Private equity and venture capital activity in the U.S. solar industry is on track to reach its lowest level in the past four years. This contrasts with significant global private equity inflows into the sector during 2024, according to a new global report by S&P.
According to the report, private equity investments in residential and utility-scale solar energy in the U.S. from January 1 to November 26 totaled $3.1 billion, approximately 24.6% lower than the total reached in 2023 and representing only 7.3% of the $42.54 billion accumulated in 2021. So far, only four private equity deals in U.S. solar energy have been announced in 2024.
Globally, the value of transactions in residential and utility-scale solar energy reached $25.04 billion, an increase of approximately 52% from the $16.46 billion recorded for the entire year of 2023, according to data from S&P Global Market Intelligence.
This rise in global investment comes amid China’s dominance in solar panel production, which has led to oversupply levels. According to a report by Wood Mackenzie, the Asian country will continue to hold more than 80% of global solar manufacturing capacity through 2026.
Europe, including the United Kingdom, attracted the majority of private equity investments in residential and utility-scale solar energy, with 23 deals exceeding $20 billion. The value of private equity transactions involving UK-based renewable energy companies has already surpassed private investments in the U.S. renewable energy sector this year.
Additionally, the U.S. and Canada ranked second in transaction value, with $3.25 billion across seven solar energy deals. The Asia-Pacific region, including China, followed closely with 20 deals worth over $795 million.
European Mega-Deals Drive Private Equity Financing Growth
Several multibillion-dollar transactions have contributed to the total value of solar sector deals so far this year. The largest private equity-backed solar energy deal announced in 2024 is Energy Capital Partners LLC’s planned $7.87 billion acquisition of Atlantica Sustainable Infrastructure PLC, a UK-based company. Its ECP V LP fund is set to purchase Atlantica from Algonquin Power & Utilities Corp., which decided to sell after conducting a strategic review of its renewable energy business.
The second-largest deal is Brookfield Asset Management Ltd. and Temasek Holdings (Pvt.) Ltd.’s proposal to acquire 53.32% of Neoen SA, a Paris-based company, for $7.57 billion. The buyers are expected to eventually acquire full ownership of the company and take it private.
Private investments in the industry can help pave the way for the development of new solar technologies. The shorter development timeline, lower capital costs, and compatibility with battery energy storage systems have kept solar energy more attractive than other alternative energy sources, such as wind or nuclear, according to Benedikt Unger, director at consulting firm Arthur D. Little.
“By financing next-generation solar technologies, such as bifacial modules and perovskite cells, private equity investments can accelerate innovation,” Unger wrote in an email to Market Intelligence.
The technical explanation is that bifacial modules capture light on both sides of the solar panel, while perovskite cells are high-performance, lower-cost materials compared to those currently used in solar technology. Unger also sees opportunities for private equity in emerging local solar technology supply chains and the growing solar panel recycling industry.
“Photovoltaic recycling is an emerging industry, but its development is crucial, especially in more mature markets like Europe or the United States. Localized supply chains will be needed in many regions, including Africa and Southeast Asia,” Unger concludes.
