Corporate solar interest surges as companies exit pandemic and turn focus to ESG issues

Dive Brief:

A record 24.7 GW of solar projects were acquired globally in the second quarter of this year, according to new data from Mercom Capital Group, with interest in renewables surging as the COVID-19 emergency has waned and environmental, social and governance (ESG) issues drive more corporate decisions.
Total corporate funding for solar projects, including venture capital funding, public market and debt financing, reached $13.5 billion in the first half of 2021 compared with $4.6 billion in the same period last year.
"Funding was up across the board in the first half of 2021 compared to last year, which was severely affected by the pandemic," Mercom CEO Raj Prabhu said in a statement.

Dive Insight:

A financial rebound is in progress as the COVID-19 pandemic abates, and it is one that is apparent in the renewables sector. Experts see growth fueled not just by pent up demand, but also growing attention to ESG considerations and renewables' financial advantages over fossil fuels.

Corporate merger and acquisition (M&A) activity "was up significantly with solar developers expanding their pipelines, oil and gas companies diversifying into renewables, and funds buying up renewable assets," Prabhu said.

Solar project acquisitions reached a record high in the second quarter, he said, with more than 24.7 GW of capacity acquired. That total came from 34 corporate M&A deals, compared to 20 in the first quarter of this year and 13 in the second quarter of 2020.

"The transition from fossil fuels to renewables and ESG investing trends made an impact on financing as well as M&A activity," Prabhu said.

In the first half of 2021, solar project acquisitions reached 39.3 GW, more than doubling the 14.7 GW acquired in the the first half of 2020.

Venture capital funding in particular has experienced a strong recovery. Funding for VC was 680% higher in the first half of the year, compared with last year, with $1.6 billion raised in 26 deals, according to Mercom. "The increase in VC funding activity in the first half resulted from some very large transactions," Mercom's analysis noted, "including Loanpal's $800 million deal in the first quarter of 2021." Loanpal, now Goodleap, is a finance tech company focused on residential solar.

Public market financing for solar was 386% higher in the first half, and debt financing activity was up 125%, according to Mercom.

"Spurred by low interest rates, a record $2 billion was raised through seven securitization deals" in the first half of the year, the firm said. "Cumulatively, over $9 billion has been raised through securitization deals since 2013."

Renewables have been rapidly gaining market share for years. In 2020, the United States saw its fifth consecutive year of renewables consumption growth, reaching a record high of 12% of the country's total consumption, according to the U.S. Energy Information Administration (EIA).

EIA estimates solar energy accounted for about 11% of last year's renewable energy consumption, and "overall, 2020 U.S. solar consumption increased 22% from 2019."

By comparison, the agency said fossil fuel consumption fell last year by 9% to "the lowest level in nearly 30 years."

The trend is represented globally as well. The International Energy Agency's (IEA) most recent market update, released in May, found renewable electricity capacity added in 2020 rose by 45% in 2020 to 280 GW.

"Solar PV installations will continue to break new records, with annual additions forecast to reach over 160 GW by 2022," IEA said in its analysis. "That would be almost 50% higher than the level achieved in 2019 prior to the pandemic, affirming solar's position as the 'new king' of global electricity markets."