Dive Brief:
- Total corporate funding raised by solar and energy storage companies declined 16% and 19%, respectively, in 2025, according to analysis by Mercom Capital Group.
- Despite the declining dollar amounts, mergers and acquisitions activity rose in 2025, driven primarily by growing energy demand and lower valuations. The Mercom analysis covered the global market excluding China.
- While a major recovery seems unlikely, there are reasons to believe the steady pace of renewable energy project acquisitions will continue in 2026, according to Scott Wilmot, a principal analyst at Enverus.
Dive Insight:
Despite some turbulent headlines, 2025 wasn't as bad for renewable energy companies as it may have seemed, according to Mercom CEO Raj Prabhu.
While policy uncertainty, trade and tariff risks, as well as higher interest rates, chilled investor interest in the sector, that same trend drove lower company and project valuations that prompted a greater number of mergers and acquisitions amid growing energy demand, he said.
Global venture capital and private equity funding for solar companies fell 22% in 2025, according to data compiled by Mercom. But solar M&A rose 17%, with 96 mergers in 2025 compared to 82 in 2024.
A small number of high-value, one-off energy storage deals in 2024 caused the total value of energy storage M&A activity to fall 71% in 2025, but storage saw the total number of project acquisitions jump from 38 transactions in 2024 to 65 in 2025.
“When there is uncertainty, there are good deals to be had,” Prabhu said, adding that he expected the pace of renewable energy M&A to continue in 2026. “People are looking for late-stage, low-risk projects that are ready to go, and those are hot commodities. Everyone wants to get their hands on them.”
Meanwhile, investor excitement about the future of artificial intelligence and energy demand drove a 38% increase in total funding for smart grid technology companies, with valuations rising faster than the number of deals, which also rose 25%, according to Mercom.
But while there's clearly a lot of private equity interest in new grid technologies, it's not entirely clear whether utilities will buy them, Wilmot said.
Energy storage projects — especially those located near potential data center sites — drew particularly strong interest in 2025, Wilmot said. But he also suspects that interest in battery storage may have already peaked in some markets, such as CAISO and ERCOT, which he said have become oversaturated.
New “foreign entity of concern” rules will impact solar and storage supply chains and could further depress activity in 2026, Wilmot said, because the need to locate domestic suppliers could stall some projects and raise costs for developers.
“I expect there will be some pain over the next couple of years, because it will take time for local supply chains to mature,” he said. “If I had a big pipeline of projects, I would be a little nervous about where costs are going.”
On the other hand, if the Federal Reserve cuts interest rates in 2026, that could give renewable energy more of a boost — but probably not enough to overcome the costs of FEOC compliance, Wilmot said.
Even so, there's still a large number of high-quality renewable energy projects on the market and ample demand for new generation, Wilmot said. So while buyers and investors may be feeling a bit more selective, Wilmot doesn't think renewable energy project acquisitions are likely to slow in 2026.
