Sorting Out Solar PV Downstream M&A

The volatile swings seen in the upstream part of the solar PV supply chain, from silicon to cell/module pricing, have been well documented. End-market demand and associated policies supporting it is also a roller coaster, with many key regions currently embroiled in what to do for 2012 and beyond.

Meanwhile, downstream sectors in the solar PV supply chain — those involved with financing, development, and installation — represent the final step in monetizing a solar PV project. Firms in this universe have created a fragmentation of pockets of niche specialists in key areas vs. full turnkey integrators (read: high-margin businesses), which also helps insulate against that upstream sturm und drang.

Investors — both VC and firms seeking expansion via M&A — are paying more attention to the downstream side of the industry (see graphic below), seeking to spawn more innovation and leaner business models. Downstream start-ups, led by SolarCity, SunRun, Recurrent Energy, SunEdison, and Solar Power Partners, have raised over $1 billion. (Note that Solyndra raised a billion on its own, in headier times for all involved.) This is “setting up a battle between cleantech industrialists and general contractors/self-funded construction industry veterans,” Lux Research claims in a new study.

Conclusions from the study are bracketed into three categories of developers and installers:

  • Residential: SolarCity dominates this crowded market, but its expansion into the Northeast won’t be easy. SunRun is building its partner roster, and the Alteris-Real Goods merger creates another strong player.
  • Commercial and utility-scale: Tioga and Enfinity lead a group of new large-scale developers, but this sector has few up-and-coming players. Acquisitions of Recurrent, SunEdison, and SPP have concentrated large-scale development to larger companies or vertically integrated suppliers (First Solar, SunPower).
  • High-potential startups: An influx of venture capital is spawning “a burst of entrepreneurial activity” and a “steady stream” of startups. Solar installers were prominent in Inc. Magazine’s 2011 list of the 50 fastest growing US companies: Greenspring Energy, re2g, SunDurance Energy, OnForce Solar, and FLS Energy.

 

Downstream M&A activity has remained high since MEMC bought SunEdison in Nov. 2009. (Source: Lux Research)

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Jim is Contributing Editor for RenewableEnergyWorld.com, 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, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 17 years of experience in producing websites and e-Newsletters in various technology markets.

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