According to BloombergNEF, the stationary energy storage market tripled in 2023, a surge we might not see again, but the momentum isn’t slowing down. With an expected annual growth rate of 21%, battery storage is set to outpace both wind (9%) and solar (7%) in the coming years. The question is: where’s the opportunity now, and how has the investment landscape shifted?
Let’s break down the key business models in stationary battery storage and see which ones still have room for VC-backed growth, and which are now the domain of long-term institutional investors.
1. OEM (Original Equipment Manufacturer)
What’s this model about? Manufacturers produce battery cells, modules, and packs that are integrated into energy storage systems. This is your normal hardware OEM play - build a factory or assembly facility and sell the product.
Examples: Think CATL, LG Chem, and EVE energy - major players producing batteries not just for EVs but for stationary storage too. There are also numerous dedicated players like Pomega in Turkey, or just assemblers of ESS containers.
Investment Outlook: This market is fully commoditized. When 90% of your conversation with clients revolves around price, you know the product has become a commodity. Margins are thin, and differentiation is minimal. For VCs seeking exponential growth, this isn’t the play anymore. Instead, OEMs are now ripe for long-term institutional investors, who are looking for steady, predictable returns rather than risky bets.
2. New Technologies (Thermal Batteries & Long-Duration Stationary Energy Storage)
What’s this model about? Innovative solutions like thermal batteries and long-duration storage aim to solve grid stability issues by storing energy over days or even weeks and decarbonizing industries using a lot of heat.
Examples: Companies like Malta Inc. (thermal storage) and Form Energy (iron-air batteries) are pushing the envelope in long-duration storage. Most companies in this space are startups.
Investment Outlook: These technologies are still developing, but the question remains: is it worth investing in? For VCs looking for a 10x return, probably not. Long-duration storage and thermal batteries are niche markets within the already niche stationary storage sector. They lack the scalability and market size to deliver explosive growth. However, they can still be solid investments for impact funds or patient capital, offering decent but not transformative returns.
3. Utility-Scale Storage
What’s this model about? Utilities integrate large-scale battery storage into their grids to balance renewable energy inputs and improve grid stability.
Examples: Tesla’s Megapack deployments, Fluence’s grid solutions, and Octopus Energy storage and demand-response projects are leading the way. Others, like Flower, Field, or TerraOne focus on demand response and developing software for battery integration and management.
Investment Outlook: This is where things get exciting. Utility-scale storage is just hitting its stride. As countries ramp up their renewable energy portfolios, co-location of batteries with solar and wind farms is becoming the norm, either through regulatory mandates or market incentives. The decoupling of software from the capital-heavy infrastructure gives room for scalable solutions, which is perfect for VC-backed startups focusing on energy management software. Expect this segment to grow rapidly as utilities seek to optimize their renewable integration.
4. Developer Model
What’s this model about? Developers find strategic locations, secure land, and permits, and build or sell battery storage projects.
Examples: Grid-scale battery developers like Stem Inc. and Key Capture Energy focus on identifying critical grid points for storage deployment.
Investment Outlook: Think of this as the real estate of the energy world. Developers scout locations near transformer stations or weak points in the grid, secure land and permits, and either build the project or sell the rights at a premium. While this model can be highly profitable, it’s not scalable in the way VCs prefer. Each project is location-specific, and growth is linear, not exponential.
The Bottom Line
The hardware side of battery storage, OEMs and developers, is shifting towards traditional capital sources like long-term loans and infrastructure funds. However, the rapid deployment of batteries is opening up new opportunities in the demand-response market, where agile startups, particularly those leveraging AI, can achieve exponential growth.
For VCs, the sweet spot lies in the software and services that optimize and manage energy storage systems. Think AI-driven grid management, predictive maintenance platforms, and energy trading algorithms. These are the areas still ripe for disruption and scalable growth.
What’s your take on the future of stationary energy storage? Are you betting on new tech, utility-scale growth, or software-driven solutions?