The value of merger and acquisition (M&A) activity in the renewable energy sector more than doubled in 2016 as offshore wind investments soared, according to new data.
While overall levels of project finance activity rose 5.7 per cent to £18.5bn, M&A in the sector was worth a record £6.6bn last year despite the number of deals dropping from 113 to 84, according to UK law firm TLT’s renewable energy finance report with industry analysts Clean Energy Pipeline (CEP).
In offshore wind specifically, M&A activity surged to £3.4bn, a steep rise on the £384m recorded in 2015.
Onshore wind M&A deals powered ahead to reach £1.2bn in 2016, double the £609m recorded in 2015, while biomass activity hit a record £498m during the period.
“The data for 2016 clearly shows a strong, robust sector adapting to a subsidy-free era. Renewables projects are a good source of long-term and stable returns for investors and funders. Scale and maturity will continue to make renewables attractive to both finance and re-finance as the secondary market expands,” said TLT head of energy and renewables Maria Connolly.
Solar power was the only renewable energy source in the report where M&A activity dropped last year. As was expected with the end of the government subsidy scheme, M&A activity dipped from £1.7bn to £1.5bn as investment fell to just £1bn from £5bn the previous year.
Connolly said the solar market will likely plateau in 2017, but that should boost interest and competition in smaller deals.
Looking forward, M&A activity across the renewables sector is seen remaining strong in 2017 – £2.9bn has already been recorded for the first quarter.
That means high demand will push investors to focus their interest on less traditional technologies, like energy storage, Connolly said.
“Energy storage is widely heralded as the technology that will change the face of the sector; and projects are already attracting considerable investment interest. But the key to making energy storage attractive (is) demonstrable revenue streams.”
A recent report found the energy storage sector is expanding rapidly as growth in independent renewables flatlines. It said UK battery capacity poised to grow up to 100 times by 2020.