Ultimate Guide to Energy Storage M&A Strategies
- Brandon Chicotsky
- Jan 2
- 15 min read
Updated: 6 days ago
The energy storage market is booming, driven by rising demand for grid stability, AI-powered data centers, and supportive policies like the Inflation Reduction Act (IRA). Mergers and acquisitions (M&A) have become a key strategy for companies to scale quickly, access new markets, and adopt advanced technologies. Here's a quick breakdown of the key takeaways:
Market Growth: Global energy storage installations grew by over 75% in 2024. U.S. battery storage capacity reached 32 GW by the end of 2024.
M&A Trends: In 2023, 227 battery storage M&A deals totaled $24.1 billion - almost triple 2022’s value. By 2024, acquisitions climbed to 25, up from 15 the previous year.
Key Drivers: AI-driven energy demand, declining battery costs, and federal incentives like tax credits are fueling this growth.
Notable Deals: Google and TPG Rise Climate’s $20 billion partnership with Intersect Power in 2024 highlights the trend toward co-locating data centers with renewable energy and storage.
M&A offers energy storage companies a way to scale faster than organic growth, but success depends on thorough due diligence, accurate valuations, and effective post-acquisition integration. Read on for insights into the market forces, processes, and strategies shaping energy storage M&A in 2026.
Market Forces Driving Energy Storage M&A
Energy storage mergers and acquisitions (M&A) in 2026 are being shaped by three major factors: advancements in battery technology, supportive policies, and increased private equity investments. These drivers are creating unique opportunities, especially for businesses with EBITDA below $25 million. Let’s break down how these forces are influencing the market.
Advances in Battery and Storage Technology
Battery technology is evolving well beyond traditional lithium-ion systems. While the cost of lithium-ion batteries dropped to $115/kWh in 2024 [8], investors are increasingly drawn to long-duration energy storage (LDES) systems that can operate for more than the standard 6–8 hours [7].
Next-generation technologies are commanding attention and higher valuations. For example, in October 2023, Hitachi Energy acquired a majority stake in eks Energy, a company based in Seville, known for its renewable energy management solutions and cutting-edge battery energy storage systems (BESS) [2]. Similarly, Spanish solar company Soltec expanded its stake in Silbat, a startup specializing in converting electricity into heat stored in molten silicon, which is later transformed back into electricity using thermophotovoltaic cells [2].
Other innovative approaches are also making waves. In January 2026, Energy Dome announced large-scale deployments of its CO2 Battery in India and Wisconsin. This system can deliver 20 MW of power for 10 hours using liquefied carbon dioxide [7].
"Flexibility - specifically the ability to adjust supply and demand to continuously achieve energy balance - is of paramount importance to grid reliability as renewable sources comprise an ever-increasing portion of our power generation mix." – White & Case [2]
The demand for diverse storage solutions is being fueled by the rapid growth of AI and data centers, which require reliable baseload power and flexible energy capabilities. This has led to a surge in M&A activity targeting companies that enhance grid stability through advanced battery management software, inverters, and hybrid storage systems [1][8].
U.S. Policy and Regulatory Support
Federal and state policies have played a crucial role in reducing regulatory uncertainty and improving the economics of energy storage projects. The Inflation Reduction Act (IRA) provides Investment Tax Credits (ITC) for standalone energy storage systems and Section 45X production tax credits for U.S.-based battery manufacturing [10][8].
State-level initiatives are also driving long-term market confidence. Twelve states, including California, New York, and Massachusetts, have set formal energy storage procurement targets. For instance, New York aims to achieve 6,000 MW of storage by 2030, while Massachusetts has set a goal of 5,000 MW by the same year:
State | Storage Target | Target Year |
New York | 6,000 MW | 2030 |
Massachusetts | 5,000 MW | 2030 |
Virginia | 3,100 MW | 2035 |
New Jersey | 2,000 MW | 2030 |
California | 1,825 MW | 2020 |
Connecticut | 1,000 MW | 2030 |
Nevada | 1,000 MW | 2030 |
"Procurement targets are beneficial in that they provide supportive signals for investors and reduce regulatory uncertainty." – Morgan Lewis [9]
At the federal level, FERC Orders 841 and 2222 have mandated that grid operators eliminate barriers preventing energy storage from participating in wholesale capacity and energy markets. This regulatory clarity has made revenue models for M&A targets more predictable [10][8]. As a result, the first three quarters of 2024 saw 83 energy storage financing and investment deals, totaling $17.6 billion [3].
However, some policy concerns remain. For example, the Trump administration's focus on thermal energy raised questions about the longevity of tax credits and the potential for tariff increases - up to 60% on Chinese imports - which could impact project costs and supply chains [1][6]. Despite these challenges, state-level decarbonization mandates continue to provide a solid foundation for M&A activity.
Private Equity Investment Activity
Private equity (PE) firms are actively consolidating the energy storage sector to take advantage of grid modernization and the growing energy demand from AI applications. In September 2023, KKR acquired a 45% stake in Zenobē, a London-based grid-scale battery storage company, for $1.1 billion. This deal positioned KKR as a joint majority shareholder, enabling Zenobē to expand its 430 MW storage portfolio into North America and Australia [2].
PE investors are increasingly focusing on operating assets and late-stage development projects, which offer stable cash flows through long-term Power Purchase Agreements (PPAs) [1]. This strategy reduces risks related to grid interconnection delays and policy changes while providing immediate revenue.
The rising demand from data centers is creating significant opportunities for storage companies capable of delivering reliable, zero-carbon power. In December 2024, Google and TPG Rise Climate announced a $20 billion partnership with Intersect Power to develop renewable and storage-powered data centers [1]. Similarly, in early 2025, Blackstone made a major move into the power sector with its $11.5 billion acquisition of TXNM Energy, driven by the infrastructure needs of AI and data center growth [4].
"As leading private equity investors have noted in this report, despite changes in policy and market volatility, the U.S. energy sector is surging." – Jennie Simmons, Partner in the Energy Practice Group, Troutman Pepper Locke [11]
PE firms are also adopting vertical integration strategies, acquiring platforms that combine energy generation, transmission, and storage to address AI-driven energy demands [4]. These strategies are creating opportunities for smaller energy storage companies, emphasizing the potential for targeted acquisitions in this space [1]. Further details on these integration strategies will be discussed in upcoming sections on post-acquisition approaches.
The Energy Storage M&A Process
Mergers and acquisitions (M&A) in the energy storage sector require a distinct approach to due diligence and valuation. This market saw 18 M&A deals completed in the first three quarters of 2024, a noticeable jump from 11 during the same period in 2023, signaling growing confidence from investors [12]. However, battery storage projects come with unique challenges - like interconnection risks and revenue stacking models - that demand careful evaluation. These factors make thorough due diligence, precise valuation, and strategic negotiations essential.
Due Diligence Requirements
Conducting due diligence for energy storage projects goes far beyond the standard financial review. Buyers need to analyze battery technology degradation rates, confirm the origin of components to avoid tariff issues, and assess grid connection specifics [12][14]. The project's nodal location - its exact grid connection point - plays a major role in its value, as lenders closely examine price fluctuations and congestion at both injection and withdrawal points [16].
Revenue stacking is another critical factor. Buyers must understand how income streams from applications like arbitrage, frequency control, and peak pricing influence overall valuation [14]. Additionally, site assessments should cover system design, permits, noise regulations, and fire safety protocols [14].
The energy storage development pipeline is notoriously risky - up to 93% of projects in early stages may never reach commercial operation [13]. To address this, buyers should use probability-weighted analysis to separate viable projects from speculative ones [13]. For construction-phase projects, it's crucial to confirm that contractors offer "full-wrap" or "turnkey" agreements to mitigate risks tied to material supply and project completion [12]. This rigorous review process underpins the growing M&A activity in the energy storage sector.
Business Valuation and Financing
Valuing energy storage projects combines traditional power sector methods with additional operational considerations [17]. The stage of development has a significant impact on valuation - early-stage projects, with higher interconnection risks, are valued lower, while operational assets in later stages command premium prices [16]. Renewable and storage assets currently achieve double-digit EBITDA multiples [13].
For development-stage acquisitions, pricing is often tied to capacity milestones. In contrast, operational projects generally involve most payments being made at closing, though these deals tend to include fewer indemnification protections [12]. Through the first three quarters of 2024, 83 financing and investment deals in energy storage totaled $17.6 billion [12]. This financial activity reflects the sector's strong growth and the importance of accurate valuation.
Financing structures have also evolved. Tax credits under the Inflation Reduction Act are trading at approximately $0.92–$0.93 per dollar [16], with demand for tax equity expected to hit $60 billion in 2024 [16]. As energy storage technology becomes more mainstream, there's been a shift from venture capital to debt and public market financing [12]. Buyers must carefully evaluate nodal pricing and account for battery degradation - higher depth of discharge can accelerate degradation and lead to more frequent replacements, affecting long-term costs [15][16].
After completing due diligence, precise valuation and well-structured financing are essential to closing deals successfully.
Confidentiality and Deal Negotiations
Once assessments are complete, maintaining confidentiality and managing negotiations become critical. Discretion is vital to protect intellectual property, avoid premature rival bids, and maintain employee stability. In 2023 alone, 227 battery storage M&A deals were announced, totaling $24.1 billion - nearly three times the value of 2022 [2].
The process typically starts with an anonymized "teaser" to gauge buyer interest without revealing the target's identity. Serious buyers then sign Non-Disclosure Agreements (NDAs) before accessing the Confidential Information Memorandum (CIM), a detailed document - often exceeding 50 pages - outlining financials and market position [18]. Virtual data rooms are now standard for securely managing sensitive data and tracking access.
"Sellers should be shrewd about what deeper information you provide bidders at this point." – Smartsheet [18]
Once a preferred bidder is identified, a 30–60 day exclusivity period allows for focused due diligence. For deals involving competitors or consortiums, "clean teams" of independent advisors review sensitive data that the buyer's operational staff cannot access until the deal closes. Buyers should also establish formal retention plans and non-compete agreements with key management early in the process, as retaining talent is often a critical condition for closing [19]. Representation and Warranty Insurance is increasingly used to minimize the need for long-term indemnification escrows, ensuring smoother post-closing interactions while maintaining discretion.
Post-Acquisition Integration
Once the deal is signed, the real work begins - turning projections into reality through effective integration. This phase is crucial, as 83% of failed acquisitions cite integration issues [20], and the overall M&A failure rate hovers between 70% and 90% [21]. In the energy storage sector, where deals often merge large-scale utility operations with nimble, innovative startups, the stakes are even higher. While careful evaluations lay the groundwork, swift and thoughtful integration is the key to achieving the intended synergies. Success hinges on aligning cultures, streamlining operations, and keeping close tabs on progress.
Aligning Company Cultures and Objectives
Integration planning should start as early as the due diligence phase, with a focus on identifying cultural gaps and assessing talent. Aligning cultures is just as important as aligning financials and operations. In energy storage M&A, this often means bridging the gap between the structured, hierarchical culture of utilities and the fast-moving, innovative environment of startups [21].
"The cultural program can't be viewed as an isolated job - it must be interwoven with all integration initiatives." – McKinsey & Company [21]
Addressing cultural differences in decision-making and communication early is critical [20]. Companies that prioritize culture during integration planning are 50% more likely to meet or exceed their synergy targets [21]. Leaders from both organizations should collaborate to create a "change story" that outlines the desired cultural transformation and model the behaviors needed to achieve it [21].
Timely decisions on leadership roles are equally important. Delays create uncertainty among employees and open the door for competitors to lure away top talent [20]. For energy transition deals, preserving the target company’s unique qualities is often the smarter move, integrating only where it adds value to avoid stifling innovation [22]. A notable example: In 2021, Hitachi acquired GlobalLogic for $9.6 billion. Through workshops and cross-geographic teams, Hitachi identified cultural differences and successfully integrated GlobalLogic while preserving its innovation-driven culture [20].
Creating Operational Efficiencies
An integration team should be established immediately, covering areas like legal, tax, HR, and IT, to ensure operational continuity from Day 1 [23]. Start by assessing existing ERP systems and IT infrastructure to identify opportunities for synergy. Centralized data access can help maintain consistent information across the newly combined organization [23].
Simplify third-party contracts by consolidating and standardizing terms after the deal closes [23]. Combining development teams and leveraging the scale of the merged pipeline can significantly cut construction costs and overhead [5]. As strategic buyers accounted for nearly 70% of deal volume and 78% of deal value in H1 2025 [4], vertical integration across generation, transmission, and distribution has become essential for maximizing value.
"As vertical integration accelerates, post-merger integration becomes critical. Aligning operations across generation, transmission, and distribution will be key to unlocking value." – KPMG [4]
For acquisitions aimed at gaining new capabilities or business models, consider maintaining the target as a separate business unit with its own leadership. This approach helps preserve the innovative edge that made the target an attractive acquisition in the first place, focusing on revenue synergies like cross-selling or market expansion rather than just cutting costs [22]. These operational adjustments pave the way for precise tracking of integration performance.
Tracking Integration Performance
An Integration Management Office (IMO) can be a game-changer for tracking both hard and soft synergies, ensuring that friction points are resolved quickly [20][24]. The IMO acts as a central hub, aligning teams on strategy, managing interdependencies, and serving as a "culture lab" to address emerging conflicts [20].
"Playbooks are one of the most important tools a company can deploy in high pressure integration efforts." – PwC [24]
Instead of relying on generic checklists, focus on a few critical cross-functional decisions that drive the most value, such as merging operating models or aligning R&D roadmaps [20]. Setting revenue targets before the deal closes can help maintain momentum from Day 1 [22].
Generative AI is increasingly being used in integration planning, with 22% of M&A practitioners leveraging it to analyze culture gaps, draft job descriptions, and highlight integration risks for leadership [20]. Regular reviews of personnel, products, and operations post-acquisition are essential to pinpoint what’s working and what needs adjustment [18].
Business Brokers in Energy Storage M&A
While major transactions often dominate the headlines, most mergers and acquisitions (M&A) in the energy storage sector occur in the lower mid-market. Between Q1 2020 and Q2 2024, the average deal size for battery energy storage systems (BESS) M&A was less than $20 million [27]. This is where business brokers step in, playing a crucial role in facilitating these transactions and complementing the financial and strategic processes involved.
Services Business Brokers Provide
Business brokers handle a wide range of tasks, from initial valuation to final negotiations. They assess key elements like battery technology, supplier relationships, and the condition of hardware [25]. Their financial analysis dives into profit and loss statements, cash flow trends, revenue performance, and profit margins, giving potential buyers a clear and detailed financial picture [25].
"A business broker is not just a facilitator but a vital asset during the due diligence process. They ensure every aspect of the transaction is transparent and fair." – Ad Astra Equity [25]
Confidentiality is a cornerstone of their work. Brokers act as intermediaries, ensuring that sensitive information is only shared with thoroughly vetted parties. At the same time, they promote open communication and schedule regular meetings to build trust throughout the process [25]. They also collaborate with legal experts to confirm compliance with business licenses, intellectual property rights, and regulatory requirements - critical tasks in the highly regulated energy storage industry [25].
When challenges arise during due diligence, experienced brokers step in with practical solutions. Whether it's renegotiating terms or designing creative financial structures, they work to keep deals moving forward. This problem-solving ability is especially important in the energy storage sector, where stringent due diligence standards, corporate hygiene, and properly executed contracts can determine the success or failure of a deal [26].
God Bless Retirement's M&A Services
God Bless Retirement offers specialized M&A services tailored to energy storage companies. Focusing on businesses with under $25 million EBITA, the firm targets the lower mid-market, providing expertise in managing every aspect of the transaction. They deliver certified business valuations that consider not only traditional financial metrics but also unique drivers like technology assets and project pipelines.
The firm manages the entire selling process, from identifying qualified buyers to maintaining confidentiality during negotiations. Their private network includes CPAs, financial planners, and private equity professionals who understand the complexities of energy transition deals. With roughly 27% of all energy and natural resources transactions now driven by the energy transition [22], having advisors with this level of expertise can make a significant difference.
Additionally, God Bless Retirement offers a free preliminary valuation and consultation, giving business owners an opportunity to gauge their company's market value before committing to a full listing. Operating on a success-fee basis, the firm only charges fees upon the successful closure of a deal. For energy storage companies planning an exit or merger in 2026, this approach provides a low-risk way to explore opportunities in a growing market.
Future of Energy Storage M&A
Building on earlier discussions about policy and technology drivers, the strategies below illustrate how the market is evolving through a focus on mature assets and scaling platforms.
Main Strategies for M&A Success
By 2026, successful energy storage M&A hinges on prioritizing mature assets over early-stage projects. Buyers are gravitating toward operational facilities backed by long-term power purchase agreements, which provide dependable cash flows - an increasingly critical factor given the shifting policy landscape [1][28]. Projects that started construction before 2026 to lock in tax credits and sidestep Foreign Entity of Concern (FEOC) restrictions are commanding higher valuations [28].
Conducting supply chain due diligence is now non-negotiable. With more than 83% of the planned 219 GW of U.S. grid storage at risk of losing tax credits under FEOC regulations starting in 2026, buyers must verify the origins of batteries and inverters [28]. To counter these risks, companies are broadening their supplier networks and investing in domestic production. Meanwhile, dealmakers are modeling various policy scenarios - such as potential rollbacks of federal clean energy subsidies - to price risks more accurately and avoid overpaying [4].
Platform acquisitions are gaining traction over single-asset deals, as investors seek scale, experienced teams, and well-developed project pipelines. A notable example is Constellation Energy Corporation's January 2025 acquisition of Calpine Corporation for $16.4 billion, aimed at securing flexible generation assets to meet the rising energy demands driven by AI [4][1]. These trends point to a dynamic and evolving energy storage M&A landscape heading into 2026.
Energy Storage M&A Outlook for 2026
The energy storage sector is poised for a pivotal year, fueled by AI-driven demand and the growing needs of data centers. Global data center power demand is projected to rise by 17% through 2026, with U.S. data centers expected to account for 8.6% of total electricity demand by 2035 [29][4]. This growth is compelling major players like Amazon, Google, and Meta to invest in solar-plus-storage projects that provide reliable, 24/7 carbon-free power. For instance, in late 2024, Google and TPG Rise Climate partnered with Intersect Power on a $20 billion initiative to co-locate data center operations with renewable and storage-powered energy generation [1].
"In 2026, AI's surging power demand growth will be testing grid limits, revenue models and sustainability goals." – Eduard Sala de Vedruna, Vice President and Head of Research, Horizons, S&P Global Energy [29]
Battery technology is advancing rapidly, with Lithium Iron Phosphate (LFP) batteries replacing Nickel Manganese Cobalt (NMC) due to their lower costs and enhanced safety. Meanwhile, long-duration solutions like iron-air and sodium-ion batteries are moving into pilot stages [28]. The global energy storage market is on track to surpass 1 terawatt-hour (TWh) of installations before 2030, while U.S. storage capacity is expected to reach 37.4 GW by October 2025 - a 32% increase compared to the previous year [3][28]. Notably, renewable energy deal values surged 384.6% in the first half of 2025 compared to the latter half of 2024, reflecting strong investor confidence despite regulatory uncertainties [4].
Grid modernization remains a significant hurdle. Interconnection delays are pushing investors to prioritize projects that can sidestep these bottlenecks or co-locate with existing infrastructure [28][29]. Companies embracing vertical integration across generation, transmission, and distribution are positioning themselves to capture more value as the energy system shifts toward electrification.
FAQs
What challenges arise when integrating an acquired company in the energy storage sector?
Integrating a newly acquired energy storage business is no small feat. It’s not just about combining operations - it’s about syncing technology, regulatory requirements, and corporate cultures seamlessly. One of the biggest hurdles? Maintaining business continuity while merging battery management systems, grid software, and maintenance protocols. A single misstep here could throw off power purchase agreements or lead to issues with regulatory compliance. And let’s not forget the challenge of navigating state-specific permits and interconnection agreements, which can stretch timelines and drive up compliance costs.
The sector’s rapid expansion only adds to the complexity, especially with M&A activity hitting record levels in recent years. Integration teams face the tough task of aligning financial reporting, valuation models, and cash flow assumptions - all while dealing with systems that were designed to operate independently. For mid-size businesses (those with under $25 million EBITA), turning to specialists like God Bless Retirement can make a world of difference. Their expertise in valuations, deal execution, and connections to private equity networks can help smooth out the technical, regulatory, and cultural challenges that often arise during these post-deal transitions.
How are U.S. policies shaping mergers and acquisitions in the energy storage sector?
U.S. initiatives such as the Inflation Reduction Act and various state-level clean energy mandates are driving a surge in energy storage mergers and acquisitions. These policies provide attractive tax credits and financial incentives, making the sector increasingly appealing for investors and businesses looking to expand.
That said, the road isn’t entirely smooth. Policy uncertainties and inconsistent regulations across states can make deals more complex. Successfully navigating this landscape demands staying well-informed and collaborating with experts who understand the legal and regulatory intricacies of the market.
Why is private equity investment important for the growth of the energy storage industry?
Private equity is a major force behind the expansion of the energy storage sector, offering both significant funding and strategic guidance. This backing allows companies to scale their operations more efficiently, merge with or acquire competitors, and secure resources for cutting-edge projects in a fast-growing market.
With the increasing demand for energy storage solutions, private equity investments help speed up project timelines and encourage partnerships across the industry, ensuring businesses are well-positioned to meet evolving market demands.
