During the second quarter of this year (Q2’16), total corporate funding, including venture capital (VC) funding, public market and debt financing, into the solar sector fell to $1.7 billion, a 41% drop compared with the $2.8 billion raised in the previous quarter, according to a new report from Mercom Capital Group. The report says year-over-year total corporate funding was down significantly (71%) compared with $5.9 billion in the Q2’15.“The solar industry continues to experience weakness in terms of financing activity, and corporate funding in Q2’16 was at its lowest level in three years,” explains Raj Prabhu, CEO and co-founder of Mercom Capital Group, a clean energy communications and consulting firm.

The report says global solar VC funding, including private equity, saw a large decline during the quarter, with $174 million in 16 deals compared with $406 million in 23 deals in Q1’16. Year-over-year VC numbers were slightly better compared with Q2’15 with $142 million in 24 deals.

Solar downstream companies raised the most (64%) VC funding in Q2’16, with $112 million in seven deals. A large part of the total came from the $100 million raised by Silicon Ranch from private equity firm Partners Group.

Other VC deals this quarter included the $20 million raised by Tigo Energy, 1366 Technologies’ $15 million raise, and the $12.5 million raised by Sol Voltaics. A total of 21 VC investors participated in funding deals.

Solar public market financing in Q2’16 came to $179 million in four deals, compared with $94 million in four deals in Q1’16 and $2.3 billion in 12 deals in Q2’15.

Announced debt financing came to $1.3 billion in 12 deals in Q2’16, compared with $2.3 billion raised in 19 deals in Q1’16 and $3.4 billion in 14 deals in Q2’15.

According to the report, the $588 million secured by Engie for its 100 MW Kathu CSP solar project in South Africa led the Top 5 large-scale project funding deals in Q2’16. The remaining deals included the following: Connor, Clark & Lunn Infrastructure, Samsung Renewable Energy and Six Nations of the Grand River Development secured $482 million for their 100 MW Grand Renewable solar project; D.E. Shaw Renewables received a $226 million syndicated loan for its 100 MW North Star solar project; Suzhou GCL New Energy secured a loan of $200 million for the construction of the Hubei Jiangling Sanhu and Hefei Changfeng Mingcheng Reservoir solar projects (60 MW); and Mytrah secured a $175 million loan for the development of a portfolio of solar and wind projects in the company’s pipeline.

The report says it was a good quarter for residential and commercial solar funds, led by SolarCity, Mosaic and Sunnova Energy, with $1.36 billion in 11 deals in Q2’16, a 36% increase over the $1 billion raised in six deals in Q1’16. Of the $1.36 billion announced in Q2’16, $800 million went toward the lease model and $555 million went to loan funds. Since 2009, almost $20 billion has gone into residential/commercial solar funds.

There were also 17 solar merger and acquisition (M&A) transactions in Q2’16, compared with 14 in Q1’16. Almost half of the M&A transactions involved solar downstream companies with eight deals, which was followed by balance-of-system companies with five. Sungevity announced a merger with Easterly Acquisition Corp., a blank-check company traded on Nasdaq, in a deal valued at $357 million.

There were 38 large-scale solar project acquisitions (13 disclosed for $1.9 billion) during the quarter, compared with Q1’16 with 50 transactions (22 disclosed for $1.2 billion). More than 2 GW of solar projects were acquired in the second quarter compared with the 2.4 GW in the previous quarter.

According to the report,  the $1.4 billion acquisition of 1,140 MW (solar 994 MW and wind 146 MW) renewable energy project pipeline of Welspun Renewables Energy by Tata Power Renewable Energy, a Tata Power subsidiary, led the the quarter’s Top 5 largest disclosed project acquisitions by dollar amount. The remaining deals included the following: NextEnergy Solar Fund, a U.K.-based investment fund, acquired a portfolio of five solar projects totaling 84.3 MW for $140 million; United PV (Changzhou) Investment, a wholly owned subsidiary of United Photovoltaics Group, acquired a 99% equity interest in Guodian Wulateqianqi Photovoltaics Power from Forty-eighth Research Institute of China Electronics Technology Group for $75 million, which gave it a 50 MW solar project located in Inner Mongolia; 8point3 Energy Partners, a yieldco formed by First Solar and SunPower, acquired an interest in the 40 MW Kingbird solar project in California from First Solar for $60 million; and Sky Capital America, a wholly owned U.S. subsidiary of Sky Solar, acquired 22 operating solar projects in California and one operating solar project in Massachusetts for a combined 22 MW from Greenleaf-TNX and SunPeak Universal Holdings for $57 million.

“Corporate funding has slowed since the third quarter of last year, with contributing factors including SunEdison and the decline of yieldcos, proliferation of hypercompetitive auctions, and policy uncertainty around rooftop solar, all of which has caused skepticism around solar stocks in general,” explains Prabhu. “Only four solar company stocks are in positive territory year-to-date among the 30 public companies we track. Oil prices have also added pressure on solar stocks.

“That said, solar installations continue to grow unabated worldwide and is becoming the fastest-growing new energy source around the world,” he continues. “An increase in corporate financing activity will largely depend on how soon the sector can get past some of its issues and gain back investor confidence.”

Mercom says it also tracked 196 new large-scale project announcements worldwide in Q2’16 totaling 11.3 GW.