A new report from PriceWaterHouse Coopers (PwC) says the value of global renewable energy mergers and acquisitions jumped 40 percent from $38.2 billion in 2010 to a record high of $53.5 billion in 2011.
The report, “Renewables Deals: 2012 Outlook and 2011 Review,” says much of 2011’s deal activity was due to the renewable energy industry “undergoing a growing maturity and consolidation phase.” This trend indicates that deal activity will remain significant in 2012, but depends on how the European Union financial crisis unfolds.
Wind, Solar, Biomass, Energy Efficiency Deals Outnumber Hydro 7:1 in 2011
In addition to the sheer volume of deals in 2011, the type of renewable energy mergers and acquisitions was also notable. Hydropower has historically dominated the renewable energy deal sector, but “big deals” of $1 billion dollars or more have now become more common in wind, solar, biomass, and energy efficiency. For the first time, deals in these four fields topped the list of overall renewable deals, and outnumbered hydropower seven to one.
Solar and energy efficiency, in particular, had a banner year in 2011. Deal value nearly doubled from 2010 in these two sectors, and accounted for nearly 80 percent of the total $15.3-billion value increase. Solar jumped from $10.7 billion in 2010 to $15.8 billion in 2011, and energy efficiency jumped from $3.7 billion in 2010 to $10.1 billion in 2011.
Renewable Energy Deals Vary Greatly by Region
Interestingly, deal trends differed dramatically between North America and Europe. Total European deal value rose 80 percent to $30 billion dollars, but fell 5 percent in North America, led by a 35 percent decrease in wind energy mergers and acquisitions. PwC attributes this decline to low natural gas prices and continued uncertainty over the extension of U.S. incentives like the Production Tax Credit.
2012 May Not Be a Bright Year
Expanding Chinese solar photovoltaic manufacturing may also reduce the outlook for deals in 2012. The glut of supply is not only reducing solar PV prices, but could also reduce the number of major solar manufacturers:
“It is not just US and European manufacturers who are experiencing growing pains. Some Chinese manufacturers face heavy debt and are coming under competitive strain. There is significant overcapacity in China. The result is likely to be a succession of tie-ups within and between the main manufacturing territories of the US, Germany and China leading to a smaller number of big global players.”
India a Solar Savior?
Much of this oversupply could be taken up by India, however. The report predicts the Indian solar market could reach 1.2 gigawatts (GW) by 2015 as it moves toward a national target of 20 GW of solar power by 2022.
Additional activity in the renewable energy sector may be driven by the Fukushima nuclear meltdown. After the disaster, several countries have pulled back plans for new nuclear power investment, and renewables could take up the slack. “The consequent reappraisal of nuclear energy has boosted the importance of renewable generation in many countries’ energy strategies,” says the report.
EU Financial Crisis Could Have Big Impact
Ultimately, the key to renewable sector deals in 2012 may be held by the EU’s financial crisis. Austerity measures have already forced solar powerhouses like Spain and Germany to end or reduce their popular renewable subsidy programs, and could cause contraction in new financing.
“A climate of ‘rolling uncertainty’ looks set to continue through 2012 in the absence of sustained growth signals or strong leadership from policy makers …financing might become scarcer and worries about energy affordability could combine with stretched public financing to weaken policy support for the sector.”
Silvio is Principal at Marcacci Communications, a full-service clean energy public relations company based in Washington, D.C.