Technical Report 

NREL/TP-6A2-43602 

December 2008 

A Historical Analysis of 

Investment in Solar Energy 

Technologies (2000-2007) 

Charles E. Jennings 

Financial Analytics Consulting Corporation 

Robert M. Margolis 

National Renewable Energy Laboratory 

John E. Bartlett 

New West Technologies, LLC 
A Historical Analysis of 

Investment in Solar Energy 

Technologies (2000-2007) 

Charles E. Jennings 

Financial Analytics Consulting Corporation 

Robert M. Margolis 

National Renewable Energy Laboratory 

John E. Bartlett 

New West Technologies, LLC 

Prepared under Subcontract No. AEK-8-888272-01 and Task No. PBV7.6301 

Technical Report 

NREL/TP-6A2-43602 

December 2008 

National Renewable Energy Laboratory

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Operated by the Alliance for Sustainable Energy, LLC 

Contract No. DE-AC36-08-GO28308
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Acknowledgments 

The authors would like to thank the following people for providing helpful comments on 

draft versions of this report: Doug Arent (National Renewable Energy Laboratory), Drew 

Bond (Department of Energy – DOE), Jenny Chase (New Energy Finance), Craig 

Cornelius (Hudson Clean Energy Partners), John Lushetsky (DOE), Michael Molnar 

(Goldman Sachs), and Scott Stephens (DOE). The authors also are grateful for funding 

support from the U.S. Department of Energy. 

iii
Table of Contents 

Executive Summary .............................................................................................................................. 1 

Total Investment in Solar Industry 2000–2007 .................................................................................... 4 

Figure 1. U.S. DOE Solar Technology Development Pipeline.................................................... 4 

Figure 2. Positive Feedback for Solar .......................................................................................... 5 

Figure 3. Global Capital Investments in Solar Energy ................................................................ 7 

Figure 4. U.S. Capital Investments in Solar Energy .................................................................... 9 

Private Investment in the Solar Industry ............................................................................................. 10 

Figure 5: Global Venture Capital Investments in Clean Energy Technologies ......................... 10 

Figure 6: Global Venture Capital and Private Equity Investments in Solar .............................. 12 

Venture Capital Investment in Solar ............................................................................................... 13 

Figure 7: Global Venture Capital Investment in Solar .............................................................. 13 

Figure 8: Global Solar Venture Capital Rounds and Average Round Amount ......................... 15 

Figure 9: Global Solar Venture Capital Funding by Round Type ............................................. 16 

Private Equity Investment in Solar ................................................................................................. 17 

Figure 10: Global Private Equity Investment in Solar ............................................................... 17 

Private Investment by Technology Area......................................................................................... 19 

Figure 11: Global Venture Capital and Private Equity Investments by Solar Technology ....... 19 

Figure 12: Global Venture Capital Investment by Solar Technology ....................................... 21 

Figure 13: Global Private Equity Investment by Solar Technology .......................................... 22 

Private Investment in Solar Conclusions: ....................................................................................... 23 

Mergers and Acquisitions in the Solar Industry ................................................................................. 24 

Figure 14: Global Merger and Acquisition Activity in Solar .................................................... 24 

Public Investment in the Solar Industry .............................................................................................. 26 

Figure 15: Global Valuations of Completed Solar Public Offerings ......................................... 26 

Figure 16: Global Solar Public Offerings by Status .................................................................. 27 

Figure 17: Performance of Solar Photovoltaic Stocks ............................................................... 28 

Table 1: Public Pure-Play Solar Companies .............................................................................. 29 

Figure 18: Global Solar Industry Revenues and Operating Profits ........................................... 30 

Conclusion .......................................................................................................................................... 31 

List of Figures ..................................................................................................................................... 32 

Glossary of Acronyms ........................................................................................................................ 33 

iv
Executive Summary 

The solar energy industry experienced unprecedented growth in the eight years from 2000 to 

2007, with explosive growth occurring in the latter half of this period. From 2004 to 2007, global 

private sector investment in solar energy increased by almost twenty-fold, marking a dramatic 

increase in the short span of four years. 

In this paper, we examine the timing, magnitude, focus and location of various forms of 

investment in the solar energy sector. We analyze their trends to provide an understanding of the 

growth of the solar industry during the past eight years and to identify emerging themes in this 

rapidly evolving industry. 

In recent years, solar generation capacity has shifted from an energy source used primarily 

for remote power at off-grid locations to a viable energy source for those with access to the 

electricity grid. While the vast majority of demand for solar energy has been directly stimulated by 

government policy, this market expansion has resulted in major reductions in the cost to supply solar 

energy and has highlighted a path to future economic competitiveness with other forms of electricity 

generation. Moreover, solar energy does not bear the environmental and national security external 

costs associated with fossil and nuclear-based generation. Advanced by early government incentives 

and R&D investment, many industry analysts expect solar energy to transition to grid parity within 

the next three to seven years. 

 

In section 1 of this report, we describe the total investment in the solar industry from 2000 to 

2007. The growth in the solar industry during this period reflects a series of complex interactions 

between the private and public sectors, involving multiple feedback loops. These exchanges have 

enabled solar technology innovations to progress from the laboratory to the commercial marketplace. 

Throughout this process, investments from governments, private investors and public equity markets 

have interacted to help commercialize technology innovations. 

Our analysis focuses on venture capital, private equity, mergers and acquisitions and public 

equity investing activities. These are the types of investment that are having the greatest impact on 

the solar industry’s rapid expansion. The increased levels of investment over the past few years are 

the result of a mix of underlying factors, including private investment trends, manufacturing scaleup, greater product R&D, cost reductions, innovations in business and policy models and expanded 

markets for solar energy products. 

During the period 2000–2004, the U.S. Department of Energy Solar Energy Technologies 

Program (SETP) investment averaged about 50% of total investment in the U.S. solar sector. 

However, during the period 2004–2007, total investment in the U.S. solar industry increased at a 

145% compound annual growth rate (CAGR), expanding from $215 million to almost $3.2 billion. 

Of course the focus of SETP (applied R&D) and non-governmental investment (system 

development, manufacturing expansion, etc.) are quite different. Still, during this period, SETP 

investment as a percentage of total investment dropped from 50% to less than 4%. The dramatically 

increased role of non-governmental investment signals the movement of a range of solar energy 

1 
technology innovations out of government and private R&D laboratories and into the commercial 

marketplace. 

Two main drivers spurred the growth of non-governmental investments in solar energy in 

2005–2007: (1) if projected cost reductions can be achieved, the addressable market for solar energy 

will be immense, and (2) the previous 30 years of R&D in solar energy has created a suite of 

technologies that are now entering or are poised to enter the marketplace. However, it must be noted 

that government incentive programs stimulate the vast majority of current demand for solar 

electricity generation equipment. Without the government policies in Japan, Germany, Spain, the 

U.S. and several other countries, the market for solar energy technologies would only be a fraction 

of what it is today. 

In section 2, we examine private investment in the solar energy industry, including venture 

capital and private equity financing. In 2007, solar received the largest share of global clean energy 

venture capital investment, followed by energy efficiency. The total volume of venture capital 

investments in solar and efficiency (approximately $2.0 billion in 2007), has created significant 

momentum in these industries and will help solar to become an increasingly important source of 

energy in the near future. The long-term consequences of solar and energy-efficiency improvements 

will be more abundant and diverse sources of clean and reliable energy and less intensive energy 

use. 

 Significant regional differences exist between venture capital and private equity and the 

technologies they fund. In the United States, venture capital dominates due to the collaboration 

between scientists and investors pursuing the technologies that will reduce cost, achieve scale and fit 

different applications across the country, which is potentially the world’s largest solar market. 

Private equity investments in the U.S. could expand considerably if the federal government 

establishes a cap on carbon emissions or if cost reductions enable solar energy to be more 

competitive with electricity delivered from the grid. 

In Section 3, we examine mergers and acquisitions (M&A) in the solar industry. These 

transactions had a deal volume of more than $1.9 billion in 2007, but M&A activities are only 

beginning to take off. As solar is a new and rapidly growing industry, M&A could greatly expand 

due to further entry into the industry by established semiconductor and energy companies as well as 

integration of solar companies across the supply chain. 

In Section 4, we review public equity investment in the solar industry, which has become the 

largest source of funding for the solar industry. In this section, we also examine publicly-traded 

solar companies, the performance of solar photovoltaic stocks and the growth of the industry’s 

revenues and operating profits. 

Finally, we offer some conclusions on the historical investment trends in solar energy and 

what they suggest about technological, policy and market developments in the sector. 

2 
Total Investment in Solar Industry 2000–2007 

 The solar industry has experienced rapid acceleration in investment across all segments of 

the value chain during the past eight years. An important difference between solar and many other 

advanced technologies is that all investments in solar, with the exception of solar water heating, can 

be viewed primarily as investments in electrical generation capacity. In recent years, solar 

generation capacity has progressed from an energy source used mostly for remote power at off-grid 

locations to a viable energy source for those with access to the electricity grid. Stimulated by 

government policies, this solar market expansion has resulted in major reductions in the cost to 

supply solar energy, highlighting a path to future economic competitiveness with other forms of 

electricity generation, particularly when all external costs are taken into account. This report 

compiles and analyzes the different sources and uses of investments in solar energy, with the 

objective of clarifying the dynamics currently shaping the rapid evolution of the solar industry. 

 Investment in solar energy takes many forms, ranging from government research grants for 

technology development to mergers and acquisitions. However, to understand the different types, 

timing and purposes of investment, it is useful to illustrate the progression of solar technologies with 

the U.S. Department of Energy (DOE) Solar America Initiative’s technology development pipeline 

(shown in Figure 1). 

Figure 1. U.S. DOE Solar Technology Development Pipeline 

1

 

 Investments in solar energy can generally be mapped to the technology pipeline in the 

following manner: 

 Venture capital investments fund activities in the first four segments of the pipeline: (i) 

material & device concepts; (ii) device & process proof of concept; (iii) component prototype and 

pilot scale production; and (iv) prototype system development. Venture investments are typically in 

conjunction with, or as a follow on to, government R&D investment. 

Private equity investments fund activities in all four sections of System Development and 

Manufacturing: (i) prototype system development; (ii) manufacturing-oriented design and pilot 

 

1 U.S. DOE, SETP, Technology Development Pipeline

3 
production; (iii) commercial production demonstration; and (iv) commercial replication (leading to 

market transformation). 

Investments from public equity, debt and mergers and acquisitions fund activities in the last 

two segments of the pipeline: (i) commercial replication and (ii) market transformation. 

Growth in the solar industry occurs through a series of complex interactions between the 

private and public sector, involving multiple feedback loops, which has allowed technology 

innovation to proceed from laboratories to start-up companies. Initial expansion is financed through 

some combination of governmental and non-governmental funding. Once these companies are 

commercial, meaning that they have a saleable product available in the marketplace, their further 

expansion is funded through retained earnings from product sales, larger inflows of private or public 

equity and corporate debt. These financing mechanisms differ widely depending on the technology, 

company, market expectations and current market conditions. Growth in the solar industry is 

illustrated in Figure 2, although the order of steps may vary. 

Figure 2. Positive Feedback for Solar 

2

 Each of these stages may require different types of investment to progress into the next phase 

of technology and corporate growth. In this paper, we review seven types of investment for 

financing corporate growth and consider their current use in funding the development of solar 

technologies. 

The types of investment include: 

 

2 U.S. DOE, SETP, Scott Stephens, Positive Feedback for PV

4 
1. Government Grants: funding from government institutions to universities, companies and 

laboratories. 

2. Venture Capital: independently managed pools of capital that fund start-up firms and small 

businesses with exceptional growth potential. In return, venture capitalists receive equity 

stakes and sometimes leadership roles in the company. 

3. Private Equity: independently managed pools of capital, also called buyout or mezzanine 

funds, that purchase entire businesses, or large portions thereof, with exceptional growth or 

leverage potential. In the solar industry, private equity firms generally underwrite 

manufacturing expansions and undertake buyouts and corporate spin-offs. 

4. Project Finance: funding for the installation of solar energy generation facilities. 

5. Debt: Loans from banks or other pools of capital to finance solar energy installations or 

corporate expansions. 

6. Mergers and Acquisitions: transactions involving the purchase of an entire company or a 

significant interest in a company. 

7. Public Equity: public market investments in solar energy companies, in which corporate 

equity stakes are sold on the open market. 

 We focus our analysis on venture capital, private equity, mergers and acquisitions and public 

equity investments, which are having the greatest impact on the solar industry’s rapid expansion. 

Commencing with a global overview of investment activities in the industry, we will subsequently 

determine and interpret the trends and dynamics shaping capital flows within the industry. This topdown analysis should provide meaningful insights to all investors in the solar sector, from 

government technology developers to public equity investors. 

5 
Figure 3: Global Capital Investments in Solar Energy* 

 At first glance, Figure 3 seems to imply that global investment in solar energy was minimal 

from 2000 through 2004. However, it is the scale of the expansion from 2005 through 2007 that 

dwarfs the previous investment. Total annual investment in 2000 through 2003 was $66, $144, $110 

and $417 million sequentially, an 85% CAGR. This investment set the foundation for the rapid 

expansion of the industry in 2004, as generous incentive programs in Germany and Japan brought 

solar energy into the mainstream in both countries. Total investment in 2005 of $2.5 billion, 

including $1.74 billion of public equity, $604 million of private investment, $104 million of 

corporate debt and $50 million of equity from M&A, marked a 256% increase over total investment 

in 2004. This was followed by an increase of 183% to $7.1 billion in 2006 and another 75% 

increase to $12.4 billion in 2007. In the period 2004–2007, total investment in solar energy 

increased by almost 20-fold, a dramatic expansion in the short span of four years. 

 The rising levels of investment over the past few years are the result of a mix of underlying 

factors, with many different mechanisms for positive feedbacks across the solar supply chain. As 

illustrated in Figure 2, these factors include prior private investment, manufacturing scale-up and 

product R&D, cost reductions, innovations in business and policy models and expanded markets for 

solar energy products. 

 Because of the significant change in investment between 2004 and 2005, we omit the period 

from 2000 to 2003 in many parts of this paper unless it is useful to understand trends in solar 

investment. The period from 2004 through 2007 is sufficient for most of our analysis, and thus 

many charts are limited as such. Our focus is the analysis of different types of investments to reveal 

the market dynamics shaping this rapidly expanding industry.

 In this paper, government grants are noted but not examined. However, they were 

responsible for the initial development of many of the current solar technologies. In addition, since 

government-sponsored R&D has a high risk/return profile, presently-funded R&D is likely to yield 

important technologies in the coming years. 

6 
 Debt capital is noted but not examined. Debt capital is just beginning to support the growth 

of the solar industry, as banks are becoming involved in financing the expansion of manufacturing 

plants. Greater debt financing is a positive trend, suggesting that the perceived market and 

technology risks are decreasing. Furthermore, increases in debt financing will allow industry 

participants to significantly lower their cost of capital. The future availability and cost of debt 

capital for solar companies and installations is an important issue, but it is outside the historical 

focus of this paper. 

 In this paper, project finance is neither listed nor examined. In the United States thus far, 

project finance has focused on utilizing existing state and federal incentives, in the form of tax 

credits and accelerated depreciation, to reduce the overall cost of a solar energy system to the end 

user. In this way, project financing can be viewed as strategic investments by tax-motivated 

investors to take advantage of the available government subsidies for solar installations. Therefore, 

an analysis of project finance would reveal more about government incentives than about the 

evolution of the solar industry. 

In addition, the small scale and distributed nature of solar installations means that an analysis 

of project finance requires considerable detail and includes a large estimation factor. For relevant 

studies, see Navigant Consulting’s annual analysis of solar cell/module shipments and New Energy 

Finance’s analysis of total asset financings.3,4

 

 All of the data relating to private investment within this paper are sourced from the New 

Energy Finance Desktop5

, the most comprehensive database of publicly-available financial 

transactions across the emerging energy technology sectors. Although the New Energy Finance 

Desktop contains only publicly-disclosed transactions and thus will undervalue total investment, the 

data is appropriate for our analysis of general trends of capital allocation. In certain sections, there 

are a percentage of deals that have no dollar amount listed, as private investment pools of venture 

capital and private equity are under no obligation to disclose their activities. 

 

3 http://www.navigantconsulting.com/downloads/PV_Solar_Report07-08.pdf

4 New Energy Finance, www.newenergyfinance.com

5 Ibid

7 
Figure 4: U.S. Capital Investments in Solar Energy* 

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2000 2001 2002 2003 2004 2005 2006 2007

Year

$ in Millions

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

U.S. Government R&D

VC & PE Investments

Solar Debt

Solar Public Equity Activity

US Government R&D as a % of Total Investment

*Excluding project finance investments. 

 53% CAGR 2000-2007

 7% CAGR 2000-2004

145% CAGR 2004-2007

Source: NEF / NREL / FACC No new equity was raised from solar M&A in the U.S. during this period.

 Figure 4 shows investments in solar energy in the United States, including the applied R&D 

expenditures of the DOE Solar Energy Technologies Program (SETP). Following a similar pattern 

as worldwide investment, the chart presents investment during the period 2000–2004 progressing 

from $164 to $215 million, a CAGR of 7%. During this period, SETP investment averaged 

approximately 50% of total investment in the solar sector. However, during the period 2004–2007, 

investment in the industry grew at a 145% CAGR, expanding from $215 million to almost $3.2 

billion, causing SETP investment as a percentage of total investment to drop to less than 4% in 2007. 

This change in investment amounts and types reflects the movement of solar energy technologies out 

of government and private R&D laboratories and into the commercial marketplace. The type of 

investment provides a rough estimate of the readiness of the respective solar technology for the 

commercial marketplace. 

 Two main drivers caused the growth of non-governmental investments in solar energy in 

2005–2007: 

1. If projected cost reductions can be achieved, the addressable market for solar energy will be 

immense. 

2. The previous 30 years of R&D in solar energy has created a suite of technologies that are 

now entering or are poised to enter the marketplace. 

8 
Private Investment in the Solar Industry 

Figure 5: Global Venture Capital Investments in Clean Energy Technologies 

 Figure 5 illustrates only venture capital investments, which are early-stage financings of 

private companies. For comparison, venture capital investments in solar are shown with the top four 

other areas of venture capital funding within renewable energy and energy efficiency over the past 

eight years. 

 Energy efficiency, which includes supply-side and demand-side energy efficiency and 

energy-efficient building technologies, have received the second-largest share of venture capital 

investment. Significant improvements in energy efficiency would enable distributed solar power, 

which is limited by the absence of storage and the area available on building rooftops or other 

localized production sites, to serve a larger portion of energy demand. The synergies between solar 

energy and energy efficiency are many and diverse. They include smart electricity grid 

technologies, which would provide feedback to natural gas peaking units during periods of high 

energy demand and solar output; energy management technologies, which would allow for storage 

and/or more efficient timing of energy usage; and plug-in hybrid vehicles, which would enable 

vehicle-to-grid integration and store solar energy in a mobile asset. All of these technologies would 

further increase the market share that could be addressed effectively by electricity generation from 

intermittent resources, such as solar or wind. 

 Also of note is the limited amount of venture capital investment in wind technologies. This 

difference is attributable to wind technology already being largely commercialized, and firms are 

now pursuing large-scale manufacturing expansion. In contrast, the extensive venture capital 

9 
investment in solar is funding innovation in the first four stages of the technology pipeline in order 

to achieve market breakthroughs. Given the scale of current funding, some of these innovations are 

likely to prove successful in the next three to five years, as the next generation of solar devices 

enters the market. 

 Biofuels have received a great deal of public and media attention during the past few years 

based on their near-term potential for displacing oil imports for the transportation sector. However, 

over the past few years biofuels have received less than one-third of the venture capital investment in 

solar. This difference is likely in part due to the early emphasis on scaling up first-generation 

biofuels, such as corn-based ethanol, which has been funded instead by project financing and debt. 

Second and third-generation biofuels, however, are beginning to attract attention from venture 

capitalists, and increased investments are anticipated for these technologies. However, with a 

diverse set of potentially successful technological pathways and capabilities in both centralized and 

distributed applications, solar energy provides a good market for venture capital investment. 

 The amounts of venture capital investment in solar energy and energy efficiency, in 

comparison to other clean energy technologies, signals that solar will be an increasingly important 

source of clean energy in the near future. With momentum gained through growing venture capital 

support, the advancement of solar and energy-efficiency technologies will likely have long-term 

consequences for the energy sector, including more diverse and abundant sources of clean energy, 

greater energy reliability and security and less-intensive energy use. 

10 
Figure 6: Global Venture Capital and Private Equity Investments in Solar 

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

VC VC VC VC PE PE PE PE

2004 2005 2006 2007 2004 2005 2006 2007

Year and Type

Millions of $

US

EU

Asia

ROW

Source: NEF / NREL / FACC

 Figure 6 shows the growth of venture capital and private equity investments in solar over the 

past four years. We focus on 2004–2007, because it is the period when significant changes occurred. 

While global private equity investment in solar totaled only $24 million in 2004, it increased by 

272% in 2005, 476% in 2006 and 142% in 2007, in which year total private equity investment 

reached $1.24 billion. This was an increase of over 50-fold in three years. Global venture capital 

investment in solar has shown somewhat more steady growth, with $122 million in 2004 and 

growing by 199% in 2005, 78% in 2006 and 73% in 2007, when it reached $1.1 billion. 

 This chart demonstrates a major theme in the recent history of solar investment, that regional 

differences in subsidy programs, policies and regulations have produced significant differences in 

investment patterns. Especially apparent in 2007 was the predominance (57% of the total) of private 

equity investment in Europe. The large majority of private equity investments in the solar industry 

has been to finance capacity expansions (often by means of constructing new factories), thus 

indicating that companies based in the European Union have been building the majority of these 

factories. Also apparent in 2007 was the predominance (82% of the total) of venture capital 

investment in the United States. Venture capital investment is an indicator of new and/or emerging 

technologies or business models. Whereas generous subsidy programs in the European Union have 

spurred companies in the E.U. to expand capacity rapidly, the market in the United States has not 

been sufficiently attractive to enable significant growth with recent technologies, prices and business 

models. Therefore, more U.S. investment has been made in innovative technologies with longerterm prospects. In addition, 2007 was the first year with significant investment in companies in the 

rest of the world (ROW), which in this case included Canada, Israel, Australia, Morocco and South 

Africa. Investment in these countries is expected to increase in the coming years. 

 To reveal the financial and geographical trends in greater detail, we subsequently analyze 

venture capital and private equity investments separately. Finally, we examine venture capital and 

private equity funding by solar technology. 

11 
Venture Capital Investment in Solar 

Figure 7: Global Venture Capital Investment in Solar 

 Figure 7 shows that over the past three years, global venture capital investment in solar has 

grown at a nearly 110% CAGR. In making regional distinctions, we used the headquarters’ location 

of the company receiving venture capital funding to determine where to allocate the respective 

investment. It is important to note that 21% of publicly-disclosed venture capital deals during this 

period were of undisclosed dollar value, and therefore the numbers in this chart represent a lower 

bound to global venture capital investment. 

 In 2004, venture capital investment was split fairly evenly between companies based in the 

United States and the European Union. However, over the next three years, substantial regional 

differences emerged. In 2005, venture capital investors started to provide significant financing to 

Asian firms, while also increasing their investment in European and American start-ups. In 2006, 

the amount of venture capital investment in Europe had declined precipitously, while American and 

Asian venture capital funding continued to grow. Finally, in 2007, the first sizeable venture capital 

investments were made in countries outside of the United States, European Union or Asia, with 

venture capital funding firms in Israel, Canada and Australia. There was also a decline in venture 

capital investment to Asian companies in 2007 as U.S. venture capital funds’ enthusiasm for starting 

up crystalline silicon companies in Asia diminished. As venture capital funding to U.S. companies 

increased dramatically in 2007 during a year of decreased investment in Asia and small totals of 

venture capital in Europe and ROW, the share of venture capital investment in the U.S. grew to 82%. 

12 
 These trends are due to the underlying dynamics within the three primary solar markets, the 

U.S., Europe and Asia. In the European market, with generous subsidies available in Germany and 

Spain and nascent carbon markets, demand has grown steadily. Investment has thus focused on 

satisfying demand by scaling up existing technologies, rather than investing in new technologies. 

Asian companies received significant investment in 2006 to expand the production of polysilicon 

and crystalline silicon modules in order to meet accelerated demand in Europe. However, 

intellectual property concerns have limited investment in innovative solar technologies in Asia, and 

it is unclear whether this barrier will persist for the near future. In the United States, start-up 

companies with novel technologies have attracted venture capital investment as relatively low 

electricity prices and current solar energy costs make significant market penetration in the U.S. 

presently out of reach, but attainable with technological development. While the German and 

Spanish feed-in tariffs have provided consistent and growing demand, they are markets with limited 

potential for driving long-term industry growth. Venture capital funds look for companies with high 

risk and high return potential. The U.S. energy market, with the possibility of hundreds of GWs of 

solar installations over the next couple of decades, certainly offers such potential. The more than 

$1 billion of venture capital investment in U.S. solar companies in 2007 is a reflection of the 

numerous potential pathways to technological and market success. 

 The growth of venture capital investment in solar companies reflects the changing dynamics 

of innovation in the sector, from a government R&D-dominated process to a more private sectordriven process. This trend does not portend an end to government-funded R&D in the solar sector, 

but it means that the role for government is to support the highest risk and value areas, including 

advanced materials science for the next generation of solar technologies, and to help develop the 

new frameworks required for distributed energy generation. For example, the DOE Solar America 

Initiative created a new framework for evaluating solar energy technologies in 2006 by focusing on 

the levelized cost of energy over the lifetime of a system. In 2008, the DOE is focusing its efforts on 

non-technical barriers to market entry, such as the policies, codes and standards of state and local 

governments and regulated utilities. To continue encouraging the growth of solar energy, the 

government could fund innovation for the next generation of photovoltaics, address the challenges of 

renewable system interconnections and further reduce the non-technical barriers to market entry. 

13 
Figure 8: Global Solar Venture Capital Rounds and Average Round Amount

 Figure 8 shows the growth from 2000 to 2007 in both the number of venture capital rounds 

(referring to the rounds of funding received by start-up companies) conducted per year and the 

average investment per round. The growth of venture capital funding reflects the increasing interest 

in the solar industry and signals forthcoming technological innovation. 

 

 The rise in average funding per round is a function of at least four market factors. First, as 

interest in a sector increases amongst venture capital investors, larger amounts of funding compete 

for the available deals. This expanded supply of capital may result in higher valuations and thus 

larger transaction sizes. 

 

 Second, as venture capital-backed companies mature, they typically need further rounds of 

funding to continue their growth to a size at which an initial public offering (IPO) or spin-off would 

be possible. Early rounds of funding are smaller and focused on R&D and prototype development, 

whereas subsequent rounds of financing may be significantly larger, as they focus on scaling up the 

business. During these subsequent rounds, companies begin to hire management teams, build out 

pilot production lines and start product sales. The capital requirements are generally much greater 

for the later-round activities than for those needed to support initial technology development. 

 

 Third, the capital requirements for entry into the energy sector are substantially larger than 

those for the information technology (IT) industry that venture capital has traditionally financed. 

Venture capital investors have learned a great deal about the clean energy sector over the past few 

years, and thus the average deal size has increased as they have begun to understand the need for 

significant hard assets, such as manufacturing lines, to establish the value of a solar energy start-up 

company and enable investment exit through an IPO or other means. 

14 
 Finally, in the past three years, massive venture funding rounds may have skewed the 

average round amount upwards. Such funding included pre-IPO rounds of $80 million for Suntech 

Power Holdings Company and $68 million for Q-Cells AG in 2005 and the pre-IPO rounds of $150 

million for Yingli Green Energy Holding Company, $100 million for China Sunergy Company and 

$53 million for Solarfun Power Holdings in 2006. These deals were all essentially for scaling up the 

manufacturing of crystalline silicon cells and modules to meet increased worldwide demand. As 

such, they faced relatively low technology risk and offered a quick exit. A shift occurred in 2007, 

with large venture capital rounds for areas with higher technology risk, suggesting that venture 

capital investors have recognized the larger capital requirements and longer time to exit for 

innovative energy technologies. Large 2007 venture rounds included series B/second-round funding 

of $100.5 million for HelioVolt Corporation, $79.2 million for Solyndra, Inc. and $63.6 million for 

SolFocus, Inc. as well as series D/fourth-round funding of $50 million for Miasole, Inc and pre-IPO 

funding of $61.3 million for Big Sun Energy Technology Incorporation. Except for the funding of 

Big Sun, all of these investments were for new technologies designed to decrease the cost of solar 

energy, including three thin film manufacturers and one concentrating photovoltaics (CPV) 

manufacturer. 

Figure 9: Global Solar Venture Capital Funding by Round Type 

 Figure 9 shows the number of venture capital rounds by type of round. The round types are 

arranged with the earliest round, Seed/Angel, at the bottom of the columns, and the latest round, PreIPO, at the top of the columns. This chart sheds light on whether the increase in average funding per 

venture capital round is a consequence of larger, later-stage investments being more prevalent in 

recent years. Recently, the largest increase in annual number of rounds has been in series A/firstround funding, rising from five deals in 2004 to 40 in 2007, followed by series B/second-round 

funding, which increased from four in 2004 to 21 in 2007. Evidently, most of the growth in the 

number of venture funding rounds over the past four years has been the result of new entrants into 

15 
the solar industry, rather than older companies returning for additional capital to fund their growth. 

This trend signals the potential for significant future innovation in the solar industry. 

 As a general rule of thumb in venture capital funding, for every ten investments, there may 

be one or two companies that achieve major future success. If this proportion holds true for the 99 

solar companies that received first-round funding over the past 8 years, 10–20 sizeable and 

influential solar companies will emerge during the next few years. Furthermore, within the vast 

market for solar energy, there are diverse applications for which different technologies may have 

strong competitive advantages. Therefore, it is likely that within the next three to five years, 

multiple solar technologies will enter and compete successfully in the marketplace. 

Private Equity Investment in Solar 

Figure 10: Global Private Equity Investment in Solar 

 

Figure 10 shows private equity investment in solar by region, as determined by the location 

of the company’s headquarters. Through the end of 2007, this approach does not differ substantially 

from an analysis using the location of manufacturing facilities. In 2008 and beyond, adjustments 

would have to be made for the financing of overseas manufacturing expansions, such as First Solar’s 

facilities in Malaysia, SunPower’s facilities in the Philippines and Q-Cells' planned expansion in 

Mexico. However, all U.S. and EU companies currently planning overseas manufacturing 

expansions are publicly-owned and are not receiving private equity to finance these expansions. 

Also, in 2008, there has been a substantial slowdown in the overall private equity market due to the 

prolonged crisis in the credit markets that began in August 2007. Currently, private equity firms 

16 
lack the access to inexpensive capital that had been fundamental to their investment strategies. It 

remains to be seen how much and for how long the credit crisis will affect the private equity 

financing of solar companies. 

 Figure 10 is focused on 2004–2007 because of the massive changes in private equity 

investment in solar energy during this period. 2000–2003 has been omitted because there were only 

three transactions during this period, which occurred in 2002 and totaled $40 million. Also note that 

26% of disclosed private equity deals for the years shown were of undisclosed value, and therefore 

the actual value of deals is certainly somewhat higher than that shown in the chart. However, deals 

of undisclosed value are likely to be smaller transactions. 

 Figure 10 illustrates that private equity is increasing fairly evenly across the three major 

regions. The vast majority of private equity investment in the solar industry has been for asset 

acquisition and capacity expansion, often to build or enlarge a manufacturing facility. Over the past 

few years, the solar PV market has been undersupplied, and private equity firms have seen 

opportunities in financing existing producers to scale up their production facilities and take 

advantage of the price premiums. Other emerging trends in private equity deals involve the spin-offs 

of solar divisions within larger companies and the integration of solar companies across the supply 

chain. Over the next couple of years, these types of deals will likely become more frequent as 

existing solar companies consolidate across the value chain and conglomerates sell off solar 

divisions that are peripheral to their core business. 

17 
Private Investment by Technology Area 

Figure 11: Global Venture Capital and Private Equity Investments by Solar 

Technology 

 Figure 11 shows the value of private investment (both venture capital and private equity) in 

solar by year, region and technology on the left axis and the number of transactions by year and 

region on the right axis. Both of these measures are important because large deal values may 

indicate great interest in a certain area, whereas a large number of small deals may indicate interest 

in the technology but not enough perceived market demand for ambitious business plans. In 

addition, certain solar businesses, such as project developers, have lower capital requirements and/or 

margins, which can lead to a large number of deals of smaller value. Recall also that 21% of 

disclosed solar venture capital deals and 26% of disclosed private equity deals were of undisclosed 

value. The number of transactions is the only indication of investment in certain time periods and is 

also why not all of the technologies shown in the key appear in the chart columns. Lastly, ROW 

investments, including transactions in Canada, Israel, Australia, Morocco and South Africa have 

been added to either the EU or U.S. regions for ease of display. Total ROW private investment grew 

from $0.8 million in 2000 to $48.9 million in 2007, equal to just over 10% of Asia’s total private 

investment in that year. 

 The chart shows the nascent state of private investment in solar companies, with few 

transactions of variable size prior to 2004–2005. In 2000, there was a major CPV deal, Energy 

Innovations, but little else, while in 2001, the number of transactions increased in the European 

Union and United States, but the deal values were either very small or not disclosed. In 2002, there 

were two European deals in the $20-million range and smaller deals in the United States focusing on 

18 
crystalline silicon and thin-film technologies. Finally, in 2003, a diversity of technologies emerged 

amongst private investment deals, with project developers, manufacturing equipment, nextgeneration PV, polysilicon, CPV and thin film PV receiving investment in both the United States 

and European Union. Still, U.S. private investment included a more diverse set of companies than 

investments in other parts of the world. 

 Even with venture capital and private equity deals grouped together, the regional differences 

of investment in solar energy are strikingly apparent. Private investments in Asia were almost nonexistent until 2005 and have remained strongly focused on the production of crystalline silicon PV. 

Private investment in Europe started a little earlier, and has focused on crystalline silicon PV and 

polysilicon production, with additional interest in project developers and thin-film technologies in 

recent years. In contrast, U.S. private investment is a broadly diversified, with investments in nearly 

all areas of the solar industry and increasing interest in CPV, next-generation PV, concentrating solar 

power (CSP) and project developers. Most importantly, of the $552 million of global private 

investment that thin film PV received in 2007, $488 million went to U.S.-based companies. 

 Examining venture capital and private equity investments separately by year, region and 

technology provides additional insight into the nature of these investments. 

19 
Figure 12: Global Venture Capital Investment by Solar Technology 

 Figure 12 reinforces the trends seen in the overview chart of venture capital investment 

(Figure 7). During the past few years, very little growth has occurred in the venture capital funding 

of European solar companies. In Asia, nearly all venture capital investments went to producers of 

crystalline silicon PV. For ROW in 2007, the total of $48.9 million consisted of $20.8 million in 

next-generation PV, $10.8 million in thin film PV and investments of between $1 and $6 million in 

polysilicon, solar heating and cooling, manufacturing equipment, multijunction cells and CPV. 

Venture capital investment may increase in Canada, Israel and Australia in the coming years, as 

these countries are hubs for technology innovation and have reasonably strong political and policy 

support for solar energy development. 

 The U.S. venture capital mix was very similar to the U.S. private investment mix in Figure 

11 due to the dominance of venture capital in the U.S. U.S. venture capital investments have 

increased and diversified from $35 million in crystalline silicon PV and CPV in 2000 to 

$902 million in a broad selection of industry technologies in 2007, including CPV, crystalline silicon 

PV, CSP, inverters, next-generation PV, polysilicon and thin film PV, a CAGR of 59%. The 

increase and diversification of venture capital funding suggests that significant innovation across 

many areas of solar energy should occur in the near future. Furthermore, the diversity of 

technologies receiving funding in the U.S. and abroad reflects the potential for many successful 

companies with different technologies, each providing specialized solutions for distributed, 

centralized or future hybrid models of electricity generation. 

20 
Figure 13: Global Private Equity Investment by Solar Technology 

 In contrast to venture capital shown in Figure 12, private equity is a newer source of funding 

to solar companies, with the first deals in the United States and Asia occurring in 2005 and 2006, 

respectively. Private equity investments are generally larger and therefore not allocated as broadly 

as venture capital investments. The differences in timing and technology allocation between venture 

capital and private equity funding are mostly attributable to the characteristics of private equity 

investments in the solar industry, which often fund production capacity expansions. Companies that 

require broad expansions to meet increased demand are the recipients of most private equity 

investments, and thus the smaller number of solar technologies that are proven and ready for 

manufacturing scale-up receive a disproportionately large share of private equity investment. 

 An example of this funding model is the case of Advent Solar, which raised (i) a venture-A 

round of funding of $0.8 million in 2003 to start the company; (ii) a venture-B round of $8 million in 

2004 to further develop its technology; and (iii) a venture-C round of $30 million in 2005 to build a 

25-MW pilot manufacturing line. Advent Solar then transitioned to private equity with funding of 

$80 million in 2007 to finance the building and ramp-up of its first commercial production line. 

 On a regional level, there were large private equity investments in crystalline silicon PV 

production in Asia, with some thin film PV investment in 2006–2007. In the European Union, early 

private equity investment in crystalline silicon PV has grown to include expansions in polysilicon 

supply in response to the shortage of the material, with 2006 and 2007 funding to Norsun AS, SiC 

Processing AG and Silicium de Provence SAS. There was also significant European private equity 

investment in four project developers and three thin film PV manufacturers in 2006 and in another 

PV thin film manufacturer in 2007. 

21 
 In the U.S. market, private equity investments did not start until 2005. Since then, they have 

focused on crystalline silicon PV manufacturers, thin film PV manufacturers and project developers. 

Private Investment in Solar Conclusions: 

 Significant differences exist between the purpose, risk/reward profile and timing of venture 

capital and private equity investments, which result in different opportunities that are pursued. 

Venture capital investors in the solar industry pursue innovative technologies and have a high 

tolerance for risk. These investors have also begun to tolerate longer exit times in the solar industry, 

as evidenced by the more than 10 first-round investments in next-generation PV over the past few 

years that will take a minimum of seven years to get to market. In contrast, private equity investors 

in the solar industry have pursued established technologies with larger capital requirements, lower 

risk profiles and a somewhat faster expected exit time. 

 Significant regional differences also exist between venture capital and private equity 

investments and the technologies they fund, which are attributable to policy differences and 

production specialization. Both venture capital and private equity investments in Asia are primarily 

focused on crystalline silicon PV to take advantage of lower manufacturing costs without the 

intellectual property concerns of more innovative technologies. In Europe, private equity investment 

has rapidly expanded in response to increased demand for polysilicon and crystalline silicon PV to 

take advantage of the feed-in tariffs. However, the feed-in tariffs have also led to a dearth of venture 

capital investment in the region, as innovative products are not rewarded any more than the 

incumbent technology. In the United States, venture capital investment dominates, with innovative 

scientists and businessmen collaborating to pursue the technologies that will reduce costs, achieve 

scale and fit different applications across the country, which has the potential to be the world’s 

largest solar market. Private equity investment in the United States is emerging as manufacturing 

facilities are expanded to meet demand that is subsidized by specific states. U.S. private equity 

investment could rise considerably if the federal government establishes a cap on carbon emissions 

or if further cost reductions enable solar technology to be more competitive with electricity delivered 

from the grid. 

22 
Mergers and Acquisitions in the Solar Industry 

Figure 14: Global Merger and Acquisition Activity in Solar 

 Figure 14 shows the total transaction value of mergers and acquisitions (M&A), new equity 

raised for those transactions and the number of M&A transactions per year globally in the solar 

industry. Disclosed M&A deals raised new equity of $49.5, $13.8 and $58.6 million from 2005 to 

2007, sequentially. Based on industries growing at similar rates, further spin-offs and consolidations 

in the coming years should increase M&A activity in the solar industry. 

M&A activity is still in a nascent stage, with larger companies starting to make acquisitions 

to integrate their operations across the supply chain, thereby gaining more control over their 

feedstock-supply or downstream distribution costs. Deal volume surpassed $1.9 billion in 2007, 

with such large transactions as Applied Materials' acquisition of HCT Shaping Systems SA for $475 

million, SunPower's acquisition of PowerLight for $332.5 million, DC Chemical’s $166 million 

investment in Evergreen Solar, E-Ton Solar’s acquisition of Adema Technology for $153.7 million 

and Multiutility’s $146.5 million investment in X-Group. Although such transactions have increased 

in size and number over the past few years, they have not yielded much new investment for the 

sector. This is an important distinction for M&A transactions, in which equity is often only 

transferred between market participants, generating no new investment in the solar sector. 

 While our focus is on investment in solar energy technologies, M&A activities are likely to 

have increasing impacts on the industry in the coming years, whether they result in new investment 

or not. Three main deal types are emerging in the industry: 

23 
1. Established semiconductor companies enter the solar industry to leverage their 

manufacturing experience, and they acquire technology and core competencies from existing 

solar companies. Examples of this type include Applied Materials, Wacher Chemie, DC 

Chemical and MEMC Electronic Devices. 

2. Established energy companies enter the solar industry to capitalize on their experience in the 

energy sector. Examples of this type include Norsk Hydro, Nippon Oil and Sichuan Energy. 

However, this strategy did not succeed for Shell or BP, both of which had been leaders in the 

photovoltaic industry at one time. Shell sold its solar business to SolarWorld, and BP Solar’s 

growth has not kept pace with that of the industry. 

3. Solar companies integrate or build strategic partnerships across the supply chain, either 

upstream (polysilicon and wafering), downstream (services and installations) or in valueadded companies (tracking or automation equipment). Examples of this type include 

SunPower’s acquisition of PowerLight and First Solar’s acquisition of Turner Renewables. 

These types of transactions are emerging as the market for solar energy technologies is experiencing 

rapid growth. Companies with interest and understanding of the sector are trying to establish their 

presence and grow their market shares by capitalizing on first-mover advantages. In the future, 

some of these transactions may unwind, as occurred with Shell’s solar business. Competition 

between existing manufacturing and energy firms for the intellectual property and business models 

in the solar industry will likely intensify, thereby raising valuations. Expansionary M&A 

transactions and subsequent reversals, as well as increased competition for IP and business models, 

are characteristic of a new and rapidly growing industry. 

24 
Public Investment in the Solar Industry 

Figure 15: Global Valuations of Completed Solar Public Offerings 

 Figure 15 shows that public equity offerings of solar companies were extremely limited in 

2004, but in 2005, $1.74 billion of new equity was raised, followed by $4.83 billion and $7.92 

billion in 2006 and 2007, respectively. In contrast, during the 2000–2004 period, public equity 

investment ranged from $12.1 to $59.4 million. It is clear that many things changed in 2005: 

Germany’s revised feed-in tariff took effect in 2004 and began to generate interest in solar, Japan’s 

solar industry was experiencing steady growth while its subsidy programs were being phased out and 

the California Energy Commission (CEC) passed the California Solar Initiative (CSI) in December 

2005. During the 2005–2007 period, new public equity dwarfed other types of investment in solar 

energy and grew at a 113% CAGR. This momentum may help to continue the growth of public 

equity investment despite far more challenging market conditions in 2008. 

 In Figure 15, the differences between new equity raised and total offering size are due to 

several factors. Most of the differences are the result of exits, in which the initial venture capital or 

private equity investors in the firm sell their shares to the public. Examples include Stroher 

Finanzholding’s $791 million exit of Q-Cells in 2006, Hafslund Ventures $779 million exit of REC 

in 2007 and the Walton family’s sale of $237 million in First Solar equity in the company’s August 

2007 secondary offering. In addition, the companies’ founders may sell some of their shares in 

secondary offerings.

 Companies also raise debt as part of their public offerings, usually in the form of convertible 

bonds, which are included in the total offering size because they have the potential to convert into 

shares of the company at a later date. At the time of the public offering, however, they are not 

considered to be equity because, as bonds, they have the expectation of repayment. A recent 

example is Yingli Green Energy Holding Company’s issuance of $173.6 million of convertible 

bonds in conjunction with its follow-on offering of $150 million of new equity in December 2007. 

25 
Figure 16: Global Solar Public Offerings by Status 

 Figure 16 shows the status of public equity offerings of solar companies. There were only a 

few offerings per year in the 2000–2003 period, and not until 2004, when there were seven offerings, 

was there a postponed or cancelled public offering. From 2005 to 2007, public offerings of solar 

companies grew rapidly, with 45, 64 and 88 offerings, sequentially, in those years. The increasing 

number of public offerings and the rather low percentage of postponed/cancelled offerings indicate 

strong market demand for solar company stocks. While the overall stock market has softened 

considerably since the fourth quarter of 2007, successful public offerings of solar companies 

continued into Q1 2008. However, difficult market conditions in 2008 may prevent solar companies 

without significant revenues from entering the public equity markets. In the first quarter of 2008, 

there was a significant slowdown compared to 2007, with $1.1 billion raised in 17 completed public 

equity offerings, most of which were secondary issues rather than initial public offerings. 

26 
Figure 17: Performance of Solar Photovoltaic Stocks 

0

250

500

750

1000

1250

1500

1750

2000

Relative Index Price

1/2/2004 1/3/2005 1/2/2006 1/2/2007 1/2/2008

Relative Prices as of 1/2/2008

^PPVX: 1999.7

^NEX: 297.6

^GSPC: 130.6

^PPVX

^NEX

^GSPC

Date Source: Photon International, Yahoo Finance

0

250

500

750

1000

1250

1500

1750

2000

Relative Index Price

1/2/2004 1/3/2005 1/2/2006 1/2/2007 1/2/2008

Relative Prices as of 1/2/2008

^PPVX: 1999.7

^NEX: 297.6

^GSPC: 130.6

^PPVX

^NEX

^GSPC

Date Source: Photon International, Yahoo Finance

Figure 17 illustrates the performance of public solar photovoltaic equities from 2004 through 

the beginning of 2008.6

 The Photon Photovoltaic Stock Index (^PPVX) is a weighted index of 

companies which derive at least 50% of their revenues from photovoltaic products and services. For 

comparison, we include the WilderHill New Energy Global Innovation Index (^NEX), which 

contains a variety of clean energy technologies, as well as the S&P 500 Index (^GSPC), with each 

index set to 100 at the beginning of 2004. At the beginning of 2008, the ^PPVX was worth about 20 

times its value at the start of 2004, compared to approximately three times for the ^NEX and 1.3 

times for the ^GSPC. While the ^PPVX has declined substantially in 2008 (as have the ^NEX and 

^GSPC), its dramatic rise from the beginning of 2004 reflects increased investor interest during this 

period in solar photovoltaic companies and optimistic expectations about the industry’s future. 

 

6

 Concentrating solar power (CSP) is not included, as there have not been public companies with a 

majority of their revenues from CSP. 

27 
Table 1: Public Pure-Play Solar Companies—as of 03/31/2008 

Company Stock Symbol Type 

Akeena Solar AKNS Project Developer 

Canadian Solar CSIQ Crystalline Si 

China Sunergy Co. CSUN Crystalline Si 

Energy Conversion Devices ENER Thin Film 

Evergreen Solar ESLR Crystalline Si 

First Solar FSLR Thin Film 

JA Solar Holdings JASO Crystalline Si 

LDK Solar Co., Ltd. LDK Crystalline Si 

ReneSola, Ltd. SOL Crystalline Si 

SolarFun Power Holdings SOLF Crystalline Si 

SunPower Corp. SPWR Integrated 

SunTech Power STP Crystalline Si 

Trina Solar Ltd. TSL Crystalline Si 

MEMC Electronic Materials WFR Polysilicon 

Yingli Green Energy Holding Co., Ltd. YGE Crystalline Si 

Conergy CGY.DE Project Developer 

Q-Cells QCE.DE Crystalline Si 

Solar Fabrik SFX.DE Crystalline Si 

Solaria Energia SLR.MC Integrated 

Solon AG SOO1.DE Crystalline Si 

SolarWorld SWV.DE Crystalline Si 

ERSOL ES6.DE Crystalline Si 

Wacker Chemie WCH.DE Polysilicon 

Renewable Energy Corporation REC.OL Crystalline Si 

 Table 1 provides a snapshot of public pure-play solar companies, those with businesses 

focused entirely, or almost entirely, on one or more areas of solar energy. Of the 24 companies 

listed in Table 1, 16 are crystalline silicon PV manufacturers, two are polysilicon producers, two are 

project developers, two are thin film PV manufacturers and two are integrated companies, which 

cover the value chain from cell fabrication to device installation. The two polysilicon producers, 

Wacker Chemie and MEMC Electronic Devices, are the only non-pure-play companies included in 

Table 1. Both of these companies make polysilicon and silicon wafers for both the semiconductor 

and solar industries, and in 2006, the solar industry surpassed the semiconductor industry to become 

the majority consumer of polysilicon wafers. Although the portions of these companies’ revenues 

and earnings derived from their solar businesses varies, solar is becoming an increasingly important 

part of their overall businesses. 

28 
Figure 18: Global Solar Industry Revenues and Operating Profits 

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2003 2004 2005 2006 2007

Year

Millions of $ 

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Revenues

Operating Profits

Operating Margin

Source: CLSA Asia-Pacific Markets, 

PHOTON Consulting

CAGR 2003 - 2007

Revenues 52%

Operating Profits 110%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2003 2004 2005 2006 2007

Year

Millions of $ 

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Revenues

Operating Profits

Operating Margin

Source: CLSA Asia-Pacific Markets, 

PHOTON Consulting

CAGR 2003 - 2007

Revenues 52%

Operating Profits 110%

 Figure 18 shows the total revenues, operating profits and operating profit margin for the 

global solar energy industry. Total revenues increased at a CAGR of 52%, from about $5 billion in 

2003 to almost $27 billion in 2007. Total operating profits rose even faster, from $400 million to 

$7.8 billion (a CAGR of 110%), as operating margins expanded from 8% to 29% during this period. 

As these figures are for the entire industry, the operating profit margin is a blend, primarily 

of crystalline silicon and thin film technologies. In 2007, the crystalline silicon sector had an 

operating margin of 33%, in comparison to 7% for the thin film sector.7

 The increase of thin film as 

a percentage of total solar revenues in 2007 explains the slight drop in overall solar operating 

margins, from 29.6% in 2006 to 29.3% in 2007. 

With the strong and consistent growth of its revenues, operating profits and operating profit 

margins, the solar industry has established an impressive financial track record, which is crucial for 

continued expansion of public and private investment. 

 

7

 Source: PHOTON Consulting 

29 
Conclusion 

The growth of total investment in solar energy technologies has been tremendous during 

2000-2007, mostly due to the rapid growth over the last four years. Each of the three types of new 

investment that we examined, venture capital, private equity and public equity, grew at a CAGR of 

over 100% from 2004 to 2007. Additionally, private and public funding to solar companies 

increased vastly in each of the three main regions, the U.S., E.U. and Asia. 

Coinciding with the progress of many solar energy technologies from the laboratory to pilot 

and full-scale production, over time later and larger sources of financing have risen as a percentage 

of total investment. Thus by 2007 public equity accounted for almost two-thirds of global nongovernmental investment in solar energy, and private equity surpassed venture capital investments in 

solar energy for the first time. However, the fact that a majority of venture capital rounds in 2007 

were either series A/first round or series B/second round reflects the continued importance of startup companies with novel technologies. Also notable is the diversity of solar energy technologies 

receiving venture capital funding, in particular, in the U.S. 

Regionally, investment trends reveal differences in manufacturing costs, intellectual property 

protections and policy support. In Asia, with low manufacturing costs but also low intellectual 

property protection, investment has been towards expanding production of crystalline silicon PV. In 

Europe, feed-in tariffs have provided support for investment in incumbent technologies, mostly 

crystalline silicon PV and polysilicon. Finally, without subsidies as generous as in Europe but with 

good intellectual protection and established research/business collaboration, investors in the U.S. 

have been supporting a variety of technologies, including thin film PV, CPV, CSP and crystalline 

silicon PV. 

Although overall public and private equity markets are likely to be less accessible in the near 

future, solar energy has established both a diversity of promising technologies and strong growth in 

revenues and operating profits and margins, which should help the industry continue to secure 

funding going forward. In addition, while government subsidies are currently essential for the 

sector, solar technologies offer continued cost reductions through multiple pathways, and immense 

market potential if these cost reductions can be realized. 

30 
List of Figures: 

F i g u r e s 

1 U.S. DOE Solar Technology Development Pipeline 

2 Positive Feedback for Solar 

3 Global Capital Investments in Solar Energy 

4 U.S. Capital Investments in Solar Energy 

5 Global Venture Capital Investments in Clean Energy Technologies 

6 Global Venture Capital and Private Equity Investments in Solar 

7 Global Venture Capital Investment in Solar 

8 Global Solar Venture Capital Rounds and Average Round Amount 

9 Global Solar Venture Capital Funding by Round Type 

10 Global Private Equity Investment in Solar Energy 

11 Global Venture Capital and Private Equity Investments by Solar Technology 

12 Global Venture Capital Investment by Solar Technology 

13 Global Private Equity Investment by Solar Technology 

14 Global Merger and Acquisition Activity in Solar 

15 Global Valuations of Completed Solar Public Offerings 

16 Global Solar Public Offerings by Status 

17 Performance of Solar Photovoltaic Stocks 

18 Global Solar Industry Revenues and Operating Profits 

T a b l e 

1 Public Pure-Play Solar Companies 

31 
32 

Glossary of Acronyms: 

CAGR compound annual growth rate 

CEC California Energy Commission 

CPV concentrating photovoltaics 

CSI California Solar Initiative 

CSP concentrating solar power 

DOE U.S. Department of Energy 

EU European Union 

FACC Financial Analytics Consulting Corporation 

IP intellectual property 

IPO initial public offering 

IT information technology 

ITC investment tax credit 

M&A mergers and acquisitions 

NEF New Energy Finance 

NREL National Renewable Energy Laboratory 

PE private equity 

PV photovoltaics 

R&D research and development 

ROW rest of the world 

SETP Solar Energy Technologies Program 

U.S. United States of America 

USD U.S. dollar 

VC venture capital 
F1147-E(10/2008) 

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4. TITLE AND SUBTITLE

Historical Analysis of Investment in Solar Energy Technologies 

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C.E. Jennings, R.M. Margolis, and J.E. Bartlett 

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13. SUPPLEMENTARY NOTES

14. ABSTRACT (Maximum 200 Words)

The solar energy industry experienced unprecedented growth in the eight years from 2000 to 2007, with explosive 

growth occurring in the latter half of this period. From 2004 to 2007, global private sector investment in solar energy 

increased by almost twenty-fold, marking a dramatic increase in the short span of four years. This paper examines 

the timing, magnitude, focus and location of various forms of investment in the solar energy sector. It analyzes their 

trends to provide an understanding of the growth of the solar industry during the past eight years and to identify 

emerging themes in this rapidly evolving industry. 

15. SUBJECT TERMS

solar energy; solar photovoltaics; PV; solar; rooftop PV; energy consumption; building technologies; residential 

buildings; solar systems; solar industry 

16. SECURITY CLASSIFICATION OF: 17. LIMITATION 

OF ABSTRACT

UL 

18. NUMBER 

OF PAGES 

19a. NAME OF RESPONSIBLE PERSON 

a. REPORT 

Unclassified 

b. ABSTRACT 

Unclassified

c. THIS PAGE 

Unclassified 19b. TELEPHONE NUMBER (Include area code)

Standard Form 298 (Rev. 8/98) 

Prescribed by ANSI Std. Z39.18