U.S. Renewables M&A: 2018 Review and Outlook for 2019
Despite policy challenges in the U.S. renewable energy sector during 2018, demand for renewable energy platforms and project assets remained strong, translating into another banner year for M&A. The implementation of tax reform provided the impetus for a strong tax equity market, and the broader renewables M&A market continued to be driven by the solar and onshore wind segments. Additionally, while offshore wind and energy storage continued as “sectors to watch,” overall deal volume in these segments remained muted given their relatively early stages of commercialization in North America.
Risk return profiles and strategic considerations continued to drive investor M&A activity, with lower risk investors focused on the more mature end of the project spectrum and those with higher return requirements seeking portfolios or projects earlier in the development cycle. Platforms were in high demand with institutional investors driving landmark transactions. For purchases, foreign players – including those from Canada, Europe and Asia – were aggressive acquirers of U.S. assets, motivated by competitive costs of capital and the prospect of higher returns than those available in their respective home markets. Additionally, there was continued consolidation in the yieldco arena, and oil & gas conglomerates demonstrated an active interest in the renewables sector.
Going into 2019, annual installations for both wind and solar are anticipated to increase as the impending PTC cliff drives a development rush for onshore wind through 2020 and the effects of tariffs taper off for solar. We expect the rapid pace of M&A to continue as investors seek out attractive solar and onshore wind opportunities.