The World's #1 Renewable Energy Network for News, Information, and Companies.

VC Funding in Renewable Energy: Tracking the New Normal

Clean energy investments worldwide slid 22 percent in 1Q13 to $40.6 billion, their lowest level in four years, according to Bloomberg New Energy Finance (BNEF). The biggest declines were in the U.S. (54 percent), Europe (25 percent), and China (15 percent), while investments in Asia were robust: $8.2 billion in Japan, and the rest of Asia ex-India and China increased 47 percent to $10.1 billion. Asset finance (equity, debt, and balance sheet funds) for utility-scale projects dropped off 34 percent to $19.3 billion. VC and private equity (PE) funds fell 29 percent year-on-year to $1.3 billion.

Many significant support programs have been launched in the past 18 months following the global financial crisis, and clean energy activity has remained active in terms of megawatt capacity, if not dollar terms, noted Michael Liebreich, chief executive of Bloomberg New Energy Finance. "For investment in clean energy to play its role in stemming the growth in world emissions, we would need to see investment levels at least double by 2020, rather than fall." He also noted that the first calendar quarter is typically weak after a year-end rush of banks and investors closing deals.

New investment in clean energy by asset class in US $B, 1Q04-1Q13.

Specifically looking at the solar sector, global VC investments continued their multi-quarter slump in 1Q13, sliding to $126 million across 26 deals, says Mercom Capital Group. That's down from $220 million in 27 deals in 4Q12, and the second-lowest quarter for VC funding since 2008 — compared to around $300 million or more per quarter during the peak solar investment years of 2010 and 2011. The number of deals closed has remained roughly the same, though, in the mid-to-high twenties or low thirties, meaning investors are a lot pickier about investments with lower risk and higher upside in IP. "It looks like this is the new normal," said Raj Prabhu, Mercom's CEO.

Two trends emerge from Mercom's analysis of solar investments:

1) VCs are losing their appetite for solar technology plays, and thin-film in particular. Downstream companies pulled down the most VC funding of any category in 1Q13, raising $75 million in eight deals; within that downstream group are mostly solar leasing firms ($58 million), no surprise given the activity in the U.S. third-party financing/solar leasing companies raised $463 million in disclosed residential and commercial projects during the quarter.

Thin-film, on the other hand, had $25 million over six deals in 1Q13. Not much of a surprise there either; after 14 thin-film companies went bankrupt in 2012. After years of cyclic funding heavily into thin-film technologies, VC firms are following the market into the downstream and solar leasing sectors. (Which itself is interesting, since the VC community has generally been viewed as a forward indicator, investing where it sees future success and profitability to the industry, and themselves. "Now they're kind of lagging behind," Prabhu observed.)

2) Investors are getting comfortable with large-scale solar projects in high-growth regions. In India, China, and Chile, it's not easy to get information on financing activity, as a lot of it isn't publicly disclosed, Prabhu explained. "It's always a problem in emerging markets to get large projects funded," he explained. But it's increasingly clear that larger-scale projects, and investor backing for them, are gaining momentum in those areas and getting investor green-lights. "In India, we've never seen $100 million solar project funding transactions," he said. "To us that's a leading indicator: if that can get done in India, banks have crossed a threshold and are now comfortable" with large-scale solar investments. The same thing is happening in Chile, and even in Japan where "we're seeing $300 million projects funded, that's never happened before," he said.

And this trend extends beyond project funding and into mergers & acquisitions as well, he added, pointing to MidAmerican Holdings leading the way for asset managers and funds. "The investment community is getting really comfortable with these projects. We don't usually see investment funds come in and buy solar assets; this wasn't happening two years ago," he said. Now it's considered a safe long-term investment, especially in the U.S., for insurance and retirement funds. If a project has a long-term PPA with a AAA-rated large utility, investors are happy to take a 6-7 percent return, he said. "As solar matures, we're seeing that happen: big money sitting out there, coming to work."


Understanding the Yieldco Structure for Renewable Energy Project Finance

Gregory F. Jenner, Edward D. Einowski and Adam D. Schurle, Contributors In the 1950s, the federal government sought to boost home ownership by increasing private lending. To this end, the government facilitated mortgage lending by creating Fannie Mae and Freddie Mac. They provided liquidity to ...

NHA Recognizes Five Companies as Outstanding Stewards of America's Waters

Five companies have been recognized by the National Hydropower Association as recipients of its Outstanding Stewards of America's Water awards program for positive excellence in recreational, historical, environmental or ed...

India's 330-MW Alaknanda Hydropower Plant Enters Commercial Operation

Indian infrastructure group GVK has put the first unit at its 330-MW Alaknanda hydropower plant into commercial operation, following synchronization with the country's northern grid earlier this month.

Marine Energy Sector Continues Growing Worldwide, Despite Economic Setbacks

A report released recently by the International Energy Agency's Ocean Energy Systems shows that the marine and hydrokinetic sector moved closer to commercial viability through 2014.
Jim is Contributing Editor for, covering the solar and wind beats. He previously was associate editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, ...


Volume 18, Issue 3


To register for our free
e-Newsletters, subscribe today:


Tweet the Editors! @megcichon @jennrunyon



Doing Business in South Africa – in partnership with GWEC, the Glob...

Wind Energy in South Africa has been expanding dramatically, growing fro...

CanWEA Annual Conference and Exhibition

The annual CanWEA Conference & Exhibition has helped companies marke...

CanWEA Winter Solstice Fundraising Dinner

CanWEA Winter Solstice Fundraising Dinner December 1, 2015 Toronto, Ontario


Six Fun, Unique Solar-Powered Gifts for Mom

Mother’s Day is only a week away. Have you decided what you’...

How Did the Top 10 Solar Cities Fare in 2014?

Solar installations are happening every three minutes in the US, so it s...

Why is GreenLancer Changing the World of Solar Designs? EVP Michael...

“Why does GreenLancer focus on changing the way Solar Designs are ...


Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now