A world-leading supplier of construction equipment and services, Caterpillar sees promise in the rapidly evolving microgrid industry and markets. Caterpillar’s venture capital arm, Caterpillar Ventures, on January 25 announced it is taking an equity stake in Powerhive, a pioneering developer and vendor of smart microgrids that network residential and commercial smart solar PV-energy storage systems.
Part of a $20 million Series A round of VC funding, Caterpillar Ventures’ equity investment will enable Berkeley, California-based Powerhive to expand its presence in Sub-Saharan Africa, where collectively its PayGo Energy Systems are the second largest producer of electricity in Kenya. As a result, Powerhive was the first private utility in Kenya to be licensed to sell electricity to the public.
Smart, renewable energy microgrid growth prospects are bright, particularly in developing and less-developing countries, where it’s estimated some 1.3 billion people lack access to grid electricity. Furthermore, lack of energy access is associated with deforestation, degradation of natural resources and ecosystems, and poor human health and living conditions. In short, lack of access to sustainable energy sources perpetuates the cycle of impoverishment, development experts have pointed out.
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Founded in 2011, Powerhive is one of several innovative distributed energy resource companies proving that energy poverty can be resolved in a way that benefits local Africans, communities and businesses. In addition to solar panels, battery storage and smart meters, Powerhive’s PayGo rural home and business sustainable energy systems make use of Kenya’s popular and widespread M-Kopa mobile payments service.
“You’ve probably heard of dozens of solar companies selling solar power kits to people in rural areas all over Africa. We’re expanding electricity access too, currently in Kenya, but taking a radically different approach based on the idea that economic development depends on access to enough electricity to power productive activities, not merely lights and mobile phone chargers,¨ Powerhive co-founder and CEO Chris Hornor stated during a 2015 interview.
¨Our solar microgrids provide 24/7 electricity, which powers small machinery and home appliances in rural Kenyan villages,”
Caterpillar Ventures’ equity investment in Powerhive makes sense given its market-leading position in construction equipment and services supply, which are integral to the process of building microgrids. Yet more relevant, Caterpillar has been developing a portfolio of microgrid solutions and services that includes generator sets, energy storage and solar PV panels, management highlights.
The stationary batteries Caterpillar is selling result directly from its recent investment in Fluidic Energy, for instance. Cat PV panels flow from its alliance with First Solar.
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“This investment complements our existing portfolio and allows us to offer integrated microgrid solutions to meet our global customers’ needs no matter where they are in the world,” said Electric Power Division Vice President Steve Niehaus. “We’re building a better future for Caterpillar, our customers and the communities where they work and live by providing sustainable, reliable and cost-effective energy.”
Furthermore, both Powerhive and Caterpillar will benefit from the latter’s experience doing business in emerging markets and developing countries, Powerhive CEO Hornor elaborated. “We’re excited to work with a company that has built a reputation of integrity and quality during its 90-year existence and has been committed to a broad energy portfolio and sustainable development.”
As Caterpillar Ventures’ $20 million equity investment illustrates, the success of sustainable distributed energy startup’s success hasn’t gone unnoticed in global financial and cleantech development centers. According to Mercom Capital’s Q1 2015 solar finance and M&A report, U.S. venture capital groups provided some $38 million in funding for solar companies focused on distributed PV products in Africa. Beneficiaries included Fenix International, M-KOPA Solar, Greenlight Planet and BBOXX.
Powerhive’s Series A round of VC funding was led by Prelude Ventures. Besides Caterpillar Ventures participants included First Solar, Total Energy Ventures and Tao Capital Partners.