The number of merger and acquisition (M&A) deals in the North American renewable energy sector grew by two-thirds year-over-year in 2011, but the total deal value decreased by one-third, from $48.8 billion in 2010 to $33.4 billion in 2011, finds a new report from Frost & Sullivan.
"In 2011, the number of deals rose dramatically - by 58 percent from 2010 in wind and 48 percent from 2010 in solar - but total values were down by 24 percent in wind and 20 percent in solar," says K. Vinod Cartic, a business and financial services consultant at the firm. "Investors, developers and operators were extremely busy, but the typical deal size was smaller."
For project developers, financing is limited, and entrants must primarily rely on their own capital, the report notes. For technology developers, entry is possible through partnerships with existing research labs.
The renewable energy market is highly competitive and is moving to a cost-based business model, the firm notes, adding that renewable energy’s higher capital costs, compared to conventional energy systems', reduce its growth potential. Additionally, the technical skills needed to operate these systems affect the system installation, as well as the overall costs.
"Companies must resort to effective asset management to enhance the value chain," Cartic says."Governments can do their bit to safeguard the industry's interests through transparent and stable tariffs and using technology as a differentiator."