The total global corporate funding in the solar sector during the first half (1H) of 2023, including venture capital (VC) investments, public market funding, and debt financing, reached $18.5 billion, a 54% year-over-year (YoY) increase from $12 billion.

The numbers were revealed in Mercom Capital Group’s newly released 1H and Q2 2023 Solar Funding and M&A Report.

Despite the surge in funding amounts, there was a 12% YoY decline in the number of deals executed. During 1H 2023, 80 deals took place in contrast to the 91 deals recorded during the corresponding period in 2022.

Raj Prabhu, the CEO of Mercom Capital Group, noted that despite the challenging financial market conditions and high-interest rates, the solar industry demonstrated resilience throughout the first half of the year.

“We have witnessed positive trends in private equity, public market, and debt financing. These developments serve as promising indicators for the future. Notably, the current momentum is bolstered by the Inflation Reduction Act (IRA) and the global energy transition policies, which are moving forward with great urgency.”

“Demand due to the IRA is so strong that even interest rate-sensitive public market and debt financing in solar was up year-over-year. However, the lack of easy money affected M&A activity negatively”, Prabhu added.

Prabhu remarked that the scale of the IRA is enormous, with a massive budget of around $370 billion allocated towards energy security and climate change programs over the next ten years.

“These incentives are comprehensive and span beyond manufacturing and generation, encompassing the entire energy supply chain. Certain domestically made components are incentivized, further bolstering the program’s scope. Notably, the speed at which things are progressing is remarkable, with approximately 50 manufacturing facilities being announced within less than a year of the IRA’s implementation. This rapid development is monumental,” Prabhu noted.

In terms of attracting investments from VC funding, the solar downstream companies dominated the landscape. These companies secured a substantial share of the funding, with 17 deals amounting to an impressive $2.5 billion in the first half of 2023.

According to the Mercom report, global VC funding activity experienced a modest 3% YoY growth in 1H of 2023. The data reveals that a total of $3.8 billion was invested across 33 deals during this period, compared to $3.7 billion spread across 53 deals in 1H 2022.

Prabhu observed that the solar market’s attractiveness overshadowed other challenges and said, “In the midst of a challenging economic landscape, global industries are experiencing a decline in VC investment, except for two sectors: AI and Cleantech. These areas remain attractive to VC investors, demonstrating immense potential.”

The top VC deals in 1H 2023 were: $471 million raised by 1KOMMA5°, $375 million raised by Silicon Ranch, $360 million raised by CleanMax Solar, $325 million raised by Amarenco, and $250 million raised by Amp Energy India.

A total of 134 VC investors participated in funding for solar projects in 1H 2023.

Prabhu said the future of clean and renewable energy is undeniable, with both developed and developing countries well on the energy transition path.

Pointing out how developing countries can benefit from this energy transition, Prabhu cited an example of opportunities in parts of Africa and Asia, where distributed solar solutions can bypass the need for complex and costly grid transmission infrastructure.

However, the key lies in translating energy transition goals into actionable policies and creating a conducive environment for investment.

According to Prabhu, policy stability and consistent execution are crucial to attracting the billions and trillions of dollars that can flow into these nations.

The solar sector witnessed a substantial increase in public market financing in 1H 2023. A total of $6.7 billion was raised through 14 deals, representing an impressive 103% surge compared to the $3.3 billion generated from eight deals in the corresponding period of 2022.

In 1H 2023, there were 48 solar M&A transactions, down from 53 in 1H 2022. The largest deal was Brookfield Renewable’s acquisition of Duke Energy’s U.S. commercial renewables business for approximately $2.8 billion.

Additionally, 116 project acquisitions were made for 25.5 GW of solar projects in 1H 2023, compared to 148 acquisitions for 37.8 GW in 1H 2022.

The report encompasses a comprehensive coverage of 187 companies and investors. It spans 98 pages and includes 84 charts, graphs, and tables. For additional information regarding the report, please visit the following link: https://mercomcapital.com/product/1h-q2-2023-solar-funding-ma-report/