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What yieldco finance can do for the solar industry

YieldCoFor years, the big news in solar has been coming out of research and development, from technical innovation. But in what appears to be a sign of the maturing of the industry, this year it seems that the bigger news is coming from the development of new methods of project finance that hold the promise of cutting financing costs.

The biggest of these driving forces in cutting financing costs is the yieldco. Yieldcos are essentially publicly traded holding companies which bundle assets that produce a steady and predictable flow of income, such as energy plants, that have long-term distribution agreements. The cash flow is distributed among investors in the vehicle as dividends.

Perfect for utility-scale solar PPAs

Yieldcos are almost perfectly suited to capturing the value of renewable projects. While they can face many uncertainties during bidding, permitting and development, once they are connected to the grid their cash flows are low-risk, because they typically generate a steady income from 20 or 25-year PPAs or tariffs, once in operation.

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Solar Q2 2014 Funding: $6.3 Billion

Corporate solar funding comes in at USD 6.4 billion in Q1

Solar Q2 2014 Funding: $6.3 BillionMercom Capital Group, llc, a global clean energy communications and consulting firm, released its report today on second quarter funding and mergers and acquisitions (M&A) activity for the solar sector in 2014.

Total global corporate funding in the solar sector, including venture capital (VC), private equity (PE), debt financing, and public market financing raised by public companies, came in at $6.3 billion, compared to $7 billion in Q1 2014. This quarter also saw two IPO’s including one yieldco and a securitization deal.

Raj Prabhu, CEO of Mercom Capital Group, commented, “It was a solid quarter for the solar sector in terms of fundraising. VC funding was up, public markets remained strong and we are seeing new and innovative financial structures. Residential/commercial solar funds continue to raise record amounts.”

VC

Global VC funding, including PE and corporate VC, in Q2 2014 totaled $432 million in 21 deals, up from $251 million in 26 deals in Q1 2014, mostly due to three large deals. Solar downstream companies attracted most of the VC funding this quarter, with $388 million in 10 deals.

The largest VC/PE deal in Q2 2014 was the $150 million raise by Sunrun, a provider of residential solar-power systems. Investors included Foundation Capital, Accel Partners, Sequoia Capital, Madrone Capital, and others. Sunnova Energy, a provider of residential solar services, raised $145 million. Other Top 5 deals included the $72.5 million raised by residential solar installer Sungevity, followed by Siva Power (formerly Solexant), a manufacturer of CIGS solar modules, which raised $15 million. Brite Energy Solar, a provider of residential and commercial solar services, raised $14.2 million.

Project Funding

There were 33 large-scale project funding deals totaling $3.5 billion announced in Q2 2014. The Top 5 large-scale project funding deals in Q2 2014 included the $820 million raised by Megalim Solar Power for a 121 MW CSP project in Israel, Tenaska’s $450 million raise for the development of the 150 MW Tenaska Imperial Center West solar project in California, the $290 million raise by First Solar for its 141 MW Luz del Norte solar project in Chile, the $190 million raise by SunEdison for the 72.8 MW Maria Elena solar project in Chile, and the $142 million raise by Abengoa for its 100 MW XiNa Solar One CSP project in South Africa.

Third-party Funds

Third-party residential and commercial solar funds continued to attract significant attention, with more than $1.3 billion raised in Q2 2014. SunPower topped the list, raising $492 million in three different funds; investors included Google, Admirals Bank and Hannon Armstrong Sustainable Infrastructure Capital.

Corporate M&A

There were 25 corporate M&A transactions in the solar sector in Q2, down from 38 transactions in Q1 2014.  Solar downstream companies were involved in most of the M&A transactions with 11.

The largest disclosed M&A transaction by dollar amount was the $350 million acquisition of Silevo, a solar cell and PV module manufacturer, by SolarCity. This was followed by the $29 million acquisition of Zhejiang Ruixu Investment Company, a solar project development company and wholly-owned unit of ReneSola, by Jiangsu Akcome Solar Science & Technology Company. Jun Yang Solar Power Investments, an independent power producer, acquired the remaining 32.1 percent of Jun Yang Holdings, from Sun Reliant International, a wholly owned subsidiary of Hanergy Solar, for $14 million. RBI Solar, a provider of solar mounting systems, acquired Renusol, a subsidiary of CENTROSOLAR Group, for $3.5 million. Rounding out the Top 5 was the acquisition by Jinzhou Yangguang Energy, a wholly-owned unit of Solargiga Energy, of an additional 10 percent stake in PV module manufacturer Jinzhou Jinmao Photovoltaic Technology from Kinmac Holding, raising its stake to 96 percent, for $2.2 million.

Project Acquisitions

Project acquisitions in Q2 2014 totaled $229 million in 34 transactions with 1.1 GW changing hands. The top disclosed project acquisition by dollar amount was Foresight Solar Fund Limited’s acquisition of SunEdison’s 17.8 MW Castle Eaton solar project in Castle Eaton, UK, for $37.6 million. This was followed by the sale of the 19.5 MW Great Glemham solar project in Suffolk, UK, by BayWa to Allianz Renewable Energy Fund, an Allianz Capital Partners fund, for $35.7 million. Bluefield Solar Income Fund, an investment company focusing on large scale agricultural and industrial solar assets, acquired the 17.5 MW Hertfordshire solar projects from Solarcentury for $32.5 million, and ContourGlobal, an independent power producer, acquired a 5 MW solar portfolio in Italy from Sorgenia Solar for $27.5 million. Rounding out the Top 5 was another transaction from Foresight Solar Fund Limited, which acquired the 12.2 MW Highfields solar project in Essex, UK, for $26.3 million from SunEdison.

Mercom also tracked 150 large-scale project announcements worldwide in Q2 2014 representing 7.6 GW.

 

Solarize South Carolina

Solarize South Carolina Campaign Aims to Rev Up SC’s Home Solar Industry

Solarize South CarolinaThanks to the launch of a new grassroots campaign in South Carolina, the longtime solar laggard could be poised to triple its installed capacity among homes and small businesses.

Today, clean energy nonprofit group SmartPower officially kicks off a Solarize bulk discount buying program. Solarize South Carolina aims to inflate South Carolina’s solar capacity among homes and small businesses from 11 MW (enough to power 1,000 homes) to 33 MW in the next 18 months.

“New policies within the state have made it more attractive,” said SmartPower president Brian Keane, referring to legislation passed in June 2014 that gave the green light to third-party leasing — and required investor-owned utilities such as Duke Energy and South Carolina Energy & Gas to increase its distributed energy resources. The utilities will also pay businesses and residents that are producing their own renewable energy.

“There’s enough changes happening for it to make financial sense for consumers to go solar,” Keane said.

The Solarize model — which has been widely implemented across the U.S. in cities such as Portland, Seattle, Asheville and Raleigh — aims to quickly ramp up residential solar capacity on a citywide and neighborhood level by working with solar contractors offering discounts that are proportional to the number of residents who take the solar plunge.

But unlike most other Solarize efforts, Solarize South Carolina marks one of the first times that an investor-owned utility has expressed an interest in becoming an official partner in the campaign, according to Keane, who said that his group is currently working out how South Carolina Energy & Gas will be involved. San Francisco-based Dividend Solar, a residential financing company, is another partner.

The first phase of Solarize South Carolina will be rolled out at community events (such as farmer’s markets, book clubs and civic organization gatherings) in Charleston, West Ashley, James Island and Mount Pleasant.

“We’re basically going where the people are,” Keane said of the decision to launch the campaign in these areas. “I believe that there’s this pent-up demand for those who want to go solar.”

The Charleston chapter of the Rotary Club will host Thursday’s launch event. At that time, the city will be given an incentive: If 69 residents sign up for solar systems, it will receive 5 kW of donated solar.

After the first campaigns get off the ground, Columbia and Greenville are next on the list.

Yet despite a widespread awareness of solar, Keane says there are still challenges.

“It’s getting people to walk that last mile from awareness to installation,” he said. “You just don’t walk into a store and get solar. But we’re bringing the solar store to you.”

 

solar loan

Residential Solar Financier Sunnova Offers New Loan-Like Product

solar loanResidential solar financier Sunnova is now offering something that looks like a loan but isn’t really a loan.

When we spoke with Sunnova CEO John Berger late last year, he was adamant about selling solar as a service and had no plans to offer cash sales or loans, despite some rumors to the contrary.

Firms such as SunPower, SolarCity, Clean Power Finance, Sunrun, NRG, Sungevity, SunEdison, Kilowatt Financial, Sungage, Mosaic and Dividend Solar are already in the solar loan business. Loan specialists Sungage, Mosaic and Dividend Solar raised hundreds of millions of dollars in 2014. Vivint, one of the last holdouts, has expressed a “desire to expand into additional financing products, such as loans,” according to an investor note from Credit Suisse.

Sunnova’s new program lets customers “pay a fixed amount each month over the 25-year term at a kilowatt-hour price substantially less than what they currently pay for power,” while providing a warranty along with O&M. The customer owns the system at the end of the term.

That sounds like a loan.

 

When going solar, should you lease or buy?

solar lease or buy?As the cost of solar technology drops, more and more homeowners are considering buying or leasing rooftop solar panels. In fact, the U.S. Department of Energy projects that 900,000 homes will feature solar installations by the year 2020. Properly sized, a solar photovoltaic system can reduce your energy costs by 50 percent or more, and a recent study conducted for the DOE found that some home buyers are willing to pay a premium for a house with a solar system.

Before embarking on an installation, a homeowner should assess whether their house gets enough direct sunlight. Then there are the pros and cons of buying versus leasing. Buying the equipment can cost between $10,000 and $50,000 depending on your needs and the complexity of the installation. But once you recoup your expenses, everything else is profit. Taking advantage of rebates and tax breaks, such as the federal tax creditthat expires at the end of 2016, can lower your costs. By leasing you avoid the upfront costs but typically sign a 20-year contract. Here are some other considerations.

Assess your needs

Any analysis of your home’s energy needs should account for anticipated changes in your household such as a grown child moving out. You may have to upgrade your electrical service panel whether you buy or lease but  experts advise waiting until you make a decision because often the cost is included in the installation price. It’s also important to consider the age and condition of your roof—you won’t want to put new panels on an old roof.

 

Google, SolarCity partner

Google & SolarCity partner on $750M fund for rooftop solar

Google, SolarCity partnerSolar installer and financier SolarCity announced on Thursday that it plans to raise a $750 million fund to invest in installing solar panels on the rooftops of home owners, and $300 million of that fund will come from tech giant Google. While Google has put over $1 billion into clean energy projects over the years, the commitment to the SolarCity fund is Google’s largest to date, and the entire fund will be the largest one ever created for residential solar projects.

The deal shows the momentum behind the booming solar panel industry in the U.S. Solar energy represented over a third of all new electricity in the U.S. in 2014, and that could grow to 40 percent in 2015, which would be a new record. The solar industry is now a major U.S. employer, employing twice as many workers as the coal industry; SolarCity employs more workers in California than the state’s three large utilities combined, said SolarCity CEO Lyndon Rive at the ARPA-E Summit earlier this month.

 

solar lease vs loan

Solar Financing Guide Explores the Ins and Outs of Leases, Loans

solar lease vs loanShould solarizers own or rent their panels? It’s complicated, yet simple, according to The Clean Energy States Alliance’s recently released Homeowner’s Guide to Solar Financing: Leases, Loans and PPAs (PDF). And you won’t really know into the dig deeply into the details and ask the hard questions.

(For those, skip to end of this report and the back of the Guide.)

Nationally representing America’s respective state public clean energy funds, the nonprofit CESA’s researchers dug into the solar sector’s data and found an “increasingly complex” marketplace marred by “confusing technical jargon,” its 25-page Guide explained. That includes the escalating payment schedules found in some solar lease agreements, or the fixed rates that complicate power-purchase agreements, which can literally bet your farm on the price of retail electricity rates rising over time. Home equity and unsecured loans for solar panels come too with wide-ranging risks and rewards, from ownership to, well, ownership if things get too globally warmed.

Indeed, after analyzing the three popular options for financing home solar installations, CESA advised shoppers to scrutinize the fine contract print when it comes to home ownership transfers, any of the aforementioned escalations in rates and/or payments, net metering opportunities and especially any federal or local incentives that still exist. That includes the federal government’s 30 percent investment tax credit which, CESA wet-blanketed, “is scheduled to expire at the end of 2016 and may not be renewed by Congress.”

CESA’s Guide also points homeowners in the direction of scientific resources like the National Renewable Energy Laboratory — which last month issued its own assessment of solar loans vs. solar leases — as well as private players like SunPower and many, many more, for further clarity on pretty manageable issues. Of course, CESA reminded, nothing beats a “direct, upfront, cash purchase of a residential solar system” — which is another way of saying that, for their complexity, investment in solar panels is a good bet no matter who owns them.

Sure, third-party arrangements like leases and PPAs can’t take advantage of the ITC, but peruse CESA’s comparison tables and you’ll see the word “homeowner” pop up a lot when it comes to writing checks. That’s because homeowners have to handle everything from insurance to maintenance, although solar panels shouldn’t need much.

CESA’s Guide concludes with a very helpful set a questions about these myriad issues more, which anyone selling you a solar system should be able to handle rather easily. Fire at will, and keep your eyes on the skies.

 

solar PPA

Fight heats up between solar-leasing companies, Legislature

solar PPAThe Legislature’s effort to forge a new blueprint for Washington solar power has stirred a fight from out-of-state companies that want to offer homeowners the option of leasing rooftop systems.

Bills now pending in the House attempt to keep the solar industry expanding while paring back state subsidies. Some provisions reflect months of negotiations between local solar installers that sell rooftop systems and public and private utilities around the state.

Rep. Jeff Morris, D-Mount Vernon, currently has legislation furthest through the committee process.

He wants to extend the cutoff dates for providing state-subsidized rebate payments for solar installations. He also would gradually pare back the size of these annual payments that typically top $1,000 but can go as high as $5,000 for systems manufactured in Washington.

 

solar loan lease

Borrowing to buy rooftop solar offers big savings over leasing, a new study finds

solar loan lease
Homeowner Diane Shutt gets a close look at one of the many solar panels that’ll soon be installed on the roof of her Vista home by workers from Sullivan Solar Power, of San Diego.

Taking out a loan to buy rooftop solar can save as much as 29 percent over lease arrangements, according to a new analysis from the National Renewable Energy Laboratory.

Of homeowners who go solar, about two-thirds nationwide opt for a lease or similar power-purchase agreement. Under lease financing, the solar provider both installs and owns the rooftop solar panels and related wiring. Customers pay a monthly bill for solar energy, which is cheaper than what they would otherwise pay the utility.

That carefree arrangement, with maintenance costs included, offers immediate savings with no money down and has helped democratize solar among cash-strapped households in the wake of the U.S. financial crisis.

 

solar financing

Solar Industry Heavyweights Step in to Standardize Solar Financing

solar financingAs a concentrated effort to increase access to public capital for PV solar ends in September, a California mutual benefit organization is taking over the reins.

The Solar Energy Finance Association (SEFA) — an 18-month-old group founded by industry heavyweights such as SolarCity, Sunrun, Locus Energy and Clean Power Finance — will continue the workstarted by the National Renewable Energy Laboratory (NREL)’s Solar Access to Public Capital(SAPC) workgroup to standardize power purchase agreement contracts, bring more capital to the market efficiently and promote solar as an asset class of investments.

“Our focus is really about the intersection of the solar industry and the capital markets,” said SEFA founding member and Trepp LLC Senior Vice President Thomas Fink.

SAPC — which was funded in 2012 through a three-year Department of Energy grant to NREL — brought together over 200 groups to advance the industry on a number of different solar financing fronts, such as standardizing Power Purchase Agreement templates, residential and commercial solar leases. SEFA hopes to add to that list by setting up standardized engineering, procurement and construction (EPC) agreements.

“To access capital markets efficiencies, you need as few things as different from loan to loan as possible,” Fink said of the impetus behind the group’s efforts. “In commercial and residential real estate there’s a lot of [standardization], which makes it easier to package and sell loans from one place to another to get the best financing at lowest possible rate.”

And although the solar industry — which is still relatively young — has made a speedy effort of this task compared to other industries, Fink says there’s still more work to do in order to reduce consumer costs by establishing avenues to secure capital at lower costs.

One of the tasks on their list is to begin the conversation with rating agencies — such as Fitch Ratings and Standard & Poor’s — to determine the type of information they’d need to see to get comfortable with to rate solar as an asset class.

“That’s a delicate balance and dialogue because the rating agencies are highly regulated agencies,” Fink said.

In the next six months, SEFA will be focusing in on best practices for consumer representation. It’s already published a consumer purchasing guide for homeowners and will be presenting the information at the end of March in San Francisco before the Solar Asset Management conference in San Francisco.

“It was important for the industry to not let that work go away at the end of the Department of Energy grant to provide that work going forward,” Fink said. “We hope to continue, become a good partner and address common concerns.”

 

Homes with Solar Panels Are Worth More Money

value of solarUntil recently, it wasn’t clear whether homeowners who had installed a solar PV system could expect to receive a higher price for their investment (that is, compared to the home’s selling price if they hadn’t installed solar panels at all).

Now, thanks to a recent study by Lawrence Berkeley National Lab, that question can be definitively answered as a yes.

“Overall, this study finds that home buyers consistently have been willing to pay more for a property with PV across a variety of states, housing and PV markets, and home types,” said Ben Hoen, a Lawrence Berkeley Lab researcher and lead author of the report.

The research did not include data for homes that had PV solar systems installed via a third-party leasing agreement, such as those offered by SolarCity where customers do not have to front the costs of a system.

Hoen and his collaborators — including researchers from Texas A&M University; the University of California, San Diego; and Sandia National Laboratories — analyzed real estate transaction data from eight states (California, Connecticut, Florida, Massachusetts, Maryland, North Carolina, New York and Pennsylvania) over the 11 years from 2002 to 2013. According to Lawrence Berkeley Lab, this doubles the number of PV solar system home sales previously studied, and makes it the most comprehensive study of its kind.

Hoen said that in addition to looking at a broader time period — one that included 4,000 transactions — the LBL study is the first to try to hone in on if there was a depreciation in the value of PV home solar systems over time, as well as if that premium (that is, the difference in selling price between homes that have PV and homes that do not) was diminished during the housing bubble and bust.

The results? “We found that for every subset in our data, a premium for [houses with solar PV] that was relatively new or up to 8 years old still saw a premium for homes inside and outside before, during the bubble and after the bubble,” Hoen said.

The team got their results by using a pricing model incorporating certain components that influence a home’s selling price, such as the individual home site, neighborhood and market characteristics. Then, they compared the selling prices of homes with PV to those without.

New homes ended up garnering a premium of an average of $3.58/watt, while existing homes gathered an average of $4.51/watt.

But Hoen warned that homeowners shouldn’t apply these premium values to their own home without consulting an appraiser first.

“The premiums we found might not be present if the market continues to decrease the PV system installation price,” he said, referring to the recent decrease in PV’s hard and soft costs. “As PV system prices come down, that might have an influence on premiums in the market.” Regional differences also exist, he added.

Yet Hoen does note that the study has larger implications for the solar market.

“This does seem to say that there is a robust market for homes with PV. To the degree that consumers are consistently wanting homes with PV, that market should continue to have a premium…and that should give greater confidence to greater institutional stakeholders that might lend money to homeowners that want to install a PV system.”

 

The Great Solar Panel Debate: To Lease Or To Buy?

Solar lease or own?
Elizabeth Ebinger in Maplewood, N.J., bought her solar panels, while neighbor Tim Roebuck signed a 20-year lease. Both are happy with the approach they took, and both are saving money on energy bills.
More than 600,000 homes in the U.S. have solar panels today — up dramatically from just a few years ago, according to the Solar Energy Industries Association. Leasing programs that require little or no money up-front have played a key role in that growth.

But here’s a question for homeowners: Is it better to lease or buy?

In Maplewood, in northern New Jersey, two next-door neighbors with similar houses arrived at different answers. Elizabeth Ebinger bought her panels — while Tim Roebuck signed a 20-year lease.

Ebinger says she enjoys the nitty-gritty of owning solar panels, from figuring out her eligibility for government incentives to crunching the numbers. “I have to confess that I do maintain a spreadsheet that analyzes the details of our expenses and our payback,” Ebinger says.

solar loan or PPA?

NREL examines trade-offs of owning versus leasing a solar PV systems

solar loan or PPA?
LCOE of commercial PV systems, financed under a PPA or loan, compared to retail rates

Two new reports from the Energy Department’s National Renewable Energy Laboratory (NREL) examine the economic options customers face when deciding how to finance commercial or residential solar energy systems. NREL analysts found that businesses that use low-cost financing to purchase a photovoltaic (PV) system and homeowners who use solar-specific loans can save up to 30 percent compared with consumers who lease a PV system through a conventional third-party owner.

The first report, “Banking on Solar: An Analysis of Banking Opportunities in the U.S. Distributed Photovoltaic Market,” provides a high-level overview of the developing U.S. solar loan product landscape. The analysis covers the range of consumer and commercial loan products available for financing solar in the United States, discusses the potential and active market players in the distributed solar loan space, and provides qualitative and quantitative analyses of how solar loans of varying maturities stack up against third-party financing. Key findings include:

  • The levelized cost of energy (LCOE) for residential systems with solar loans was lower than the LCOE for residential systems with power purchase agreements (PPAs) by 19-29 percent (varying by the term of the loan), because of the higher cost of capital necessary for the sponsor and tax equity in a PPA transaction.
  • There are additional operational and financial risks associated with owning a solar asset, and many of the savings calculated depend on market environment and the specific situation of an individual homeowner or business. For example, changes in a homeowner’s credit rating and the term of the loan can more than double the interest rate payments on the loan.

“Market interest rates on solar-specific loans currently range from 2 percent with special provisions to 8 percent,” said Travis Lowder, an energy analyst and coauthor of the report. “Compare this to a weighted average cost of capital of 9-10 percent for third-party systems financed through tax equity investments. Using the lower cost rates provided by the loans could help to make solar power more affordable to more consumers, and more competitive with utility rates in more states.”

The second report, “To Own or Lease Solar: Understanding Commercial Retailers Decisions to Use Alternative Financing Models,” examines the tradeoffs between financing methods for businesses installing onsite PV systems. The authors present case studies of PV financing strategies used by two large commercial retailers that have deployed substantial PV capacity in the United States: IKEA, which owns its PV, and Staples, which leases its PV through PPAs. In addition to carrying out in-depth interviews with both organizations for the report, the authors analyze the considerations that influence any company’s choice of PV-financing strategy using corporate and solar industry data. The report’s goal is to clarify the economic and institutional costs and benefits of financing strategies and to inform other companies that are considering launching or expanding similar PV programs. Key findings include:

  • The LCOE for the modeled self-financed system is approximately 30 percent lower than the LCOE for the PPA-financed system, given a commercial customer’s pre-tax discount rate of 10 percent; however the LCOEs are equivalent when the discount rate rises to 23 percent.
  • Companies may view the risks of ownership differently than those for a PPA-financed system. If a company assumed a 10 percent pre-tax discount rate for a PPA versus a 23 percent pre-tax discount rate for self-financing, then the LCOE would be 14 percent lower using the PPA.

“The most appropriate PV financing option for a particular business depends on the characteristics and circumstances of that business,” said David Feldman, a senior financial analyst and lead author of the report. “A company must work across its different business groups to decide what is most appropriate for its situation. With that said, if a company has less expensive sources of financing and is comfortable with the risks, it can often save on its energy bills by owning a PV system.”

The research was supported by funding from the Energy Department’s Office of Energy Efficiency and Renewable Energy, in support of its SunShot Initiative. The SunShot Initiative is a collaborative national effort that aggressively drives innovation to make solar energy fully cost-competitive with traditional energy sources before the end of the decade. Through SunShot, the Department supports efforts by private companies, universities, and national laboratories to drive down the cost of solar electricity to $0.06 per kilowatt-hour. Learn more at energy.gov/sunshot.

NREL is the U.S. Department of Energy’s primary national laboratory for renewable energy and energy efficiency research and development. NREL is operated for the Energy Department by The Alliance for Sustainable Energy, LLC

 

corporate funding for solar

Total Corporate Funding Increases 175 Percent to $26.5 Billion in the Solar Sector

corporate funding for solarMercom Capital Group llc, a global clean energy communications and consulting firm, released its report on funding and merger and acquisition (M&A) activity for the solar sector in 2014.

Total corporate funding into the solar sector encompassing venture capital/private equity (VC), debt and public market financing increased 175 percent in 2014 with $26.5 billion, compared to $9.6 billion in 2013.

Global VC investments more than doubled to $1.3 billion in 85 deals in 2014, compared to $612 million in 98 deals in 2013.

“The big story coming out of 2014 was the revival of capital markets – solar companies were able to access funding through multiple avenues like VC, public markets, IPOs and debt in record numbers, while the quest for lower cost of capital continued with Yieldcos and securitization deals. The solar sector has come a long way from being perceived  as a speculative high risk investment to attracting investors based on low risk attractive dividend yields,” said Raj Prabhu, CEO of Mercom Capital Group.

Solar downstream companies saw the largest amount of VC funding in 2014 with $1.1 billion in 44 deals, accounting for 85 percent of venture funding. Investments in PV technology companies reached $75 million in 12 deals and Balance of Systems (BoS) companies were close behind with $73 million in seven deals. Concentrated Solar Power (CSP) companies came in at $59 million in three deals, followed by thin film companies with $52 million in nine deals.

The Top 5 VC funded companies in 2014 were Sunnova Energy, a provider of residential solar service to homeowners through its network of local installation partners offering leases and PPAs, which raised a total of $505 million in three separate deals; followed by Sunrun, a provider of residential solar-power systems and third party finance, raising $150 million; Renewable Energy Trust Capital, a finance platform established to acquire and own solar projects and provide a single equity capital source, brought in $125 million; Sungevity, a provider of residential solar installations and third party finance, raised $72.5 million; and GlassPoint Solar, a provider of solar steam generators to the oil and gas industry for applications such as Enhanced Oil Recovery (EOR), raised $53 million.

A total of 119 VC investors were active in 2014, with 12 investors participating in more than one round in 2014 including: Acero Capital, Acumen Fund, DBL Investors, E.ON, Ecosystem Integrity Fund, Novus Energy Partners, Omidyar Network, SolarCity, Sustainable Development Technology Canada, Trident Capital, Vision Ridge Partners and Vulcan Capital.

Public market financing increased considerably to $5.2 billion in 52 deals in 2014, up from just $2.8 million in 39 deals in 2013. In 2014 seven IPOs brought in more than $2 billion combined including, Vivint Solar, Scatec Solar, Thai Solar Energy and Sky Solar. Yieldcos accounted for three of the IPOs for $1.5 billion going to Abengoa Yield, Terraform Power and NextEnergy Solar Fund.

Announced debt financing in 2014 totaled almost $20 billion in 58 deals, compared to $6.2 billion in 38 deals in 2013. China accounted for $15.8 billion of the debt activity.

Large-scale project funding announced in 2014  totaled $14.2 billion in 144 deals.  The largest project funding deal announced in 2014 was the $942 million loan raised by China WindPower Group for a portfolio of projects totaling 800 MW. Top investors in large-scale projects were Mizuho Bank with 12 projects and Bank of Tokyo-Mitsubishi UFJ with 10 projects.

Residential and commercial funds showed strong growth in 2014 with 34 announced funds totaling $4 billion. SolarCity, SunPower, Vivint Solar, SunEdison and Syncarpha Capital were top fundraisers in 2014.

Corporate M&A activity in solar totaled $4 billion in a record 116 transactions compared to $12.7 billion in 81 transactions in 2013. Consolidation activity continued among solar downstream companies with 57 transactions followed by manufacturers and equipment companies with 35 transactions. In a bid to vertically integrate, SolarCity made the most acquisitions in the last five years with seven, followed by First Solar and SunPower with six apiece. The largest M&A transaction in 2014 was the $1.2 billion acquisition of Hanwha Q CELLS Investment by Hanwha SolarOne, followed by Bluestar Elkem’s acquisition of REC Solar for  approximately $637 million. Danfoss acquired a 20 percent stake in SMA Solar Technology for $416 million; SolarCity acquired Silevo for $350 million and Solargise acquired a majority stake in Grapp Energies for $200 million.

Large-scale solar project acquisitions totaled $3.2 billion in 2014, compared to $1.7 billion in 2013. Transaction activity was up 46 percent year-over-year, with 163 deals in 2014. A total of 6.4 GW of large-scale solar projects were acquired in 2014. Good solar projects with solid returns continue to be in heavy demand and are being acquired at a record pace. Competition to acquire quality projects intensified with the emergence of Yieldcos.

The fourth quarter of 2014 was an active quarter for large-scale project development around the globe. Mercom tracked 241 project announcements totaling almost 9.5 GW for the quarter and 736 project announcements totaling 34.4 GW for 2014 in various stages of development globally.

To learn more about the report, visit: https://store.mercom.mercomcapital.com/product/2014-q4-solar-funding-report/