Great expectations | Deal making in the renewable energy sector
/11th January 2018, by KPMG/
Margins are tight, forcing key players to seek out new ways to improve efficiency and returns on investment, and new revenue streams.
At the same time, customers expect more from suppliers. They are demanding increasingly green energy options that are both consistent and made available at a reasonable price. Governments, meanwhile, are struggling to adapt or reinvent their energy policies to help the industry meet this demand, maintain a healthy energy sector and address the challenges posed by climate change.
There are plenty of opportunities to be found. The renewables revolution offers technology-driven energy generation and distribution, consistently and at an increasingly reasonable price. The energy sector itself is undergoing consolidation in some countries while in others, new, smaller and more agile providers are stepping onto the stage at a steady pace. And with this activity comes a stream of renewable energy M&A activity and growth, as developers, utilities and investors alike strive to stay ahead of the curve. Who is taking advantage of the opportunities? Who is holding back, worried about the inherent risk?
Analysts of KPMG spoke with 200 senior-level investors in renewable energy to find out where they’re looking for the next big opportunities.
Highlights from the report include:
- Deal volumes in the renewable energy sector have increased every year since 2010 and continue to climb. In 2017, there were 406 deals globally, worth EUR40.1 billion.
- Respondents expect Germany to see the biggest rise in M&A activity in the next 12 months, ranking it the western European country where they are most likely to invest. This is attributed to its stable regulatory landscape and continuous development plans for renewables.
- China is attracting similar interest, based largely on its deep pockets and long-term renewables strategy. The government plans to invest 2.5 trillion Yuan (US$377 billion) in renewable power generation as part of its 13th Five-Year Plan on Energy Development, increasing installed capacity to 680GW by 2020.
- In terms of sub-sectors, 43 percent of respondents say offshore wind will see the biggest rise in M&A over the next 12 months, followed by hydropower (39 percent), photovoltaic solar (16 percent), and thermal solar (1 percent), while smaller scale technology like biogas remains under-represented.
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