US solar M&A activity led by deals for co-located storage assets for the first time since 2018

The adoption of solar energy in the United States has grown steadily over the last decade, with North America currently leading the global landscape in terms of yearly increases in installed capacity, investments, and M&A activity. In 2022, solar energy assets accounted for more than 50% of the total transaction enterprise value and M&A activity for renewable generating assets in the country. While standalone solar plants are helping to decarbonize operations for several customers, the need to co-locate a storage facility with the solar power plant has become increasingly necessary to satisfy the rising demand for clean power by the commercial and industrial sectors. 

Prior to the Inflation Reduction Act (IRA) of 2022, co-located storage assets were considered “solar property", which limited investors’ ability to maximize the benefit of tax credits on the combined project. With the new law, even standalone storage facilities can claim 30% investment tax credits (ITC), while solar assets can claim production tax credits (PTC), which will improve the project's economics.

The Enerdatics research team has analyzed the growth of M&A activity for solar-plus-storage assets in the US, and summarized its findings on the attached slide, the highlights of which are:

– High value ($100mn+) deals involving solar + storage assets accounted for 63% of the total M&A activity in US' solar sector in 2022

– Private equity (PE) firms are dominating the space, with Brookfield, TPG Capital, The Carlyle Group, and CarVal Investors deploying between $300mn-$1bn to take over or invest in companies developing large pipelines of solar assets co-located with storage facilities

– The increase in investor appetite for solar-plus-storage assets is consequently stimulating a rise in the distributed energy segment, with Brookfield’s acquisition of Standard Solar for $1bn marking the first billion-dollar deal for an early-stage distributed resources platform in the US, since 2017

– French utility ENGIE kicked off 2023 with the acquisition of 1.25 GW of solar-plus-storage assets in Arizona, representing a growing interest among large utilities to acquire assets with tremendous upside potential from incentives approved under the IRA

The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.

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