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04 INVESTMENT FLOWS
INVESTMENT BY TYPE
Global research and development i (R&D) spending was
almost unchanged in 2015, at USD 9.1 billion.
Government R&D was down 3% relative to 2014, to USD 4.4 billion,
and corporate R&D was up by 3% (to USD 4.7 billion). China’s
level of R&D spending challenged Europe’s for the first time;
spending in Europe fell 8% compared to 2014 while that in China
rose 4%, with each investing USD 2.8 billion. In third place, the
United States spent USD 1.5 billion, a modest increase of 1%.
Total R&D spending on solar power rose 1% to USD 4.5 billion.
For the fifth year in a row,, R&D spending for solar power equated
that for all other sectors combined, and it was approximately 2.5
times that of the next closest technology, wind power. Investments
in wind power were unchanged over 2014, at USD 1.8 billion.
Investment in biofuels was down 3%, to USD 1.6 billion.
Asset finance of utility-scale projects accounted for the vast
majority of total investment in renewable energy. It totalled
USD 199 billion during the year, an increase of 6% relative to 2014.
Small-scale distributed capacity investment, largely rooftop
solar PV, was USD 67.4 billion. Falling costs and innovative
financing mechanisms are putting small-scale distributed solar
PV within reach of more people in developed, emerging and
developing economies.
Public market investment in renewable energy companies and
funds fell 21%, to USD 12.8 billion. However, it remained three
times higher than the total in 2012. Funds raised by initial public
offerings (IPOs) fell by 35% relative to 2014, to USD 2.3 billion.
However, secondary issues and private investment in public
equity (PIPE) rose by 4% to a new record of USD 6.7 billion.
Investment via public markets in “yield companies” (yieldcos)
started to emerge in 2013, with investors seeing this model as
providing steady dividend income at relatively low risk, at a time of
record-low interest rates. The noteworthy overall figure for public
markets investment in 2015 (USD 12.8 billion) hides the fact that
the year saw disproportionate equity-raising by renewable energy
companies, with North American yieldcos and their European
equivalents accounting for nearly half of the total. The yieldco
model came under closer examination in the second half of 2015
in response to a sudden reassessment by investors of whether
yieldcos were really growth stocks, and to a resulting sell-off.
Venture capital and private equity investment (VC/PE) in
renewable energy increased by 34% to USD 3.4 billion in 2015,
the second consecutive year of growth. Investment in earlystage
venture capital jumped 60%, although from a very low
base. There was a more modest 28% increase in late-stage
venture capital, while private equity made solid gains of 32%.
As in previous years, solar power companies led the field with
USD 2.4 billion in venture capital and private equity investment,
representing an increase of 58% compared to 2014. Due in part
to the falling costs of solar PV, venture investors have begun
to shift their focus away from improving the performance of
the hardware, to making solar technologies available to new
markets and previously unreachable sectors of society – for
example, the development of mobile-enabled solar systems for
off-grid communities in developing countries. (p See Distributed
Renewable Energy chapter.)
Acquisition activity – which is not counted as part of the
USD 285.9 billion in new investment – jumped to a record
USD 93.9 billion, up 7% compared to 2014. The scale of this total
is a sign of how large the renewable energy sector has grown in
terms of both annual sales and installed capacity. These figures
include corporate mergers and acquisitions (M&A); power
infrastructure acquisitions and debt refinancing; private equity
buy-outs; and the purchase of stakes in specialist companies by
trade buyers.
Corporate M&A – the buying and selling of companies – increased
by 63% to USD 19.2 billion. This increase represents a substantial
change from 2014, when corporate M&A fell 35%. Similar to
past years, the largest category of acquisition activity was asset
purchases and refinancing, which totalled USD 69.3 billion in 2015,
down 3% from the all-time high reached in 2014. Public market
investor exits were almost unchanged, at USD 1.8 billion, but
private equity buy-outs increased some 36% to USD 3.5 billion.
As usual, acquisition activity was dominated by wind power (at
USD 57.6 billion) and solar power (at USD 29.4 billion).
i See Sidebar 5 in GSR 2013, “Investment Types and Terminology”, for an
explanation of investment terms used in this section.
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