Japanese conglomerate Sumitomo has entered the US microgrid market with an investment in New York-based blockchain innovator LO3 Energy, a company perhaps best known for the Brooklyn Microgrid, a peer-to-peer energy trading experiment that has captured worldwide attention.
Sumitomo was one of two major investors to give new backing to LO3 this week. Shell Ventures, the corporate venture capital arm of oil major Royal Dutch Shell, also joined the roster of those throwing their support behind the company. Earlier investors include Braemar Energy Ventures, Centrica, and Siemens.
LO3 Energy declined to disclose the dollar amount of the investments. But William Collins, LO3 co-founder and chief strategy officer, told Microgrid Knowledge that the “investments are substantial,” and are being made as a bridge note, rather than equity. “It will convert into equity when we do our Series B raise.”
While Sumitomo owns and operates several utility-scale renewable energy projects in the US, this is the company’s first time making itself known within the US microgrid market.
However, the $25 billion company has worked with the technology in Japan, where it piloted a microgrid project in Koshiki-shim that uses recycled batteries from electric vehicles, part of an eco-island effort by Satsumasendai City.
Sumitomo also is participating in a virtual power plant proof of concept project in Japan with Kansai Electric Corporation, according to a Sumitomo spokesperson.
Japan is viewed as a natural launching point for microgrid innovation, given its quest for reliable alternatives to nuclear following the Fukushima disaster in 2011. Another Japanese-based company, Hitachi, moved into the US microgrid arena in 2015, only to withdraw as several large players, among them Schneider Electric, Siemens and S&C Electric, sought ground in what was then a nascent US market.
Sumitomo, which has invested in large wind farms in Kansas and Texas, as well as utility-scale solar in California, intends to use the LO3 Energy investment to expand into decentralized energy.
“Under drastic change and innovation in the power sector, especially rapid penetration of decentralized renewable energy, we have the intention to expand our business into the new field created by LO3 Energy,” said Norihiko Nonaka, executive officer of Sumitomo. “We will work together and support LO3 Energy’s further growth which can realize a clean, environmentally sound community.”
The new investments from Sumito and Shell will be used to commercialize blockchain-based community microgrids broadly, as LO3 Energy continues to expand beyond its New York base.
“We are active in the US, parts of Europe, Japan and Australia right now,” LO3’s Collins said. “We would expect these relationships and investment funds to support all of those rather than any one geography in particular.”
For Shell, the investment marks its continued exploration into de-carbonizing alternatives.
“As we move into a less carbonized future, Shell aims to invest in innovative companies that will help enable the energy transition. LO3 Energy fits right in that space.” said Kirk Coburn, investment director Shell Ventures.
Another arm of Shell, New Energies, has invested in a range of distributed energy companies, among them Autogrid, GI Energy, Sonnen and Husk.
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