICE units with gas at $5.20/US gal.

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