Total corporate funding, including venture capital/private equity (VC) funding, public market, and debt financing, in the solar sector reached $16.6 billion in the first half of 2024, marking a 10% year-over-year (YoY) decrease from $18.5 billion.

Despite this decline, the number of deals increased by 9%, with 87 deals in 1H 2024 compared to 80 deals in 1H 2023.

The numbers were revealed in Mercom Capital Group’s newly released 1H and Q2 2024 Solar Funding and M&A Report.

“Financing activity in the solar sector remains restrained despite tailwinds from the Inflation Reduction Act and favorable global policies. High interest rates, an uncertain rate trajectory and timeline, increasing trade barriers, and supply chain challenges have created an unpredictable and uncertain climate. This has slowed down development, investments, and decision-making,” said Raj Prabhu, CEO of Mercom Capital Group.

In the first half of 2024, VC funding dropped by 29%, raising $2.7 billion across 29 deals, compared to $3.8 billion from 33 deals in 1H 2023. However, Q2 2024 saw a 29% YoY increase in global VC funding, with $2.2 billion raised in 16 deals, up from $1.7 billion in 15 deals.

Solar downstream companies led the financing activity with 24 deals worth $2.5 billion in 1H 2024.

The top VC deals for 1H 2024 included $650 million raised by Pine Gate Renewables, $520 million by Nexamp, $400 million by Doral Renewables, $325 million by MN8 Energy, and $200 million by ENVIRIA.

In total, 96 VC investors participated in solar funding in 1H 2024.

Prabhu commented on the market dynamics: “The market has not recovered yet. VC funding increased in the second quarter, but public market funding was down, and debt funding was up. Interest rates and uncertainty remain high.”

He also highlighted the political and economic factors affecting the market, “There’s nervousness in the U.S. regarding upcoming elections and potential policy changes. Analysts predict little policy change regardless of election outcomes, but the market is mostly taking a wait-and-see approach.”

Solar public market financing in 1H 2024 totaled $1.7 billion from eight deals, a 75% decrease from $6.7 billion in 14 deals in 1H 2023. Conversely, solar debt financing reached $12.2 billion across 50 deals, a 53% increase from $8 billion in 33 deals in 1H 2023, marking the highest 1H total for debt financing in a decade.

Additionally, 1H 2024 saw eight securitization deals totaling $2 billion, a 5% YoY increase compared to $1.9 billion from seven deals in 1H 2023.

There were 40 solar M&A transactions in the first half of 2024, down from 48 in 1H 2023. The largest deal involved Brookfield Asset Management and institutional partners, including Brookfield Renewable and Singapore’s Temasek Holdings, acquiring a 53.12% stake in Neoen, a solar, wind, and energy storage project developer, for $6.54 billion.

In 1H 2024, 113 solar project acquisitions totaling 18.5 GW were recorded, compared to 116 acquisitions totaling 25.5 GW in 1H 2023.

 Project developers and independent power producers (IPPs) were the most active acquirers in Q2 2024, with 3.4 GW acquired, followed by other companies (insurance providers, pension funds, energy trading companies, industrial conglomerates, and IT firms) with 1.6 GW. Utilities acquired 1.3 GW, investment firms 1.2 GW, and oil and gas companies 250 MW.

Looking ahead, Prabhu emphasized the potential impact of a Fed rate cut. “A potential U.S. Federal Reserve cut could ease market frustrations and jump-start financial activity. Corporate and project M&A have consistently been down due to high borrowing costs. While the Inflation Reduction Act provides incentives, it also creates logjams with interconnection and supply chain issues, causing project delays. These delays create uncertainty for investors regarding returns.”

“Recent inflation readings have been trending down, and predictions suggest that the Federal Reserve might cut interest rates in September, potentially marking a turning point for the sector. Lower interest rates reduce borrowing costs, allowing stalled projects to proceed.”

The comprehensive report covers 258 companies and investors, spans 96 pages, and includes 75 charts, graphs, and tables. For more information, visit Mercom’s Solar Report.