By Simeran Bachra and Michele Parad
Solar has strong head-winds right now, with the market forecasted to grow 25-50% in 2016 alone. We are seeing a rise in consolidation, and in both horizontal and vertical integration across the industry. Industry leaders, many of whom have appeared on our past editions of the Global Cleantech 100 (GCT100) – are expanding their market share and taking control of solar deployment across the customer value chain (from owning and operating plants, to financing, installation and maintenance), thereby further reducing the overall system costs for consumers. Just as Amazon, Apple and Google became the mega-monsters of the Internet age two decades ago, solar industry front runners are making large strides towards dominating the market, based on power of scale and network effects.
SunEdison, GCT100 2009 alumnus and the ‘king’ of consolidators, has through its yieldco spinout vehicle, TerraForm Power, acquired more than 757MW across developing markets, and recently purchased Vivint Solar (a 532MW portfolio) for $2.2 billion and First Wind (a 521MW portfolio) for $2.4 billion. SunEdison is among several renewables companies using new financing mechanisms like yieldcos to buy up clean power assets – First Solar and Sunpower are following suit with their joint yieldco, 8point3Energy Partners.
While several years ago utilities and oil companies were selling off their solar divisions, today that trend may be reversing. French utility Engie (previously GDF Suez) is leading the way with its ambitious plans to double its renewables capacity in the next decade, beginning with its July 1 acquisition of Solairedirect (GCT100 2009, 2011, 2012 alumnus), a 486MW global portfolio, for Є200 million.
Meanwhile, in the residential solar space, SunRun (GCT100 2010, 2011, 2013, 2014) has been on a buying binge, adding REC Solar, Mainstream Energy Corporation and Clean Energy Experts and expanding its core business beyond installation and maintenance to include parallel solar hardware and marketing services. SunRun looks to be next in line to hit public markets after 2012-15 IPOs by GCT100 alumni SolarCity, SunEdison Semiconductor and SolarEdge.
To keep up with the pace, NRG Solar, one of the largest solar developers and retail providers of clean energy, has in tandem bought solar installation and financing companies Roof Diagnostics and Pure Energies, and is now rumoured to be acquiring the solar division of Next Step Living (GCT100 2013, 2014), a provider of energy services to homeowners including energy auditing and retrofitting.
Solar financing continues to strengthen as its own defined category in the solar industry and is experiencing consolidation as well, with the recent announcement of Clean Power Finance (GCT100 2012, 2013, 2014) and Kilowatt Financial forming into a new entity, Elevate Power. The combined company will manage more than $1.6 billion in power purchase agreements, leases, and loans for both PV and energy efficiency.
We anticipate a continued trend of consolidation in solar, not only through M&A activity, but also through emerging partnerships with the leading energy storage companies to incorporate energy storage products into bundled offerings to solar customers. SunRun, Sunpower, SunEdison, and Sungevity have already made headlines with their newly formed relationships with Tesla (GCT100 2009 alumnus), Stem (GCT100 2014), Green Charge Networks, and Sonnenbatterie (GCT100 2014) respectively. As the top solar companies continue to become ‘full-service’ powerhouses, it will become increasingly difficult for newcomers in the solar space to appear on the scene today. Are we starting to see the end of the wave of major venture-backed solar companies? We look forward to monitoring this closely, and what lies ahead more generally, through our forthcoming 2015 Global Cleantech 100.