Renewable energy investor CleanCapital LLC said April 20 that it is using $300 million in new funding from Manulife Investment Management to buy up more mid-sized solar plants and to begin developing projects in a part of the U.S. market that historically has been difficult for big investors to access.
Money is flooding into the renewable energy sector as companies and governments set targets to eliminate greenhouse gas emissions and swelling enthusiasm for environmental, social and governance investing drives financiers to allocate more capital to "green" infrastructure. According to consultancy Mercom Capital Group LLC, the solar market drew in $8.1 billion in corporate funding during the first three months of the year, a 21% increase from the prior quarter.
"If more institutional capital is coming into the market in large sums, that necessarily means there's going to be some sort of consolidation, there's going to be a lot fewer entities owning a lot more assets. We're excited to be one of those," CleanCapital CEO Thomas Byrne said in an interview. "That creates capital efficiencies by having more of those types of investors in the market."
CleanCapital focuses on the solar sector's "middle market," a no man's land between residential and utility-scale projects where the company says fragmentation and a lack of standardization have hindered investment. The firm, which manages 200 MW of distributed solar plants, said it has begun putting Manulife's investment to work by purchasing a batch of existing solar assets totaling 63 MW. CleanCapital is also creating a construction pipeline of new projects totaling nearly 100 MW, Byrne said.
"Regardless of whether it's clean energy, it's a good investment. It has infrastructure-like features, recurring revenue and that is what the ... institutional world really likes," the CEO said, adding that the wave of money washing through the solar industry is pushing down investment returns to more "normalized" levels.
"It's good for the risk-return pricing to be normalized and more accurate, because these institutional investors, they're measuring this against traditional infrastructure," Byrne said. "And so having a maturity of pricing is a good thing for our market."
Steve Blewitt, head of private markets at Manulife Investment Management, said in a statement that the company's investment in CleanCapital "is in keeping with our priority to strategically invest in private market assets across private equity and credit, infrastructure, timber, agriculture, and real estate."
With the new investment, CleanCapital also plans to move more aggressively into energy storage, which will likely comprise "a good portion of our overall portfolio by the time we have deployed this committed capital," Byrne said.
"In order for the transition to clean energy to happen rapidly, there has to be a stabilizing, balancing force, which storage provides," the CEO said. "So we're again going to lead institutional investors into that market."