Venture Capital Investment in Solar Industry Falling Sharply

11th Apr 2013

Mercom Capital Group have just released a new report which shows that venture capital funding that goes to solar companies is falling fast. In the first quarter of this year solar venture capital fell almost a third to $126 million, from the $324 million invested the same time last year. This means that fewer solar start-up companies receive the funding needed to survive.

Mercom’s report also saw a shift in the destination of venture capital in the solar industry, with investors turning away from solar manufacturers to new solar technologies, such as thin film solar panels, and downstream operations, such as solar panel installers.

Raj Prabhu, the CEO of Mercom, said, “downstream companies received the most VC funding of all categories. This is the first quarter we’ve seen this happen since we began tracking.”

Part of the reason behind the shift is the low price of silicon PV, which makes it hard for new companies with new technologies to enter the market and compete. There are plenty of new ideas out there, but they are stuck in the development phase awaiting the necessary funding.

Downstream companies are more appealing than new solar technologies due to the risks, especially after the high profile failure of Solyndra and Abound Solar. Prabha explained that “after being burned by solar technology investments, especially thin film, we are finally seeing VC investments shift away from technologies and towards downstream or lease companies that are benefitting from record low panel prices.”

By. Daniel Boardman