Investing in Climate 5/5 : Why Energy Storage Is the Backbone of the Climate Transition
Welcome to the fifth and last chapter of our deep dive into climate investing.
At Breega, we’re constantly asking: How can founders and investors most effectively accelerate decarbonisation?
After exploring how best-in-class climate funds like Breakthrough Energy and Lowercarbon Capital approach this challenge, we broke the energy transition into four pillars: Energy Management, Fusion, Renewables, and Storage.
Today, we’re focusing on storage, a silent enabler of decarbonisation, often overlooked, yet indispensable. Without storage, renewable energy remains intermittent. Without storage, we remain dependent on fossil fuels to stabilize the grid. This piece explores why storage matters, where the market is heading, and where we, as VCs, see the most promising opportunities to build.
What Is Energy Storage? and Why it does matter.
Energy storage is the ability to capture energy produced at one time and release it later, when it’s needed. That sounds simple. But in a world powered by intermittent renewables like solar and wind, it’s game-changing.
Storage balances electricity supply and demand. It stabilizes the grid. It enables households, companies, and countries to consume cleaner, cheaper energy when the sun doesn’t shine or the wind doesn’t blow. Without it, countries fall back on gas-fired plants to ensure reliability, losing both value and emissions efficiency in the process.
Today, the dominant technologies include lithium-ion batteries , widely used across residential, commercial, and utility-scale applications , and pumped hydro storage, which still accounts for around 36% of global capacity thanks to its large-scale, mature footprint. Smaller but growing niches include thermal storage and compressed air, with novel long-duration solutions starting to emerge.
A Market Scaling Rapidly
The global energy storage market has grown rapidly, with an annual growth rate of over 11% since 2019. In Europe, battery storage capacity is expected to reach a total of 400 GWh by 2029 — six times its current level — thanks to significant yearly increases. By 2025, batteries are expected to make up over 11% of Europe’s total energy storage capacity.
Lithium-ion dominates new deployments, driven by falling costs, improved energy density, and manufacturing scale. Pumped hydro remains significant in terms of legacy capacity, but it’s largely static. Today, the growth is in batteries : short-duration, fast-response systems that can be deployed anywhere and scaled modularly.
The drivers are structural:
Renewable energy integration, electrification of mobility, grid modernisation, decentralisation of energy systems, and a growing focus on energy sovereignty, especially in Europe.
Without storage, the economics of renewables weaken: Curtailment increases, Grid flexibility decreases, Fossil back-up re-enters. With storage, clean power becomes controllable, reliable and resilient : key traits for any viable energy system.
Use Cases: A Segmented View of Storage Applications
1. Mobility short term storage (EVs and Transport)
Electric vehicles are the most visible storage deployment in the world. Lithium-ion batteries dominate for their power density and rechargeability. Most EV batteries deliver energy for minutes to a few hours depending on use, and nearly all market growth in this segment comes from short-duration battery systems. Auxiliary technologies like supercapacitors and flywheels support regenerative braking or ultra-fast discharge but remain marginal.
2. Stationary Grid Storage
The heart of large-scale energy decarbonisation lies in grid storage. These systems integrate renewables, provide backup during peak demand, and ensure frequency stability. Lithium-ion again leads for short- and mid-duration (up to 4–6 hours). But long-duration solutions are gaining ground: Vanadium redox flow batteries, compressed air, hydrogen, and gravity-based systems are being explored for 8+ hours and even multi-day needs. Pumped hydro continues to deliver capacity, but is geographically and environmentally constrained.
3. Residential Storage (B2C)
Storage solutions for rooftop solar have matured rapidly, with products like the Tesla Powerwall enabling households to store excess solar energy, optimize their energy bills, and maintain power during outages. Most systems today offer 4–8 hours of backup, providing enough energy for nighttime consumption or peak shaving.
Innovations are still emerging, with startups like Revolty offering second-life batteries to reduce costs and improve sustainability, contributing to a more circular economy in residential energy storage. This innovative approach complements the growing trend of combining solar energy with storage to maximize the financial efficiency of energy systems.
For companies like Ensol, integrating both solar panels and storage solutions is a key part of their commercial offering. Bundling these technologies not only optimizes the energy savings for consumers but also maximizes the return on investment for the overall installation, helping to justify the upfront cost. By providing a complete solar and storage package, Ensol enables homeowners to achieve energy independence while ensuring that the full potential of solar energy is realized.
4. Commercial & Industrial Storage (B2B)
Businesses install behind-the-meter batteries to reduce peak consumption, participate in flexibility markets, and gain energy resilience. Systems can reach several MWh in size and are often coupled with on-site solar or even backup generators. While most are designed for 1–4 hours of storage, larger deployments extend that duration as use cases expand.
Today, most new installations remain short-duration, quick to deploy, economically viable, and useful for grid balancing. But the future demands more: medium- and long-duration systems that can ride through cloudy weeks, windless nights, or geopolitical shocks.
At Breega, we don’t just want to invest in better batteries, we aim to invest in scalable, defensible business models that unlock new market segments or monetization pathways.
Unlocking Value Through Business Model Innovation
The standard model in energy storage has largely been front-of-the-meter (FTM) systems, where batteries are integrated into the grid to provide services like peak shaving and frequency regulation. However, behind-the-meter (BTM) solutions are where we see more innovation today. These systems, which sit directly with the consumer, offer greater flexibility and unique value propositions, making them the area of focus for many new startups and innovative players in the space.
Front-of-the-Meter (FTM): Playing with the Grid
FTM storage connects directly to the grid, often at utility scale. These batteries provide services like frequency regulation, peak shaving, or load shifting to grid operators. Infrastructure players like TotalEnergies Storage, EDF Renewables, and Fluence (Siemens-AES) are developing large-scale deployments, while integrators like Saft and Tesla Energy provide the hardware.
However, the FTM space is facing margin compression. As more batteries plug into the grid, competition for grid services intensifies. In some markets, over-capacity risks turning formerly profitable arbitrage into a race to the bottom.
Behind-the-Meter (BTM): Owning the Consumption Curve
BTM systems are installed at the consumer level, homes, businesses, electric fleets, and serve to store self-generated energy, reduce peak charges, or sell back to the grid. French startup Storio is a standout example, building software-integrated BTM storage for households and small businesses. The company focuses on self-consumption, autonomy, and smart load management.
BTM players tap into distributed generation trends, regulatory incentives for prosumers, and growing expectations of energy independence. Other promising names include GreenAlp, Sunna Design, and Entrix in Germany. While FTM may be larger, BTM is often more agile, more defensible, and more deeply integrated into end-user value creation.
The Tech Edge: What’s Next Beyond Lithium-Ion
Lithium-ion is the incumbent but far from perfect. It is resource-constrained, geopolitically exposed, and chemically limited. That’s why we’re watching the next generation of storage technologies closely.
Solid-state batteries promise improved safety and higher energy density. Sodium-ion, pushed by CATL (China) and BYD, offers a cheaper, lithium-free alternative. Lithium-sulfur, though still early, could deliver lighter batteries for transport. Meanwhile, flow batteries and thermal systems are moving the needle in long-duration storage.
Architectural innovation is also critical. Silicon-anode designs, quasi-solid electrolytes, and flexible batteries are changing performance baselines. Safety is improving via advanced materials and active cooling systems. AI and machine learning are enhancing battery management systems, increasing lifespan, and reducing failure rates.
Our Take at Breega
We believe energy storage is not just a support system for renewables, it’s the enabler of a flexible, decarbonised energy economy. We’re actively looking at both ends of the innovation spectrum:
- On the business model side, startups like Storio are building systems that integrate software, hardware, and user behaviour to deliver energy resilience and cost optimization.
- On the technology side, we’re excited by the push toward medium-duration solutions, lithium-free chemistries, and battery circularity, and innovative startups like Moonwatt.
The next generation of climate leaders will be those who master not only energy production but energy timing. If you’re building something in this space, we’d love to hear from you.
Let’s build the future together.
