Decline in Renewable Energy Financing in 2024
Global funding for solar, energy storage, and smart grid companies saw a significant downturn in 2024, as reported by the Mercom Capital Group. Venture capital and public market financing for solar took major hits, with declines of 36% and 59%, respectively. Similarly, energy storage venture funding plummeted by 60% year-over-year. The overall slowdown in renewable energy financing can be attributed to political uncertainty surrounding clean energy policies under the Trump administration, according to Raj Prabhu, CEO of Mercom Capital.
Despite these challenges, corporate energy storage funding increased slightly by 5%, reaching $19.9 billion. However, this rise was primarily driven by a single large deal in the fourth quarter, and the overall trend indicated a drop without that transaction. Solar companies, on the other hand, experienced a 24% decrease in total corporate funding, falling from $34.4 billion in 2023 to $26.3 billion in 2024.
Political and Economic Factors Shape Investor Behavior
Investor hesitation in 2024 was influenced by a combination of high interest rates and political uncertainties surrounding the U.S. election and the Trump administration’s stance on renewable energy incentives. Smaller solar projects and rooftop solar companies were particularly affected by rising interest rates, though global funding for solar installations exceeding 1 MW grew by 21% compared to the previous year.
Debt financing became a more prominent funding avenue, with solar companies securing a record $5 billion in securitization deals. Prabhu noted this shift as a sign of solar’s maturity as an asset class, which continues to attract investment despite broader market challenges.
Meanwhile, mergers and acquisitions within the energy storage sector increased, showcasing some resilience in this area. The smart grid sector also saw a 13% rise in venture capital funding, primarily supporting companies involved in software and services for electric vehicle chargers.
Outlook for Renewable Energy Funding in 2025
Investor confidence in renewable energy sectors, including solar and energy storage, is expected to remain subdued in the early months of 2025 as the industry waits for clarity on the Trump administration’s energy policies. However, there is potential for growth in energy storage later in the year, driven by increasing electricity demand and a renewed emphasis on grid stability.
Prabhu emphasized the growing appeal of energy storage projects, citing faster growth rates compared to solar companies. He also noted the pivotal role of energy storage in advancing various energy deals. “I see much more aggressive forecasting when it comes to energy storage installations in 2025,” he remarked, suggesting that this sector may emerge as a key area of focus in the renewable energy landscape.
As the new administration establishes its policies, stakeholders are likely to keep a close watch on developments that could influence the trajectory of global funding for solar investments in the coming years.
