Solar financing up but policy support is still crucial

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Global funding for solar may be up – almost – across the board according to the latest first-quarter and first-half figures published by consultants Mercom Capital Group but the industry is still some way off standing on its own feet without policy support, according to Mercom CEO Raj Prabhu.

Mercom’s figures show total funding for solar, venture capital, debt financing, project acquisition spending, public market support and the overall volume of solar capacity acquired were all up on the results seen in the same periods of last year.

The only fly in the ointment was the fact large scale project funding fell 42% in the last three-month window compared to the opening quarter of the year, from $5.7 billion on 43 deals in the January to March period to $3.3 billion across 33 deals in the three months to the end of June. Even then, the first-half total came in at $9 billion across 76 projects, up from $8 billion for 98 projects in the same period of 2018.

The news five fewer debt financing deals were arranged in the first half, compared to the same period of last year, was tempered by the fact the 27 deals reported in the first six months of this year were worth a combined $4.2 billion, $600,000 more than the 32 arrangements seen from January to June 2018.

Policy crutch

However, despite the encouraging figures a pull quote from Mercom CEO Prabhu, used in a release to publicize the report, referred entirely to political developments to explain the progress of solar.

Prabhu cited the expiry of the EU’s imposition of minimum prices on solar products from China as the reason for booming European PV growth. The U.S. market was benefiting from a rush to qualify for a 30% federal investment tax credit that is due to expire at the end of this year and was further lifted by the recent decision to exempt bifacial panels from President Trump’s Section 201 trade tariffs on panels from China and Malaysia.

The Indian market, according to Prabhu, is set to return to healthy growth now the world’s largest general election has been completed – and renewed the electoral mandate of solar-friendly prime minister Narendra Modi.

Even Prabhu’s note of caution: “China remains the wild card” refers to the continuing uncertainty surrounding the ability of the central authorities to process and approve applications for the limited amount of public funding available for solar project development.

Funding up

But the figures do make for encouraging reading, with total funding for solar up 11% to $6 billion in the first half, from $5.4 billion in the same period last year. The second quarter was also up on a year-on-year basis, from $2.9 billion to $3.3 billion.

Venture capital (VC) funding drove most of that rise, clocking in at $799 million, up 50% on the $531 million seen in the same period of last year. Those figures included $622 million in the last three months, spread across 16 deals and including the $300 million raised by Indian developer ReNew Power. Downstream solar companies accounted for 87% of those three-month VC returns.

Public market funding came in at $993 million in the first half, including $746 million across five deals in the last three months.

Capacity acquisitions

The volume of solar projects acquired also rose, from 11.3 GW of generation capacity in the first half of last year to 11.6 GW in the same period this year, with investment firms accounting for 6.8 GW (58%) of the figure. The capacity level acquired in the second quarter was also up on a year-on-year basis, from 3.6 GW to 5.7 GW in the most recent three-month window.

The Heolios joint venture formed by French energy company Engie and Tokyo Gas topped the second-quarter acquisition rankings with the 746 MW generation capacity portfolio bought from Tokyo Gas. China’s GCL-Poly Energy moved for a 684 MW project portfolio developed by Ningbo Rongshang Investment Partnership and an unknown entity bought 500 MW of capacity from Goldman Sachs Renewable Power.

Canadian Solar snapped up 386 MW worth of assets from Nebras Power Investment Management, Essel Infraprojects acquired 310 MW of capacity developed by India’s Adani Group and Ellomay Luxembourg Holdings completed the list of top deals by purchasing 300 MW of capacity from GSE 3 UK Ltd and partners.