The third quarter of 2016 was strong for the solar industry, raising $3 billion in investments across all its segments, nearly double the $1.7 billion raised in the second quarter of the year. However, Mercom Capital’s Q3 2016 Solar Funding and M&A report observed that for the year of 2016, investments are still down compared to 2015.
There are a number of reasons for the drop in investments in the industry, among them the expected end of the Investment Tax Credit in the US, which was set to end at the end of 2015 and would have dramatically reduced the development of solar throughout the US for years. However, it was extended in a last-minute deal, which is expected to have some lowered impact on the market in the US in 2016 and 2017 since companies aren’t as concerned about making the final deadlines that were previously in place, but not as dramatic as ending the rebate.
"Funding levels bounced back across the board compared to a weak Q2, but they are still well below last year's totals,"explained Raj Prabhu, CEO and co-founder of Mercom Capital Group. "The combination of slower than expected US demand, the overcapacity situation coming out of China, and global hyper-competitive auctions leading to lower margins has affected the entire supply chain and most of the solar equities are in the red year-to-date. The exception has been the rebound of some of the yieldcos.”
Indeed, the report found public market financing for the solar industry, which includes yieldcos, came to $880 million in five deals up from $179 million in four deals in the previous quarter.
The report found that there were a total of 45 deals across the industry, including corporate funding, including venture capital and private equity (VC) funding, public market and debt financing. That’s compared to 32 in the second quarter.
Highlights for the industry included global VC funding which almost doubled to $342 million across 16 deals in the quarter and growth in downstream companies, which raised $273 million in the quarter in eight deals compared to $112 million in seven deals in the previous quarter.
New funding deals for the residential and commercial solar markets fell to $1.1 billion in five deals compared to $1.4 billion in 11 deals in the previous quarter, the report found.Tweet