Statics presented in Mercom Capital Group’s report on venture capital spending for the 3rd quarter of 2013, portray a brighter outlook for solar demand for the rest of 2013. Although VC funding for the solar industry is down 54% from the same time last year, spending has seen a recent increase from the previous 2013 fiscal quarters and appears to be gaining momentum.
Key findings from the Mercom Capital Group Q3 Report:
• Increase in venture capital spending for solar
• Rise in third-party solar financing
• Growing number of large-scale solar projects
Solar becomes more appealing to Venture Capitalists:
Global venture capital funding for Q3 in 2013, totaled $207 million, which is a slight increase from the $189 million, from Q2 of 2013. In comparison to the 27 investors who participated in funding rounds from Q2 of 2013, there were 35 venture capitalists that participated in funding rounds in 3Q13. The average deal size in Q3 came to $7.4 million, down from $9.9 million in the previous quarter. In addition, there were 37 announced large-scale project funding deals in Q3 2013. Overall, a total of 52 investors took part in project funding deals in Q3 2013.
3rd-party financing takes off:
Third-party solar financing companies raised approximately $584 million in the past quarter, with help from banks. So far with 3 months to go, third-party solar leasing firms have raised roughly $2.5 billion this year, compared to just $2 billion in both 2012 and 2011.
Financing for solar, especially utility-scale projects, continues to improve. There were 37 large-scale project funding deals listed in Q3 2013 with a total of $2.89 billion, bringing year-to-date funding deals to 106 compared with just 84 in 2012. With the addition of 37 large scale projects from Q3, the total for 2013 comes to 106, which is 22 more than projects completed for the entire year of 2012.
Large-scale solar projects experience a growth spurt:
Project acquisitions were the highest in three years, with around 5.5 gigawatts (GW) of large-scale projects announced in the 3rd quarter of 2013. Disclosed large-scale project funding came to $2.89 billion in Q3 2013; with large-scale projects totaling 1,267 megawatts (MW) announced funding this quarter.
“It’s important for utility-scale projects to be really successful in the next two or three years, because they bring the costs down for the entire industry. And as costs continue to fall, developers are jumping market to market wherever they see the best returns”, according to industry expert Prabhu.
More than half of this quarter’s 30 project acquisitions involved investment firms, not developers or solar companies. After the 2010-2012 financial collapse, developers found it difficult to get big projects financed, but the solar industry is seeing a more steady return on investments, which is seen as less of a risk for investors.