Solar project M&A - Chaos on the buy side
Did you feel like the IPPs in 2024 were all over the place? It’s easy to feel that way. This post highlights some of the chaos that we witnessed last year across the buy side of the M&A market for C&I and community solar projects. But we’ve actually come to expect this, having witnessed it year after year, and you probably should too.
As a platform supporting renewable energy project funding, we see a lot of deals. We also see the aggregate behavior of buyers and sellers and its patterns. Everyone knows the deals they’re working on and the behavior of those counterparties. But without more data points, it’s hard to know if those behaviors are unique to those parties or part of a broader trend.
This is especially true for sellers who experience shifts on the buy side. One moment you’re working with a buyer who prices competitively and seems eager to close, and the next moment they’re changing their price - and not for the better - or backing out of the deal entirely. What happened? Was it me? Was it them? Was it the project? Or was it a broader trend like rising hurdle rates across the market?
The only constant is change
We help sellers make sense of this kind of experience and find a new party to work with. But we’ve seen these patterns so frequently that we’ve actually come to expect them. And if we could convey one universal truth to all developers, EPCs, and project sellers across the middle market, it would be this: the buy side of the market is constantly shifting.
Highlights from 2024
Last year was no exception. We saw changes in pricing, changes in project size requirements, changes in timeline requirements for project development and funding, and even leading investors in specific market segments abandoning those segments entirely. Here are the highlights:
Multiple buyers across C&I and community solar raised their goal posts for deal sizes, dropping or postponing anything in their pipeline that didn’t meet the new threshold.
We consistently saw C&I buyers raise their threshold for investment from $1M, then to 1MW, then to $2M, etc.
A leading PPA provider abandoned their pipeline of all sub 1MW (or is it 2MW?) projects altogether
Multiple community solar buyers increased their minimum size threshold for transacting - often to 15-20MWs
Multiple buyers found projects that “no longer fit with their pipeline” and turned around to sell them, and we don’t believe that this was the original intent from most of these buyers
Multiple PPA providers abandoned the C&I market altogether
Multiple smaller buyers chose to focus exclusively on current year CODs, while many larger buyers chose to focus only on projects that would reach COD in 2025
Multiple experienced buyers who had previously focused on earlier stage acquisitions started buying projects at NTP
Multiple experienced buyers shifted to buying earlier stage community solar projects, as they found themselves routinely uncompetitive at the NTP acquisition timing
But was 2024 unique from prior years? Will 2025 be any different?
In short, no. This is the way this market has functioned historically and will continue to function. Sure, macro trends like policy shifts, interest rates, supply chain issues, and other changes impact everybody. But why do so many individual companies shift their focus so dramatically?
Our perspective here may be different from what sellers see in their interactions with deal origination teams at buyer organizations. These groups identify investment opportunities and move deals from a first conversation to pricing and LOI all the way through diligence to closing. We work with them too, they’re great folks. But they’re often surprised by the shifts at their own companies.
The decision making that drives dramatic shifts from buyers occurs among senior executives. It’s informed by the pricing, capacity, and timing of their capital sources, including debt and tax equity, along with their viewpoints on shifting market conditions. These are not decisions taken lightly. These teams are managing hundreds of millions or billions of dollars in institutional capital. But the market for those capital sources is dynamic too. And the solar coaster is fierce.
In a recent episode of the Open Circuit podcast, Jigar Shaw mentioned 9 commercial solar platforms for sale right now despite the strongest demand we’ve ever seen for solar and battery storage among commercial customers. He attributes this buying opportunity to mispricing in 2024, prior to the election - which itself is adding uncertainty. For all of these reasons, we’re expecting new shifts on the buy side in 2025, just like in 2024 and in previous years.
What to do about it
All of this points to the importance of having multiple offers from high quality buyers. Here are our recommendations for for sellers bringing projects to market in 2025:
Find multiple buyers who are a real fit for any given project or portfolio, not just “interested.” You should be able to tell which buyers are “interested” and which buyers are “hungry” for your projects or portfolio. You want to work with those who are “hungry” for it.
Assess their team’s eagerness and ability to execute alongside their pricing.
Leverage Conductor to do this efficiently and effectively for all of your projects across size, geography, and offtake type. Most sellers take a pulse on the market once or twice a year, we’re in this daily and it helps us accelerate the deal making on our platform.
