Solar VC Investments Surge 50% Higher in 2Q 2013

Venture capital (VC) investments in the solar energy sector surged 50 percent higher quarter over quarter, to $189 million, in 2Q 2013, with investments in downstream solar businesses setting the pace, according to Mercom Capital Group's “Solar Q2 Funding and M&A Report.”

Mercom recorded a total of 19 transactions valued at $189 million in 2Q as compared to 26, for a total $126 million, in this year's first quarter. Solar downstream businesses gathered the lion's share, gathering $128 million of VC capital invested in the U.S. solar energy sector in 2Q, according to the report.

Setting a qurterly record, downstream providers of third-party finance for distributed solar power systems raised a record $1.33 billion in disclosed residential and commercial solar project funds in 2Q. The amount raised by solar leasing companies and other types of third-party finance providers during the first six months of 2013 nearly reached that for all of 2012, Mercom found.

$915MM in total corporate solar funding

Broadening out and examining total corporate funding, Mercom recorded a total $915 million in solar energy sector investments for the second quarter. That includes VC funding, debt financing and other types of capital raised by public companies, such as share sales.

Intense pressure on upstream margins led investors to focus on downstream solar companies. “With solar technology companies struggling, investments have been going to downstream companies,” Mercom Capital CEO Raj Prabhu was quoted in a press release.

That said, investments into solar technology companies haven’t completely dried up. Small venture rounds are still going to several niche technology companies instead of the larger deals that were typical for thin film, CSP and CPV companies.

Among 2Q's largest transactions, existing investor Jiangsu Akcome Solar Science & Technology invested another $69 million in Hefei Golden Sun Energy Technology. Here in the U.S., third-party distributed solar energy financing provider Clean Power Finance raised $42 million from a group of prominent VC and industry investors, including Edison International, KPC&B, Google Ventures, Claremont Creek Ventures, Clean Pacific Ventures, Sand Hill Angels, Hennessey Capital, Duke Energy, and two other investors.

Turning to M&A, Mercom recorded 18 transactions with a value totaling $1.27 billion for 2Q. Swiss power and automation multinational ABB's acquisition of Power-One for around $1 billion was the largest M&A transaction to take place.

In addition to strategic acquisitions, consolidation in the solar inverter market was also evident in 2Q's M&A activity, as was the acquisition of distressed assets and businesses. Advanced Energy Solutions acquired three-phase string solar PV inverter provider REFUsol Holding for $77 million. Troubled LDK Solar sold its interest in LDK Solar High-Tech (Hefei) Co. to Hefei High Tech Industrial Development Social Service Corp for some $19 million.