Reflecting on Stem’s journey in 2023, we have made tremendous progress in executing our vision to accelerate the clean energy transition. We continue to deliver increased value through Athena®, our AI digital platform that helps our customers navigate the ever-changing energy landscape. Our achievements over the last 12 months resulted from strong relationships with our suppliers and channel partners and, most importantly, from our investment in our people and technology.
We are proud of our achievements in 2023, which include:
- New product launches, including Athena® PowerBidder™ Pro for wholesale energy markets
- Multiple third-party awards from industry experts
- Strong sales momentum, with record Bookings and Backlog
- New commercial success, such as our SB Energy agreement
- Improved financial results, as we drive to EBITDA positive in 2024
We are working to stabilize the grid with an aggregate capacity under management that rivals even the largest utility footprint in operation today. Today, over $40 billion of solar and storage assets rely on Stem’s AI software for optimization and operational management. We are one of the leaders in the industry, with 5 gigawatt hours (GWh) of contracted storage assets under management (AUM) and 26 gigawatts (GW) of solar AUM.
Below is a summary of some of the significant accomplishments from 2023 that will further strengthen our position as a software leader in the renewable energy and climate technology sector next year.
Navigating a Complex Macro Environment
The past year wasn’t without challenges. Crosscurrents impacted the renewable energy industry, including supply chain constraints, permitting and interconnection delays, rising interest rates, and commodity price volatility. Utilities — like in Texas — are grappling with how to best balance energy needs against rising electricity costs, natural disasters, demand peaks, and integrating more renewable energy sources.
Meanwhile, the myriad of federal and state incentives, tariffs, tax credits, and penalties continue to evolve as regulators and policymakers balance the need to meet energy demand with decarbonization goals. In particular, the industry continues to monitor the implementation of (1) the Inflation Reduction Act (IRA), which has provided long-term visibility into improved renewable energy economics and (2) a rulemaking from the Federal Energy Regulatory Commission (FERC), which should improve interconnection timelines.
Stem will continue to help our customers navigate these challenges and opportunities to deliver products and services that maximize their speed to market and return on capital, while preserving and growing our own profitability.
Delivering New AI-driven Solutions to the Market
Stem is at the intersection of AI and decarbonization – two megatrends driving economic growth and productivity that are changing how most of the world operates. While there has been a lot of buzz around AI, many AI technologies are not new, and certainly not new to Stem. Athena has used predictive AI for over a decade to enhance its simulation, forecasting, and optimization analytics – as recognized by Renewable Energy World. Our industry-leading solutions enhance our customers’ efficiency and productivity, which I recently discussed in the Innovation and Leadership podcast.
We continue to introduce new products that extend our technology leadership position. In September at RE+, the largest renewable energy conference in North America, we launched our Athena PowerBidder Pro application to help energy professionals actively manage clean energy assets with confidence, control, and scalability. Asset owners, traders, and tolling offtakers can leverage PowerBidder Pro’s AI-driven automated bid optimization workflows to successfully bid into the fast-paced, highly competitive wholesale energy markets. We are excited to see strong customer interest in this offering with multiple GWhs in the pipeline across various markets. The industry is taking note as well — Frost & Sullivan awarded Stem with the New Product Innovation Award for Energy Asset Performance Optimization, highlighting PowerBidder Pro as a key differentiator.
We will continue to leverage the latest advancements in AI, including new generative AI tools, which we are integrating into our asset management capabilities and software code development. These new tools will improve the user experience for customers and drive increased development productivity that will accelerate the execution of our software roadmap. Our data advantage continues to improve our machine learning algorithms, with 30+ million runtime hours on Athena driving better results for our customers.
Ultimately, our customers benefit from better economic outcomes on their clean energy assets by using Stem. In the Electric Reliability Council of Texas (ERCOT) wholesale power market, our simulation work indicates Athena can drive a potential 10-40% uplift versus competitive storage software offerings. And in New England, Athena has generated 90% higher storage revenues lifetime to date versus our initial forecasts. Our solar software customers continue to benefit from increased uptime via our PowerTrack application, which we have enhanced with our new Event Manager feature.
Stem’s innovative technology leadership was also recognized by others throughout 2023. Athena was honored as the Best Predictive Analytics Platform by AI Breakthrough. Wood MacKenzie acknowledged Stem as the largest storage Virtual Power Plant (VPP) operator in North America, managing 3+ GWh across 14 different VPPs with Athena.
Utility-scale Expansion Across Top Markets
Industry analysts continue to expect robust growth in renewable energy in the coming years, particularly utility-scale deployments, and we are well-positioned to serve this exciting market. In energy storage, 66+ GW are expected to come online through 2027 in the United States, 83% of which will be utility-scale according to pv magazine. In solar, the US installed more solar this year than ever before; with some forecasts indicating 55% growth over 2022.
In particular, our early work with municipalities and electric cooperatives has yielded strong results, with more than $1 billion of signed projects that translate into approximately 15% market share in this fast-growing segment of the market. In August, we announced a 313 MWh battery storage agreement with Ameresco that will serve one of the fastest-growing electric cooperatives in the nation. In October, we announced a 23 MW solar + 60 MWh storage project to be optimized by Athena for Mohave Electric Cooperative in Arizona.
In November, we announced that SB Energy, a leading utility-scale renewable developer backed by SoftBank and Ares, has selected Stem as its preferred energy management system partner. SB Energy is developing a 10 GWh energy storage pipeline across North America, including California and ERCOT, over the next five years. Under this software- and services-only agreement, Stem will also help SB Energy develop capabilities to deliver 24/7 renewable energy to its customers. SB Energy is the first to qualify for the IRA’s domestic content incentives.
Stem was also critical in developing a community storage site with NineDot Energy where Athena co-optimizes multiple value streams, including New York’s Value of Distributed Energy Resources (NY VDER) tariff. This collaboration showcases the value of our AI-driven technology in the New York market where we anticipate having 700+ MWh under Athena control in the coming years.
Globally, we announced our operational support of a 304 MW project in Hungary with EXTOR Energy using Athena and our SCADA solution to monitor and optimize the country’s largest solar power plant. Our solar business continues to recover from a difficult 2022 with record revenues and backlog as well as continued high software renewal rates with low churn.
Strong Financial Footing for Next Phase of Growth
Our leading products and services have translated into strong financial results. We posted record Bookings of $654 million in the third quarter, which brought our Contracted Backlog to a record $1.8 billion, up 125% versus the same time last year. Our Contracted Annual Recurring Revenue (CARR), which represents the high-margin software portion of our business, reached a record $88 million, and we expect to exit the year with $90-$95 million of CARR.
In March, we executed on an opportunistic $240 million debt financing which strengthened our balance sheet, increased our financial flexibility, and extended our debt maturity. And we have remained disciplined on our operating expenses, driving cash opex as a percentage of revenue down every quarter this year.
We have consistently reaffirmed our plan to reach EBITDA positive in the second half of 2023, a goal we established at our Investor and Analyst Day in September 2022. We expect to be EBITDA positive for the full year 2024 and will provide more details on our 2024 financial guidance with our fourth quarter earnings release in February.
Investing in People to Meet Customer Sustainability Goals
Despite today’s volatile business environment, the renewable energy and climate tech sector is thriving. Based on our proprietary survey, the Fortune 1000 continues to expect to invest in sustainability despite economic uncertainties. As a leader in the sector, we continue to attract and retain talented, forward-thinking people who will help us achieve our mission: to maximize the economic, environmental and resiliency value of energy assets through our leading AI / digital platform.
As we scale into 2024, our India team will help streamline our global operations and enable exceptional service for our customers in critical areas such as software development and data science. With premier academic institutions and the fourth-largest renewable energy installed capacity in the world, India is a hub for top technical and renewable energy talent. We are harnessing that collective innovation and energy expertise via our new India Center of Excellence.
From a sustainability perspective, we are driving improved data collection and analysis of our environmental footprint. Over the long-term, we strive to become a leader in Environmental, Governance, and Sustainability (ESG) and plan to report on our ESG progress in our inaugural Corporate Sustainability Report next year.
Looking Forward to 2024
The momentum we have built in 2023 will drive progress in 2024 and beyond. We will continue to lead with technology, creating innovative solutions that generate differentiated economic, environmental, and resiliency results for our customers. We plan to expand our offerings and partnerships to scale clean energy portfolios across the US and globally. And we will remain financially disciplined to drive growing cash flows for our investors, while still investing in technology to maintain our leadership advantage.
The future is bright for Stem as our technology helps shape the landscape of tomorrow to create a sustainable energy future for all.
