Private equity and venture capital transactions in the global renewable electricity sector reached $14.58 billion between Jan. 1 and Nov. 28, the highest total in the past five years, S&P Global Market Intelligence data shows.
The number of transactions was at 104, roughly in line with deal volume in the prior four years, albeit slightly down from 125 deals in 2022 and 123 deals in 2021.
For the year through Nov. 28, global deal value was highest at the end of the third quarter at $6.72 billion, up significantly from $1.04 billion in the same quarter the year before, while deal count increased to 31 from 28.
Transactions are slowing in the fourth quarter, with value and volume declining after three consecutive quarters of growth, the data shows.
Europe is on track to end the year with the highest investment value. The region's share in investments in the sector, which comprises companies that engage in generation and distribution of renewable electricity, has been growing since at least 2021 and was at $9.2 billion as of Nov. 28.
The US and Canada, which logged the highest investment value in 2022 at $6.1 billion, have so far pulled in $3.5 billion.
Asia-Pacific investments are at $1.7 billion, against $2.2 billion in full-year 2022.
Headwinds
Investments in the global renewables sector are expected to continue to ramp up in the coming year as countries and companies pursue their energy transition goals. However, there are a number of challenges that could slow transition efforts, including persistent high inflation and interest rates, according to Market Intelligence's "Big Picture 2024 Commodities Outlook: Growing complexities for energy transition" report.
"Ongoing uncertainty in the macroeconomic and geopolitical environment, along with the reality of implementing a sea change in the global energy resource mix, will continue to impact the economics of clean energy projects in significant and unexpected ways," according to the report.
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Record dry powder for renewables
As of March 31, about $66.1 billion of global private equity dry powder, or capital waiting to be invested, was dedicated to renewable energy, according to data from Preqin.
This is the highest level in more than two decades.
PE seeks returns
A huge potential pool of capital is available to fund the green energy transition, but the challenge is finding projects with sufficient returns, Rebecca Fitz, partner and associate director in The Boston Consulting Group Inc.'s Center for Energy Impact, told Market Intelligence.
"Everyone wants to be involved in good low-carbon projects," Fitz said. [However], are there enough good investable projects to attract capital?"
In the overall energy transition space, scalable investments such as renewables, which are already scaling up, as well as gas transmission to enable expansion of the power grid are what will capture the most amount of capital in the coming years, Fitz believes.
Top deals
Asterion Industrial Partners' agreement to buy Germany's Steag GmbH was the top deal for the year through Nov. 28 at roughly $2.82 billion. It was followed by Antin Infrastructure Partners's announced offer to acquire Madrid-based Opdenergy Holding SA and US-based Invenergy Renewables LLC's funding round that included participation from existing investor Blackstone Infrastructure Partners LP.
