The first U.S. solar IPO in a year could be coming soon, but the merger and acquisition market is what will be bringing in exits and cash for solar startups. Yesterday MEMC Electronic Materials (s WFR), a company that makes silicon wafers for the solar industry, announced that it plans to buy up SunEdison, one of the pioneers of the solar as a service business model. Yesterday also Greentech Media reported that chip maker National Semiconductor (s NSM) has acquired power monitoring software maker Energy Recommerce.
You could call these moves proof that there are exits for solar firms that have been able to carve out a market — by being a leader in SunEdison’s case, and by developing innovative software in Energy Recommerce’s case. But it’s also an indication of continued consolidation in some solar sectors, in particular the solar service industry. During a recession, the biggest companies end up making most of the capital-intensive plays — amassing financing and building large-scale solar projects, for example.
In a difficult market, solar service startups like SunEdison and San Francisco-based MMA Renewables just couldn’t survive on their own. Spain-based solar developer Fotowatio announced recently that it would buy up most of the assets of SunEdison competitor MMA Renewables. SunEdison, however, is getting a reasonable price: MEMC plans to pay $200 million for SunEdison, with potentially up to $89 million more if SunEdison meets certain performance requirements before the end of the year.
At the end of last year Lux Research predicted that in 2009 the supply of solar modules would overtake demand, and the resulting price drop would mean “an industry shakeout, with the weakest players being acquired or failing,” wrote Lux analyst Ted Sullivan. Add the recession to that and the environment has meant trouble for some smaller me-too solar players or firms that don’t have enough scale or innovative technology to protect them. This year solar installer groSolar acquired the residential business of Borrego Solar Systems and Optisolar ended up hawking its project pipeline to First Solar (s FSLR).
Solar M&A isn’t all about consolidating in a tough market. Solar is still set to be a massive industry in the coming years, and has gotten a significant boost from the stimulus. The predictions for industry growth are large enough that the chip makers — including National Semiconductor — have aggressively started to move in. National Semiconductor recently launched a
micro-inverter power-optimizer system called SolarMagic and, as Greentech Media explains, the Energy Recommerce software, would fit nicely with SolarMagic.
Image courtesy of NREL.