Solar VC funding down 74% in H1 2020 amid COVID-19 impacts: Mercom

Dive Brief:

Venture capital funding in the global solar sector plummeted in the first half of the year, yielding $210 million in deals compared to $799 million during the first half of 2019, according to clean energy consulting firm Mercom Capital Group.
Year over year, total corporate funding saw a 25% drop in the solar sector during the first half (H1): Mercom reported $4.5 billion of VC funding, public market and debt financing for solar across the globe, compared to $6 billion in H1 2019.
While utilities were responsible for less than 0.9% of the solar project acquisitions in H1 2020, oil and gas majors dominated the space, acquiring about 44% of the solar projects sold during that time period, or 6.5 GW. Investment firms were responsible for 41% of the activity, or 6.1 GW of solar.

Dive Insight:

The volume of activity has slowed in Q2 compared to Q1 of 2020, according to Mercom, reflecting the impact of COVID-19 on the sector. For instance, only 36 large-scale solar project acquisitions took place in the last quarter, compared to 56 in Q1.

Other reports, like the U.S. Solar Market Insight Q2 report from Wood Mackenzie and the Solar Energy Industries Association, posit that Q2 reflects more of the impacts from the coronavirus pandemic, while Q1 of 2020 was largely unaffected.

Some voices in the sector point to long-term solar forecasts and increasing goals from companies to transition to renewable energy as a sign of the sector's strength, as those trends have persisted during the pandemic.

"The [renewables] industry has seen some short term headwinds, but the long term outlook is positive," Marlene Motyka, U.S. and global renewable energy leader at Deloitte Transactions and Business Analytics, said during a renewable energy webinar Wednesday.

Mercom typically tracks project acquisition activity as a marker of health in the sector, and that metric has "declined significantly in Q2," CEO Raj Prabhu said in a statement.

2.8 GW of solar projects were acquired globally in Q2 2020, compared to 5.7 GW in Q2 2019.

While fewer large-scale solar project acquisitions took place place in the first half of 2020, those deals were made up of larger projects. In Q1 2020, solar project acquisition reached nearly 12 GW, or 14.7 GW for H1, compared to 11.6 GW acquired in H1 2019. representing a significant win for the sector during this time of upheaval, according to Mercom's report.

Mercom Capital Group, data from https://www.businesswire.com/news/home/20200709005974/en/Total-Corporate-Funding-Solar-Sector-Reaches-4.5

The sector is not fully recovered from the impacts of the pandemic and the ensuing economic recession, however.

"Even though solar stocks have performed well, and corporate funding in Q2 looked slightly better because of several securitization deals, global economies and solar activity are still far from being back to where they should be," Prabhu said.

"Certainly, the coronavirus has impacted the solar sector in the first half of 2020. However, due to the performance and value added by renewable energy, including solar, during the pandemic and the continued focus on climate, 2H 2020 is expected to rebound," Motyka said.