Virtual power plant specialist Swell Energy raises $120 million to invest in 600MWh VPP

Image source: Swell Energy

Swell Energy has raised $120 million in funding from investors including SoftBank Vision Fund 2 for its 600MWh virtual power plant (VPP) projects across the United States.

The company is focused on integrating resources from home solar PV, battery storage and electric vehicle (EV) customers into its VPPs. This means aggregating dozens or even hundreds of residential systems into a single resource that can provide peak capacity to utilities or grid services in wholesale markets.

Customers are paid regularly by allowing the utility to use their home energy devices, which in turn benefits them through the sale of electricity. Swell Energy looks for areas with particular stresses on the local grid where their virtual power plants can address those issues and balance the attractiveness of the market in terms of incentives and supporting policies.

The proposal is backed by GridAmp, a distributed energy resource (DERs) management software platform that launched an 80MW VPP project with Hawaiian Electric in February.

Its other projects include partnerships with California utilities Southern California Edison (SCE) and New York Edison (Con Edison).

The company is also involved in market seeding activities with all three of California’s major investor-owned utilities, signed a 45MWh agreement with a California community energy group, and in August reached an agreement with CIT Bank to provide financing for California projects.

Swell Energy said this week that the new investment from its Series B round, which brings its total equity raised to date to $152 million, will accelerate the rollout of 26,000 customer energy storage systems, integrating them into its total 600MWh portfolio.

VPP working principle diagram. Image source: Swell Energy

In an interview with the media in 2021, the company said that it had accumulated 3 million MWh of contracts in different regions at that time. CEO Suleman Khan said that Swell has been committed to producing VPP products since 2015.

Khan said the company approached utilities to analyse how Swell’s proposal could provide reliable energy to their customers and effectively reduce the cost of managing a network with a growing share of renewable energy.

Khan said he brings experience working in structured financing for solar leases to the young company. While customer acquisition costs have long been the Achilles’ heel of the VPP industry, the list of potential customers that Swell Energy brings by working directly with utilities could help it overcome that hurdle.

SoftBank Vision Fund 2, a technology-focused investment fund, was the lead investor in the Series B round, along with Greenbacker Development Opportunities Fund I, which provides growth capital for renewable energy and sustainable infrastructure projects.

Alternative investment manager Ares’ Ares Infrastructure Opportunities Fund and institutional investor Ontario Power Generation Pension Fund also participated in the round.

"By coordinating distributed energy resources across the grid to intelligently meet fluctuating demand, Swell's AI and machine learning-driven platform helps solve key challenges of the energy transition while also lowering customers' bills," said Ben Parton, a director at SoftBank Group.

“As the market evolves, utilities and investors understand the importance of virtual power plants; this funding further demonstrates that the capital markets see significant value in this new asset class,” said Suleman Khan, CEO of Swell Energy.

(Source: Swell Energy Global Energy Storage Network, New Energy Network Comprehensive)