Energy – Solar

Solar Power Industry

Q4 2023: Mergers and Acquisitions Trend Report

Industry Overview

  • The Solar Power industry is in the growth stage of its life cycle and is expected to grow rapidly in the following decades, benefiting from strong demand tailwinds.
  • The overall outlook for the Solar Power Industry is positive with significant ESG and cost-reduction tailwinds. In the past few years, government subsidization for ESG firms has grown in light of concerns regarding climate change.
  • Industry revenue growth has been strongly outcompeting US GDP growth over the past five years as state and federal governments have provided incentives to expand the use of renewable energy alternatives.

Key Industry Trends

  • The success of the Solar Power industry is highly dependent on its ability to compete with traditional energy sources. As such, as crude oil prices reach 21st century highs, renewable energy demand is expected to rise, raising Solar Power revenue and prevalence.
  • Solar power is more prevalent in southern states due to the increased open space and exposure to direct sunlight. Further, state legislation plays a massive role in entering the solar power market, allowing companies to reduce entry-costs and create a need for solar energy.
  • Many traditional energy and utility companies are being required by state and federal governments to diversify their energy portfolio to include more renewable energy. This development has led to a rise in Solar Power in the M&A space and amongst large corporations.

Recent M&A Transactions

Historical Performance

  • The Solar Power industry realized revenue growth at a 19.3% CAGR over the past five years, mostly due to a higher government funding towards renewable energy solutions and solar panel installation.
  • New financing systems, such as power purchase agreements (PPA), reduce the cost of implementing and maintaining renewable energy. Lower costs help incentivize buyers to adopt solar power energy, supporting industry growth.
  • Due to the falling prices of solar photovoltaic installations, Solar Power plants have been built at an accelerating rate over the past six years.

Future Industry Growth

  • Growth in the Solar Power market is expected to continue as there is pressure to improve U.S. energy self-sufficiency, concerns regarding climate change, and strong government support for the emergent renewable energy market.
  • Electric power consumption is expected to increase slightly; therefore, it is expected to continue its shift toward renewable sources and away from fossil fuels.
  • As the industry exits its general growth phase, manufacturing will become more efficient and production costs are expected to gradually decrease.

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