Solar venture investments hit a three-year low in the second quarter, the Cleantech Group said Wednesday. According to Brian Fan, senior director of research for the group, solar startups in North America, Europe, China and India raised a total of only $113.8 million for the quarter, which is down 7 percent from $365.7 million in the first quarter and down 86 percent from $834.7 million in the year-ago quarter.
Another company, Greentech Media, released a report Tuesday finding a higher amount of solar investment: $333.4 million. (Read a story I wrote about the two industry reports here.) But even this amount would represent a decrease, Fan said, who added that solar venture capital has steadily shrunk for the last three quarters.
The main difference has been a lack of rounds above $100 million, he said. Those large deal sizes boosted the numbers in the third quarter of last year, when the solar funding reached $1.2 billion, as much as all the cleantech funding in the last quarter put together. The number of solar deals also has fallen steadily: 11 in the second quarter, compared to 15 in the first quarter, 19 in the fourth quarter of last year and 32 in the third quarter of last year. Investors are supporting the solar companies already in their portfolios, though not investing as much in new companies, Fan said.
Those investors may be waiting for some solar exits. The lack of exits, which are initial public offerings or acquisitions in which venture capitalists (hopefully) make money, is “a real issue” for the VC community, said Mark Jensen, a managing partner at Deloitte & Touche. “This has created a real liquidity problem, and [VCs are] sitting on portfolios a lot longer than they had planned or than they had traditionally done. This is causing them to go at a much slower pace than they traditionally have, and they are basically waiting to see what direction things are going to go.”
Solar investment does to be cyclical. The industry first saw a wave of investment in traditional silicon-based cells and panels, then in silicon wafers and polysilicon, Fan said. The last quarter of 2007 saw a wave of big investments in solar-thermal technologies. Meanwhile, the bulk of the money in the last few years has gone to thin-film solar technologies, and investors probably feel there has been enough investment in copper-indium-gallium-deselenide technologies for now, Fan added.
Still, three quarters of decline definitely sounds like more is going on than the regular quarter-to-quarter fluctuations, Jensen said.
That said, interest in solar is definitely alive, he said. For one thing, utilities are buying into solar technologies, he said. Utilities signed power-purchase agreements for a total of 3.3 gigawatts of solar-thermal capacity in the first half of this year, as well as 359 megawatts of photovoltaic capacity, he said.
Jensen added that it will be interesting to see if the solar industry gets another surge in venture activity around the first quarter of next year. Why then? That would be about 18 months after the spike it saw in the third quarter of last year, and venture capitalists would normally expect to see funded companies looking for more capital around that time, he said.