WORLD-GENERATION MAY/JUNE 2015 V.27 #2
19
PERSPECTIVE
OVERVIEW
· The renewables industry faced strong
headwinds in 2014 – from uncertain tax pol-
icy to lackluster electricity demand growth
and competition from natural gas.
· Instead of idling, renewable M&A activi-
ty revved up, with 37% more capacity chang-
ing hands than the prior year, in 115 deals.
· This was largely due to financing inno-
vations, rapidly declining costs, and pend-
ing tax credit deadlines, as well as increas-
ing investor confidence in wind and solar
technologies.
· Overall, wind and solar accounted for
approximately 5 percent of U.S. electric
generation in 2014.
· Looking ahead, M&A activity is poised
for continued growth, as investor interest
flourishes and renewables move further
into the mainstream.
DEAL-MAKING & BUYERTRENDS
· There is a broader trend of increasing
investor interest in the renewable energy
sector, with M&A activity generally moving
upward over the last five years (2010-2014).
· Independent Power Producers (IPPs)
voraciously added renewable capacity, over-
taking utilities as the lead buyers in the
renewables space.
· IPPs acquired more than 101. GW of
capacity, a stunning 147% increase from 2013.
MARKET CONDITIONS
· Nearly every type of investor has
become more comfortable with renewables
as an asset class.
· After two consecutive years of decline,
U.S. clean energy investment rose nearly
20% in 2014.
FINANCIAL INNOVATIONS
· YieldCos doubled from 3 to 6 in 2014
and increased investment to $3.2 billion. A
YieldCo is a publicly traded company
formed to own operating assets that produce
cash flows. YieldCos are typically designed
to have minimal taxable income to limit their
cash tax requirements, much like MLPs.
· Capital raised through “Green bonds,”
corporate bonds with proceeds ring-fenced
for clean energy investments, more than
doubled, to $32.9 billion in 2014, compared
with $500 million in 2013.
· Crowdfunding has helped the growth
of the rooftop solar industry. Non-profit
crowdfunds, are putting solar photovoltaic
projects within reach of churches, schools,
and other organizations.
TRADITIONAL FINANCING
· Asset financing – investors poured more
than $12 billion into wind and solar projects.
· Venture capital investment in renewable
companies rose 105% to more than $1 bil-
lion, 75% in solar.
· Public markets – Investment in solar
and wind companies jumped 68% to $5.13
billion.
SOLAR
· The US residential solar market added
1.2 GW – more than 50 percent growth for
the third consecutive year.
· For the first time ever, more than half
a gigawatt of resident solar installations
came online without any state incentive in
2014.
· Utility-scale development is also break-
ing records: in Q4 of 2014, 1.5 GW of utility-
scale PV projects came online – the largest
quarterly total for any market segment.
WIND
· Approximately 4.9 GW of wind power
came online in 2014, and 12.7 GW are
under construction.
· Texas presently accounts for the majori-
ty of wind construction activity, though
New Mexico, Kansas, Iowa and North
Dakota are also very active.
· The cost of wind power is competitive
with other sources of generation, and is
likely to be driven lower with increasing
technological innovations.
POLICY DEVELOPMENTS
· The Production Tax Credit (PTC) came
too late to stimulate large wind develop-
ments in 2014 and had little effect on new
wind development or deal-making activity.
· The Investment Tax Credit (ITC) did not
change in 2014, given its extension to 2016.
The ITC continues to provide a strong
incentive for solar development, especially
ahead of the end of 2016 deadline.
· Renewable development will likely have
more support in regulatory developments.
· Many states are experimenting with
RENEWABLES ENTERTHE MAINSTREAM
BY MARLENE MOTYKA AND BRIAN BOUFARAH
DELOITTE CENTER FOR ENERGY SOLUTIONS
Marlene Motyka
DeLoitte Center for Energy Solutions
Brian Boufarah
DeLoitte Center for Energy Solutions
(continued page 30)
