The total global corporate funding in the solar sector during the nine months (9M) of 2023, including venture capital (VC) investments, public market funding, and debt financing, reached $28.9 billion, a 55% year-over-year (YoY) increase from $18.7 billion.

The numbers were revealed in Mercom Capital Group’s newly released 9M and Q3 2023 Solar Funding and M&A Report.

Despite the surge in funding amounts, there was a 5% YoY decline in the number of deals. During 9M 2023, 124 deals were announced against 131 deals during the corresponding period in 2022.

“Despite grappling with inflationary challenges and the impact of elevated interest rates, the solar industry has displayed remarkable resilience throughout the initial three quarters of 2023. This resilience can be attributed to a strong global commitment towards achieving energy transition goals and substantial demand driven by the Inflation Reduction Act. These factors have enabled the sector to withstand persistent economic challenges and maintain its allure among investors,” noted Raj Prabhu, CEO of Mercom Capital Group.

According to the report, global VC funding activity saw a 4% YoY growth in 9M 2023. The data reveals that a total of $5.7 billion was invested across 51 deals during this period, compared to $5.5 billion raised across 72 deals in 9M 2022.

In terms of attracting investments from VC funding, the solar downstream companies dominated the landscape. These companies secured 28 deals amounting to $3.8 billion in the January – September period.

The top VC deals in 9M 2023 were: $471 million raised by 1KOMMA5°, $428 million raised by Enfinity Global, $375 million raised by Silicon Ranch, $360 million raised by CleanMax, and $350 million raised by Juniper Green Energy.

A total of 159 VC investors participated in solar funding in 9M 2023.

The solar sector witnessed a substantial increase in public market financing from January to September. A total of $7.2 billion was raised through 19 deals, representing a 47% surge compared to the $4.9 billion generated from 11 deals in 2022.

Announced solar debt financing activity experienced a 93% YoY growth. The data reveals that $16 billion was raised across 54 deals during this period, compared to $8.3 billion raised across 48 deals in 9M 2022.

Securitization deals experienced a 39% YoY growth in 9M 2023. A total of $3.2 billion was raised across ten deals during this period, compared to $2.3 billion raised across eight deals in 2022.

“Despite high interest rates, there has been a notable increase in solar debt financing. The solar industry’s huge potential and a clear understanding of incentives and provisions have encouraged investors and banks to support solar companies,” Prabhu said.

In 9M 2023, there were 75 solar M&A transactions, down from 90 last year. The largest deal was Brookfield Renewable’s acquisition of Duke Energy’s U.S. commercial renewables business for approximately $2.8 billion.

Prabhu explained that M&A activity has slowed down, especially on the project side. Many companies have relied on borrowing to fund M&A deals, and with elevated borrowing costs, they are now reconsidering their timelines for such transactions. This has resulted in some deals being pushed back or delayed as companies strategize for a more favorable financial environment.

He also noted that project acquisitions had been affected by interconnection delays, labor shortages, and stricter evaluation of deals.

“Despite these challenges, companies are hopeful that interest rates will stabilize and eventually trend down. As borrowing costs become more favorable, a renewed strength in investment activity is expected, leading to greater growth and development within the solar sector,” Prabhu noted.

In all, 166 project acquisitions were made for 31.6 GW of solar projects in 9M 2023, compared to 207 acquisitions for 52.1 GW last year.

Project developers and independent power producers were the most prominent purchasers of solar projects, securing 2 GW. Following closely behind were insurance companies, pension funds, energy trading companies, industrial conglomerates, and IT firms, collectively acquiring 1.6 GW. Investment firms completed acquisitions totaling 959 MW, electric utilities acquired 877 MW, and oil and gas companies obtained 759 MW of solar projects.

“As we look ahead to Q4, it appears that this year is shaping to be exceptionally robust, defying some initial low expectations influenced by financial conditions. It’s likely to emerge as one of the strongest years for funding and M&A activity,” Prabhu said.

The report encompasses a comprehensive coverage of 267 companies and investors. It spans 100 pages and includes 74 charts, graphs, and tables. For additional information regarding the report, please visit the following link:  https://mercomcapital.com/product/9m-q3-2023-solar-funding-ma-report/