US solar developer merger and acquisition market looks poised for growth over the coming months, as several deals have already been announced – most notably by private equity firm Greenbacker and solar operations and maintenance provider NovaSource Power Services who both acquired solar asset management companies this year.
Solar M&A activity has seen an unprecedented surge as demand for renewable energy grows and costs drop, prompting investor interest in the sector – with Bloomberg New Energy Finance reporting over $80 billion being committed over four years, according to their projections. Bloomberg New Energy Finance predicts M&A activity will remain high as investors look for ways to diversify their portfolios with low-carbon assets and expand global footprints while utilities seek solutions to mitigate climate change impacts on grid reliability.
M&A activity is widespread across several regions, but the US stands out as being particularly active. Since 2022, over three-quarters of solar and wind asset M&A deals have taken place there, making the US the second-largest market by deal value globally.
FTI Consulting reports that solar M&A activity in the United States is being driven by several trends, including increased demand for renewables; investor pressure on utility-scale project developers to deliver reliable and resilient power; rising concerns over climate change impacts; and emerging technologies designed to accelerate decarbonisation processes.
Over the past year, several major corporates have expanded their renewables portfolios significantly. French oil and gas giant TotalEnergies acquired SunPower Corp’s commercial and industrial solutions unit in February; AES Corporation (NYSE: AES) purchased Community Energy Solar to expand U.S. development activities and add 10-GW projects to their pipeline of projects.
Community-scale developers represent a growing trend among larger energy companies to acquire smaller peers in order to strengthen their presence in the solar industry. Furthermore, many solar and storage firms are investing in manufacturing of PV modules domestically in order to take advantage of incentives under the Inflation Act, potentially leading to further vertical integration.
No matter the uncertain M&A landscape of 2018, renewables industry consolidation should help it to face additional challenges like higher power prices and supply chain constraints more effectively. Larger developers will also be more capable of negotiating advantageous power purchase agreements (PPAs) and tapping state guaranteed feed-in tariffs or PPAs more successfully than before. M&A activity should remain an issue as financial investors look for exit routes from solar/storage developer platforms over time.
