Stem forges ahead with its move into SaaS

Over the course of the last year, energy storage company Stem Inc. has doubled down on the software side of its business, spinning out its AI-powered trading tools into a software-only offering: PowerBidder Pro.

The platform, released in September, is essentially a trading toolkit for asset owners and traders — a “do it yourself” version of Stem’s forecasting and optimization capabilities.

And this month, Stem announced two early software-only customers, the community choice aggregators Central Coast Community Energy and Silicon Valley Clean Energy, which will use PowerBidder Pro to bid three battery energy storage systems into the CAISO market.

• The top line: With two latest announced customers, Stem is expanding its software-as-a-service clientele to a segment it anticipates will be a strong customer base as it looks to boost recurring revenue and expand its market share in the power provider sector.
• The market grounding: According to comments on its latest earnings call, Stem has signed around 800 megawatt-hours of software-only contracts since the end of the 2023 fiscal year, and has restructured its leadership team to better focus on software-side product’s growth. However, CFO Bill Bush told investors, storage software revenue remained flat year-over-year, despite an increase in assets under management on the hardware side, due in large part to interconnection and permitting bottlenecks.

While Stem has historically provided commercialization optimization as a managed service — using its in-house price forecasting and bidding tools on behalf of customers — its latest evolution is a response to broader industry shifts, said Cedric Brehaut, vice president of cloud solutions.

“What we saw is really the market trend of these sophisticated customers wanting the tools to make some of these decisions on strategy themselves,” he said. “That’s the genesis of PowerBidder Pro: taking the AI forecasts, the optimization algorithms, and giving customers all the knobs and dials and the control so they can tailor it to their own particular strategy.”

PowerBidder Pro customers have dedicated resources and staff to manage dynamic assets, plus a trading function in-house, said Stem’s director of optimization solutions, Mike Alter.

“As more batteries get deployed in the market, there’s a real focus on being able to create differentiated trading strategies that align with an individual user’s priorities,” Alter told Latitude Media.

Stem’s latest partners, two new California CCAs, have dedicated teams of power resource experts, he added. They have slightly different use cases than other potential PowerBidder Pro users, because they have a responsibility to deliver electricity to customers. Other users like independent power producers or traders don’t have the same objectives.

Those CCAs represent Stem’s first utility-scale, software-only deployments in CAISO to date. But Alter said there’s room for substantial growth, in part because their dual needs to extract value and provide reliability make CCAs a “prime candidate” for the software solution.

The public power, municipal, and cooperative sectors are top priorities as Stem continues its rollout as a (part-time) SaaS company. To date, the company estimates it has cornered around 15% of the market for those combined sectors.

Moving forward, though, Stem will be narrowing in on public power customers who control both permitting and interconnection timelines. Those entities are key to Stem’s software strategy, CEO John Carrington told shareholders in February, because they have more autonomy and faster turnaround times.