CleanTechnica is the #1 cleantech news & analysis site in the world. Subscribe today!The future is now.

Clean Power

Published on January 8th, 2015 | by Silvio Marcacci


Global Solar Investment Surged An Incredible 175% In 2014

January 8th, 2015 by  

Solar energy has emerged as one of the best options to meet growing power demand while cutting emissions, but has it also become one of the best options to generate investor returns without volatile financial risk?

The answer is a resounding yes, according to Mercom Capital Group, which tallied $26.5 billion in solar project investment from corporate funding sources during 2014.

That’s an astounding 175% increase over 2013, when Mercom counted just $9.6 billion. “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,” said Raj Prabhu, Mercom CEO.

Superfund solar farm in Indianapolis

Solar Investment Surges, Led By Venture Capital

Venture capital funding was far and away the biggest contributor to solar’s financing surge. Developers secured more than $1.3 billion in 85 deals, more than twice the $612 million raised in 98 deals during 2013, and the highest amount since 2011.

Downstream solar companies (i.e. solar installers and direct consumer distributors) attracted the largest chunk of VC dollars by pulling in $1.1 billion across 44 deals. Sunnova Energy netted nearly half this amount with $505 million, followed by Sunrun with $150 million, Renewable Energy Trust Capital with $125 million, Sungevity with $72.5 million, and GlassPoint Solar with $53 million.

The remaining investments were split between solar photovoltaic (PV) technology companies ($75 million in 12 deals), balance of system companies ($73 million in 7 deals), concentrated solar power companies ($59 million in three deals), and thin film solar companies ($52 million in nine deals). “The big story coming out of 2014 was the revival of capital markets,” said Prabhu.

Indeed, this growing variety of funding sources is an important trend. Beyond the VC increase, financing activity increased in nearly every other sector:

  • Public markets set a record with $5.2 billion across 52 deals in 2014, nearly twice 2013’s $2.8 billion in 39 deals.
  • Debt financing more than tripled to $20 billion in 58 deals, compared to $6.2 billion across 38 deals in 2013.
  • 34 residential/commercial solar project funds worth $4 billion were announced in 2014, 21% higher than 2013’s $3.3 billion.
  • More solar mergers and acquisition transactions were completed last year than any year since 2011, with 116 transactions involving 96 companies.
  • 4 gigawatts of large-scale solar projects changed hands in 2014, up 38% year-over-year from 2013.
Top 2014 solar M&A deals

Top 2014 solar M&A deals chart via Mercom Capital

“Solar companies were able to access funding through multiple avenues like venture capital, public markets, IPOs and debt in record numbers while the quest for lower cost of capital continued with Yieldcos and securitization deals,” said Prabhu.

Stable Returns, Or Volatile Investment Risk?

Beyond merely increasing returns by expanding installed renewable energy capacity, solar funding’s surge underlines the growing allure of clean energy to hedge investments against volatile fossil fuels.

By their very nature, renewables are a safer investment than fossil fuels. Once a solar project is built, it generates consistent revenue to pay down defined costs over time, especially if the project is selling power through long-term power purchase agreements. The commodity used to generate power – sunlight – is free and investors can bank on stable returns.

Now compare renewables to fossil fuels. While the same long-term payback equation is similar, in that total project costs are known once it’s completed, the commodities used to generate power (and thus ongoing revenue) are wildly volatile and subject to market forces.

Stock market

The United Nations recently said falling oil prices show the “high risk” of fossil fuels compared to renewable energy. Consider the nearly $200 billion in debt U.S. oil and gas producers have racked up during the shale boom now at risk of default as oil prices plunge – an estimated $11.6 billion potential loss from junk bonds alone.

Don’t Forget About The Carbon Bubble

Price volatility doesn’t even get to the long-term risk of fossil fuel investments, namely climate change. A new study shows 82% of the world’s coal reserves must stay in the ground to prevent dangerous climate change, while financial analysts HSBC say 40-60% of total oil and gas market capitalization is at risk from the carbon bubble. As a result, major institutions are starting to shift toward fossil fuel divestment to minimize exposure.

Renewables have faced misperceptions about financial viability for years, and investment risk is one of the biggest criticisms facing the divestment movement. But neither of these themes can persist if we’re truly going to transition to a clean energy economy. Good thing then, that Mercom just highlighted more than 26 billion reasons both are wrong.

Complete our 2017 CleanTechnica Reader Survey — have your opinions, preferences, and deepest wishes heard.

Check out our 93-page EV report, based on over 2,000 surveys collected from EV drivers in 49 of 50 US states, 26 European countries, and 9 Canadian provinces.

Tags: , , , , , , , , , , , , , , , ,

About the Author

Silvio is Principal at Marcacci Communications, a full-service clean energy and climate policy public relations company based in Oakland, CA.

  • Steve_R

    Thanks. Will check it out.

  • Matthew

    Great article. Very detailed.

  • JamesWimberley

    This is incomprehensible without a clear distiction between investment in the solar supply chain – R&D, manufacturing, installers – and solar generation projects. The former is risky and cyclical; the latter safe and unexciting. They attract completely different sorts of investors.

  • Martin

    What a difference a few decades make, in the late 70’s a US start up tried 20 Venture Capital companies and did not get one cent.

    • Kyle Field

      Heck, what a difference 5 years make. Panels have dropped in price significantly in that time. I just picked up 15 X 250w panels for $1.09/watt including shipping and tax…and I get 30% back when I get them installed. That’s the price for just the panels…but still super cheap vs just a few years ago.

  • Kyle Field

    Just picked my recent investment up from the place I had them shipped to: 15 x Trina 250w panels 😀 😀 Won’t have funds to get the rest of the supplies for them for a few weeks but glad to have the bulk of the purchase (and most awkward to ship) at home in the garage 😀

  • Steve_R

    “renewables are a safer investment than fossil fuels. Once a solar project is built, it generates consistent revenue to pay down defined costs over time, especially if the project is selling power through long-term power purchase agreements. The commodity used to generate power – sunlight – is free and investors can bank on stable returns.” OK, so which companies do I invest in to get these stable returns?

    • spec9

      Various bond funds & yield cos. There are lots of them.

      • Steve_R

        Cool. Know any? How do I find them?

        • johnBas5

          In my country, you have to be an accredited investor to get in on the action of the good ones. Basically you have to be rich.

        • WVhybrid

          You dont have to be rich to buy yeildco stocks. Talk to your broker. Use Goggle. There are about 10 different companies.

          • Steve_R

            Yeildco stocks. Thank you, that’s what I was looking for. Now that you wrote the term I see it was mentioned in the article, but it didn’t jump out at me.

    • Will E

      the returns are stable and high. there are billions invested and many billions will follow.
      fossil is in the bag.

      • Steve_R

        That’s wonderful. How do I as an investor get these safe stable returns?

        • Ronald Brakels

          You put solar panels on your roof.

          • Steve_R

            Yeah that’s good. I already have them. But that’s not what the article was referring to: ” “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,” I’m just trying to find out what they are referring to. Don’t harsh me.

          • Ronald Brakels

            Ah, that’s a tough one. To me, thanks to the low barriers to entry, solar PV looks to be one of those things which is a huge boon to consumers but only offers normal profits to capital. But maybe some of that consumer surplus can be skimmed off by solar leasing or something.

          • Larmion

            While not solar, you could look at wind farms being built near you. Most, at least here in Europe, sell a significant stake(10-20%) to retail investors in the area. Returns are good and risks low. Perhaps solar farms offer similar opportunities to local residents.

            I’m not sure if the practice is common in the US, but its worth looking into.

    • Doug Cutler

      Then, at the end of your 20yr PPA you have a fully paid off solar plant still producing with 80%+ efficiency from new and with $0 fuel costs. Your only expense will be minimal upkeep. Close to free energy.

    • RobMF

      Given the fact that the oil price drop is no material threat to solar but market sentiment has taken these stocks down, now would be a good buying opportunity.

      If you are looking for more steady profits, choose solar firms that do installation, leasing, financing and projects. Integrated firms like Solar City and SunPower are good options. Pure panel manufacturers like Trina will tend to be more volatile as they essentially rely on demand for panels — a subset that can perform like a commodity. You may also look at the companies that own and build solar gardens, solar parks, and micro grids. There is one rather solid Hong Kong firm that does this (I think it’s SunTech, but you may want to double check as I’m away from my desk).

      Also take a look at the new solar and wind IPO SolWind.

      Just some thoughts.

      • Steve_R

        Thanks I’ll take a look.

Back to Top ↑