Corporate funding for energy storage companies, including venture capital (VC) investments, public market funding, and debt financing, increased 5% year-over-year (YoY) in the first quarter (Q1) of 2026, according to Mercom Capital Group’s newly released Q1 2026 Funding and M&A Report for Energy Storage.

Corporate funding for energy storage companies grew to $2.3 billion across 38 deals, compared to the $2.2 billion raised in 31 deals in Q1 2025.

 

Raj Prabhu, CEO at Mercom Capital Group, stated that corporate funding for energy storage in Q1 2026 increased slightly due to greater clarity on policies and incentives compared to last year. Battery storage, along with solar power, has also increased in importance amid the effects of the U.S.-Iran conflict and rising power demand from data centers and AI.

“The quickest way to install power generation currently is through solar power, along with battery storage. So, there are strong demand factors recognized by investors, which are reflected in higher funding activity for storage, especially in Q1,” said Prabhu.

Energy storage companies increased their VC fundraising by 9% YoY in Q1 2026. This included $1.2 billion raised across 26 deals, compared to $1.1 billion across 18 deals in the same quarter last year, a 44% increase in deal count.

According to the report, energy storage downstream companies attracted the highest VC funding among 14 categories. Other leading categories included metal-hydrogen battery, lithium-based battery companies, energy storage systems, materials and components providers, and battery recycling companies.

“Downstream companies receive considerable funding, just like in the solar industry. Battery storage is still in its early stages compared to solar, and many storage technologies are being funded. However, higher downstream funding means significant attention to installing batteries over new technologies,” said Prabhu.

The top five energy storage VC deals in Q1 2026 involved EnerVenue Holdings, which raised  $300 million; terralayr, which raised $223 million; Liminal Energy, which raised $200 million; Waaree Energy Storage Solutions, which raised $111 million; and Lunar Energy, which raised $102 million.

In Q1 2026, announced debt and public-market financing for the energy storage sector totaled $1.1 billion across 12 deals. Overall funding for the sector decreased 3% YoY from $1.13 billion raised across 13 deals.

Energy storage corporate merger and acquisition (M&A) activity increased in Q1 2026, with seven companies acquired during the quarter, compared to one in Q1 2025. Transactions were spread across downstream platforms, battery technologies, and materials.

Storage projects of 7.2 GW were acquired in Q1 2026, rising 227% YoY from 2.2 GW. The share of acquisitions of standalone battery storage and hybrid solar-plus-storage projects increased during the quarter.

“M&A has generally been up since last year. Funding has fluctuated slightly, but M&A has not. There has been consistent interest in energy storage companies, particularly those with new technologies. Such companies are getting purchased regardless of market conditions,” said Prabhu.

He noted that project funding in Q1, as well as earlier, was up. Demand for the acquisition of projects, particularly those in advanced stages of completion, soon-to-be-operational systems, or those that have been commissioned, has increased.

Prabhu Prabhu highlighted the July 4, 2026, deadline for the beginning of construction/safe harbor rules for federal clean electricity tax credits under Sections 45Y and 48E of the Inflation Reduction Act of 2022. This means that many solar-plus-storage companies need to begin construction of projects before this date to avail themselves of the incentives. This has also led to increased investor interest in these early-stage projects.

On the 2026 outlook for energy storage funding, the market conditions are expected to remain similar to Q1, and the funding and M&A activity is expected to remain positive going forward, barring any significant unexpected events.

Smart Grid

According to Mercom Capital Group’s Q1 2026 Funding and M&A Report for Smart Grid, corporate funding for smart grid companies, including VC funding, debt, and public market financing, totaled $1.1 billion across 16 deals. This was a 115% YoY increase from $530 million raised in 21 deals.

 

In the last few years, smart grid funding has been driven by electric vehicle (EV) charging companies, according to Prabhu. However, Q1 witnessed considerably greater diversification in financing. Investors increased funding for technologies that enable grid optimization, firming, and stability.

VC fundraising by smart grid companies reached $373 million across 14 deals in Q1 2026, up 8% YoY from $346 million across 18 deals.

“Grids experience instability as an increasing number of renewable projects, such as solar and wind, are installed, because these energy sources are intermittent. Therefore, now we are seeing companies that offer technologies to solve such grid issues are increasingly receiving VC funding,” said Prabhu.

Smart grid communications companies received the largest share of VC funding, followed by smart charging and advanced meter infrastructure solutions providers.

The top smart grid VC funding deals in Q1 2026 involved SPAN, which raised $163 million, plus an additional $75 million financing from Eaton; metiundo, which raised $48 million; Mitra EV, which raised $27 million; and Statiq, which raised $18 million.

 

In Q1 2026, announced debt and public-market financing for the smart grid sector totaled $767 million across two deals. This is an increase of 317% from $184 million raised across three deals in the same quarter of the previous year.

Smart grid corporate M&A activity involved five transactions. Smart charging companies accounted for the most acquisitions in Q1 2026.

Prabhu said smart grid funding should remain consistent, as addressing the multiple grid issues will take more than one quarter. “As long as there is consistent demand for power, which we expect to continue because of AI and data centers, grid instability issues will remain, and companies that solve such issues will continue to receive funding.”

The Q1 2026 Funding and M&A Report for Energy Storage is 42 pages in length and contains 32 charts, graphs, and tables. To get a copy, visit: https://mercomcapital.com/product/q1-2026-funding-ma-report-energy-storage/

The Q1 2026 Funding and M&A Report for Smart Grid is 27 pages in length and contains 22 charts, graphs, and tables. To get a copy, visit: https://mercomcapital.com/product/q1-2026-funding-ma-report-smart-grid/