Over $106B has been invested in batteries. Where is the funding flowing?

Since 2015, climate tech investment in the battery industry has surged nearly tenfold. According to our climate tech data, over $106B of total funding has been invested in battery companies in the last 11 years. In our deep-dive series, we’ve explored some of the battery companies building solutions within this space. Today, we’ll shift our focus to the climate tech investors backing battery companies and where the funding is flowing.

Lithium battery companies has secured over 70% of total climate tech investment, with China leading production

Value and count of deals over time broken down by Technology

Lithium batteries have long dominated the market thanks to their remarkable energy storage capabilities. But with demand soaring, the supply chain is feeling the heat, prompting investors to explore alternative battery solutions. Due to geopolitical tensions, there is a push to move supply chains away from China, which has long been the predominant player. Meanwhile, Europe and the US have ramped up production, although they still heavily depend on imports. 

As the market evolves, Nickel-based, Zinc-based, Sodium-based, and Metal-Air batteries are gaining traction, capturing a growing, albeit smaller, share of investment. Flow batteries and hybrid batteries also attract interest, though they still represent a minor segment of total deals.

Climate tech VCs account for the biggest share of deals, with governments following

While climate tech VCs lead the charge in terms of volume, governments and corporations each account for nearly 20% of annual deals. The UK government, for instance, is actively supporting EV battery manufacturing by investing in gigafactories through its Automotive Transformation Fund.

There’s a strong push to develop efficient recycling processes and sustainable practices to tackle environmental concerns and ensure a steady supply. With a global lithium shortage expected as early as next year, the sector is at a critical juncture.

Venture capitalists, governments, private equity funds, and banks are teaming up to expand production capacity, drive battery innovation on, and invest in battery companies building more resilient supply chains. Climate tech VCs like Volta Energy Technologies, Climate Capital, and Kleiner Perkins are leading the way, each having made over a dozen deals in the battery market alone. 

While corporate funding in the energy storage sector hit an all-time high in 2022, VC funding for energy storage companies has started to dip. This trend reflects a pivot towards the public market and debt financing, highlighted by massive debt deals like Northvolt’s $5 billion and Automotive Cells Company’s $4.7 billion in Q1 2024. Much like the solar industry a few decades ago, the energy storage sector is also maturing, with investment shifting from startups to established players and debt/public financing.

Inflation and high interest rates may also have cooled investor enthusiasm, making them more cautious about early-stage companies.