Global venture capital funding in solar sector down 50% in 2012

NEW DELHI: Global venture capital (VC) investments in the solar sector plunged nearly 50 % to $992 million in 103 deals in 2012 compared to $1.9 billion raised in 108 deals in the previous year. The 2012 total represent the lowest amount since 2007.

Mercom Capital Group, llc, a global clean energy communications and consulting firm, released its report on funding and mergers and acquisition (M&A) activity for the solar sector during 2012.

VC funding in Q4 2012 came in at $220 million in 27 deals compared to just $72 million in 14 deals in Q3. Twenty-five investors participated in the 27 deals in Q4, and no investor was involved in multiple deals. The leading VC deal this quarter was concentrating solar thermal company Bright Source Energy with $83.6 million.

"The slowdown in VC funding can be attributed to the grim prospects for thin-film, concentrating solar and concentrating PV technologies," commented Raj Prabhu, managing partner of Mercom Capital Group. "With the drastic fall in crystalline-silicon PV prices over the last two years, most other technologies have struggled to compete."

Thin-film companies saw the largest amount of VC funding in 2012, although the total fell 47 % to $314 million compared to almost $600 million in 2011.

On the other hand, solar downstream companies, especially solar lease companies, have benefitted from low module prices. VCs invested $269 million in 25 deals in solar downstream. The top 5 VC funding deals in 2012 were BrightSource Energy, a CSP company, for $83.6 million, SolarCity, a solar lease firm, for $81 million, CIGS company Nanosolar for $70 million, solar lease company Sunrun for $60 million, and MiaSole, a CIGS company, for $55 million.

"The diminished funding activity is not a true reflection of the health of the solar sector, because the demand side of global solar installations has continued to grow," said Raj Prabhu. "Global solar installations look set to grow by around 10-12 % this year."