A surge in solar sector investment-
Global private-sector investment in the solar industry soared 175 percent higher year-over-year in 2014, according to Mercom Capital Group's "2014 Solar Q4 and Annual Funding and M&A Report." Venture capital, private equity, debt and public market financing in the solar energy sector totaled $26.5 billion globally in the year just past as compared to $9.6 billion in 2013.
Venture capital (VC) investors returned to the sector with a vengeance, pouring $1.3 billion across 85 deals into solar energy companies and markets in 2014. That compares to $612 million across 98 deals in 2013 by Mercom's reckoning.
Highlighting recent trends, Mercom noted how quickly bank and investment group perceptions regarding the solar energy sector have improved. Access to a broader range of investors and capital market investment vehicles is driving down the cost of capital for companies across the solar energy sector, downstream finance and installation companies in particular.
A long way from speculative
“The solar sector has come a long way from being perceived as a speculative high risk investment to attracting investors based on low risk attractive dividend yields,” commented Mercom CEO Raj Prabhu.
“The big story coming out of 2014 was the revival of capital markets – solar companies were able to access funding through multiple avenues like VC, public markets, IPOs and debt in record numbers, while the quest for lower cost of capital continued with Yieldcos and securitization deals."
Corporate investments in the downstream solar energy sector accounted for 85 percent of VC funding in 2014. Vcs invested a total $1.1 billion across 44 deals in solar energy finance-and-companies last year, according to Mercom.
Corporate investors plowed $75 million across 12 deals into PV technology companies and an additional $73 million across seven deals into solar balance-of-systems (BoS) companies. Concentrated solar power (CSP) companies garnered $59 million across three deals, while thin-film PV companies attracted $52 million across nine deals.
VC investors spread their solar energy sector investments across five technology groups in 2014. The complete absence of VC investments in CSP and concentrated photovoltaic (CPV) technology companies was especially notable, according to Mercom.
VC investors put $279 million to work by investing in downstream solar energy sector companies. Sunnova alone raised $250 million of that total from Franklin Square Capital Investors and Triangle Park Partners.
Tanzania's Off-Grid Electric raised $16 million from Zouk Capital, Solar City and Vulcan Capital. Off-Grid has come up with a prepaid business model for financing of solar energy installations in Africa.
*Image credits: Mercom Capital Group