Meeting The Investment Challenge in The Changing Energy Market

Mercatus has secured US$11.7 million in funding to enhance its energy investment management platform.
Published: Wed 03 Feb 2016

The changing energy market is placing increasing demands on both investors and the management of investments with the increasing complexity that is emerging as the market diversifies.

In a challenging investment market, energy investment management solution provider Mercatus has secured US$11.7 million, with which the company plans to grow both the scope of the product and its availability in the market.

Smart grid funding steady

These challenges are indicated in the latest venture capital figures from Mercom Capital Group, which show that investments in smart grid companies were only marginally up over the past year at US$425 million in 57 deals, compared with US$384 million in 74 deals in 2014.

Indeed, comparing the published annual figures, VC investments have tended to remain fairly steady since at least 2011 (assuming no changes in accounting procedures), when Mercom recorded US$377 million in 50 deals, compared to the flurry of activity involving US$769 million in 51 deals in 2010. Subsequent figures were US$434 million in 40 deals in 2012 and US$405 million in 63 deals in 2013.

Notably also in 2015, the lower number of deals attracted the largest number of investors, 103, compared for example to 88 in 2014.

What does this suggest? At a high level, and bearing in mind the figures don’t reflect the full investment picture, investors, while supportive, appear to be becoming perhaps more discerning and risk aware in their choices. Which is a clear show of confidence for the companies that succeed in raising investment at this time.

Energy investment management gets support

San Francisco based Mercatus’s funding round was led by Traverse Venture Partners, a large real estate company that has previously made several cleantech investments, and Texas Pacific Group’s Alternative & Renewable Technologies fund, with existing Series A investors Vision Ridge Partners, Trepp, and Augment Ventures.

The company is barely four years old but its EIM platform – which is provided as a cloud solution – is clearly meeting an unmet need, being used by an array of top power producers including Enel Green Power, Conergy and Building Energy in Europe and NRG, Constellation and Sun Edison in the US. Collectively Mercatus’s customers operate in 75 countries.

“Our proposition is to digitize the energy investment lifecycle of distributed assets from the day they are conceived as an idea to end of life,” CEO and co-founder Haresh Patel told Engerati in an exclusive interview.

Traditional investment management and reporting can be complex and costly, running as high as US$1/W of power.

“We found that companies wanted a uniform way of making decisions on capital and resource allocation across business units and countries, which a single platform provides.”

Initially the solution addressed solar power, but working with Enel Green Power it has been expanded to include all the technologies in the 35 countries the company operates in – solar, wind, geothermal, biofuels, small hydro, storage, energy efficiency and combined heat and power.

Focus on asset finance management

Mr Patel told Engerati that the new Series B funding will be used to build out the product roadmap and to scale the business, primarily in Europe and the US but also in countries in Asia where it is expected to have potential with the fast growing need for new generation.

“Customers have indicated an interest in asset finance management, so during 2016 we will be dedicating a large part of our resources to working with then to understanding the scope and writing the requirements.”

Commenting on industry trends, Mr Patel says that while wind and solar dominate the distributed generation landscape, more and more companies are adding storage as costs come down. However, the most significant trend being observed now is that companies are reorganizing disparate business units focused on individual technologies into a single entity.

“Customers don’t want a solar quote or a wind quote – they want an energy solution and they are getting smart about recognizing that need.”

He continues: “We’re excited with where we are at, at the centre of this 15-20 year energy transition.  But there’s too much deal friction which is adding costs and preventing companies from committing resources, and we’re excited to be able to help to unlock the capital to fuel that transformation.”

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