New Energy Storage: Opportunities Lie in "Materials" and "AI," But More Time Is Needed | BlueRun Ventures Perspective

Energy investing is a mega-track. As a fund focused on early-stage technology investment, BlueRun Ventures has kept a close eye on the new energy infrastructure space, continuously backing innovation in batteries, hydrogen energy, charging and battery swapping, and energy storage — with particular attention to the convergence of energy and computing infrastructure, as seen in portfolio companies like Cloud Energy Storage New Energy, Bocui Recycling, and Shengke Energy. BlueRun is also actively deploying across mobility, industrial, and logistics applications of new energy, with investments in Li Auto, TCab Tech, and Yimoo Intelligent, among others.

Recently, Jui Chan, managing partner at BlueRun Ventures, sat down with Yicai for an exclusive interview, sharing his observations on current energy storage technology from the perspectives of safety and economics, as well as the entrepreneurial opportunities and business models emerging in the space. (This article has been edited and expanded from the original interview.)

The first prerequisite for investing in energy storage is that we must approach these innovative projects with a long-term perspective — meaning we evaluate a project's future growth along a 10-year horizon, or even longer.

Second, we all understand the national carbon neutrality agenda: scaling up new energy development and reducing dependence on fossil fuels. Beyond policy support, we also look at overall market demand.

Today we see new energy sources like solar, wind, hydro, and hydrogen, plus many emerging battery technologies. These new energy sources require energy storage technology as a backbone. Storage plays a critical role in improving power utilization efficiency — without it, generated electricity goes to waste. But the economics of energy storage remain challenging at this stage, which means there are significant new investment opportunities. These opportunities will be technology-driven, meaning innovation that makes new forms of storage more economical than traditional alternatives.

The third point is safety, because conventional energy storage still faces safety challenges. We recently invested in Cloud Energy Storage New Energy, which addresses this exact problem. In traditional hard-wired battery connections, the "weakest link" effect — where each battery group's varying capacity and performance drags down the whole system — reduces both safety and reliability. Cloud Energy Storage uses digitalized flexible connections that allow real-time programmable control of how batteries are linked. This software-defined approach can substantially improve efficiency.

Globally, cumulative energy storage projects have exceeded 200 GW. China alone accounts for over 40 GW, roughly 20% of worldwide storage capacity — so this market is enormous.

In traditional energy storage, large enterprises hold advantages in resources and scale. But now, the opportunity for new energy storage has truly arrived. BlueRun has evaluated many projects in this category, and I see several vectors of technological innovation. One is in materials, and another is in AI algorithms — these innovations create openings for startups.

The energy storage market is growing rapidly. Last year's global additions reached roughly 10 GW, representing over 60% growth. In this environment, startups have an opportunity. Their advantage lies in being able to move faster on underlying technology innovation than large incumbents, giving them better odds. Moreover, new energy storage isn't about providing services on top of the grid — in other words, it's not "model innovation." Service-based approaches have limited potential to create substantial value.

Frankly, we believe the business models for new energy storage are still in a relatively early stage. Everyone is bullish on the growth trajectory, but whether gross margins can be sustained and whether strong returns will materialize for all players — these remain difficult to determine at this point. As mentioned, this market has massive growth potential, and everyone is bringing their own approach to bear, whether B2B or B2C, or solving economic challenges through technology innovation. But who ultimately survives and thrives is still unclear.

Some research reports indicate that in the new energy storage space, standalone storage operations can save roughly 0.2 yuan per kWh in practice. In my assessment, that 0.2 yuan in savings is currently insufficient to cover our investment costs. It will take time, and it will take time to predict spot prices.

Recently, the Australian Energy Market Commission changed its National Electricity Market (NEM) spot price settlement mechanism from 30-minute intervals to 5-minute intervals, which substantially improved revenue capture for storage assets. So there is innovation happening on the settlement mechanism side as well.

We believe underlying technology innovation to further improve economics is also critical, and we continue to track startups in this space that can address both economics and safety. If safety is inadequate, it will inevitably impact economics too.

BlueRun has navigated multiple cycles, capturing technology transformations across different eras. For 20 years, we have done one thing: focus on early-stage technology investment.

We encounter outstanding entrepreneurs daily, each with different innovative ideas. Beyond evaluating the person, we examine whether their target market and identified demand align with the broader wave of innovation. The BlueRun team has always been industry research-driven.

Additionally, investing in innovation cannot be separated from building industrial ecosystems. Whether in the early internet era or more recently in new energy, electric vehicles, energy storage, and semiconductors, we need to integrate with industry, identify quality projects from within these ecosystems, and combine that with our industry research and early-stage technology focus to form our methodology.

Further Reading

Energy Storage and Batteries: Development and Future | Highlights from BlueRun's New Energy Salon Series

BlueRun Ventures Quarterly Investment Overview | 2022 Q2

What We Discussed with Silicon Valley Entrepreneurs: BlueRun Hosts "Web3 & SaaS Explorer Day"

BlueRun Ventures was founded in 1998 in Silicon Valley. BlueRun Ventures China was established in 2005 as a venture capital firm focused on early-stage startups.

Currently, BlueRun Ventures China manages multiple USD and RMB dual-currency funds, with assets under management exceeding RMB 15 billion, making it one of the largest early-stage funds domestically. The firm invests primarily at Pre-A and Series A stages, covering hard tech and innovative interaction, enterprise technology, new consumer, and healthcare sectors. BlueRun has invested in over 150 startups, including Li Auto, Waterdrop, QingCloud, Guazi Used Cars, Qudian, Songguo Mobility, Ganji.com, Energy Monster, Yuntu Semiconductor, Machenike, Cloud Saint Intelligence, Anxin Network Shield, and BioMap.

BlueRun Ventures has been ranked #1 on Zero2IPO's "China Top 30 Early-Stage Investment Institutions" and ChinaVenture's "China Best Early-Stage Venture Capital Institutions TOP30," and was named among Preqin's Top 10 VC fund managers globally for sustained high returns.

The firm has also received consecutive year-over-year recognition from Forbes China, 36Kr, Cyzone, Caixin Media, CBNweekly, Jiemian, and other media organizations as "China's Best Early-Stage Firm of the Year," "China Top Venture Capital Firm," "Most Entrepreneur-Friendly Early-Stage Firm of the Year," and "Most Influential Early-Stage Firm of the Year."