Private equity firms showered money on U.S. wind and solar energy companies last year, even as bottlenecks slowed new projects to a crawl.
Why it matters: Demand for renewable energy from businesses, governments and homeowners is expected to overcome shorter-term construction headaches.
What's happening: Wind and solar companies saw a one-year, 4x jump in private equity investment to $16.3 billion last year, per a report from the American Investment Council shared with Axios.
- The number of deals also climbed by more than one-third to 55 transactions last year.
Zoom in: The deals include a $750 million growth investment led by private equity giant TPG in renewables developer Intersect Power, and $175 million from Apollo in developer Summit Ridge Energy.
Yes, but: Big solar and wind projects had a miserable 2022 when it came to putting steel in the ground.
- Supply chain upheaval and trade disputes with China choked the solar industry, stoking a 16% drop in capacity that came online last year.
- Wind energy developers and their manufacturers were beset by costly mechanical failures. Offshore projects off the East Coast are having trouble too.
Plus: There's a gigantic, years-long backlog of projects waiting to connect to electric grids — those wind and solar projects alone would generate more electricity than the entire U.S. grid.
Meanwhile, even without the logjam, developers can't find enough skilled workers to build their projects.
Reality check: These are serious problems, but they have solutions. The scale of investment shows investors are confident they'll be resolved soon — or soon-ish
- Supply chain issues are easing. More imports of solar parts seem to be making it through Customs. And grid operators and regulators are taking steps to approve projects more quickly.
- Demand for wind and solar is steady, helped by corporate renewable mandates, state and local climate goals, and lucrative incentives in the Inflation Reduction Act.
What's next: Solar could see a nearly 3x rebound in new generation capacity this year, per the U.S. Energy Information Administration. Wind's growth is expected to remain flat.
