The Cleantech Group released its preliminary investment numbers on Tuesday to show that solar, once the top money grabber, ceded that spot to transportation, biofuel and green chemicals during the third quarter of this year. Solar investments accounted for only 4 percent ($70 million) of the $1.6 billion global cleantech investments during the third quarter. Transportation deals made up 21 percent ($320 million), biofuel and chemicals at 16 percent ($256 million), and smart grid at 13 percent ($208 million).

The slide has been happening for several quarters now, fueled in part by the tough times that solar technology developers, from silicon to cell and panel makers, have been experiencing for nearly two years now. A terrible imbalance of supply and demand has pummeled the prices of solar panels, causing them to fall 50 percent during 2011 and around 30 percent so far this year. All major players, from Suntech Power to First Solar, have scaled back production and expansion plans.

Back in 2008, 40 percent of the deal amount involved solar, compared with 12 percent for so far this year.

Many companies that were hoping to move from pilot to mass production during this period found themselves unable to compete or raise enough money to continue. Abound Solar filed for bankruptcy in July this year. Amonix closed its North Las Vegas factory after operating it for just a little more than a year. GE, which vowed to be a major solar panel maker using a cadmium-telluride technology, suspended its plan to build a 400-MW factory in Colorado. MiaSole, after raising somewhere around $500 million, is being sold to Hanergy, a renewable energy project developer in China, for a paltry $30 million

“Solar has really been out of favor, and it’s coming through strongly in our numbers,” said Sheeraz Haji, CEO of the Cleantech Group, during a conference call with reporters on Tuesday.

China, the home base of several of the world’s largest solar equipment makers and a popular place for accessing money from the public markets, saw 10 companies suspending or pulling their IPO plans from January to August this year, Haji said.

Cleantech Group’s finding corresponds with money surveys from other firms. Mercom Capital Group released a third-quarter investment report yesterday showing that venture capital funding fell to its lowest since 2008, reaching only $72 million with 14 deals in the third quarter. Even during the second quarter of this year, investors pumped in $376 million in 32 deals.

While manufacturers, who once made good money, now are suffering big losses, companies that develop and install solar energy projects are having an easier time attracting investments. Cheaper solar panel prices help them to reduce their costs. Plus these developers and installers have continued to benefit from federal, state and local government incentives to promote solar energy generation.

Companies such as Clean Power Finance, SunRun and SolarCity have been able to raise funds for business development and for financing solar panel installations. Charging home or business owners for using solar electricity rather than the equipment and labor costs makes going solar more affordable upfront. Blackstone, a private equity group, announced last month that it will buy home security system and solar installer, Vivint, for over $2 billion.

SolarCity’s pending IPO will be a big test on whether public market investors will view solar companies in the project financing and retail service sector with a truly better bet than those in manufacturing. SolarCity is eyeing a $201 million IPO although it has yet to make a profit. 

Ucilia Wang

About: Ucilia Wang is a California-based freelance journalist who writes about renewable energy. She previously was the associate editor at Greentech Media and a staff.

COMMENT:

Ucilia seems to imply that a drop in VC investment in solar somehow signifies the failure of the industry, when this is clearly not the case.

What is the case, is that the PV industry is maturing into it's next stage of evolution. Start-ups and "better mousetrap" models cannot compete in this stage of the curve, and this is signified by the consolidation of the industry. It is a very painful time for manufacturers, and a lean time for integrators, but an amazing time for customers. The survivors of this period will be bigger, and stronger, and go on to be solar "blue chips".

Silicon Valley needs to realize that the PV industry is fundamentally different than Tech, and success will not be measured by VC involvement in the future. It is more closely resemble the Utility industry, with lower growth expectations, and smaller margins, and bigger volumes.

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