Deals for 'new generation' renewable technologies – wind, solar, biomass – are entering the big time, and is driving the market to new record highs, reports PwC in its annual global analysis of merger and acquisition (M&A) transactions in the renewable sector.

Deal values rose 40% year on year, from US$38.2 billion in 2010 to a record level of US$53.5 billion in 2011. Billion dollar deals dominated, as solar, wind and energy efficiency deals overtook hydropower as the driver for big deal values for the first time. One in every three deals last year was solar and overall deal value for the sector is up 56% from US$10.2 billion to US$15.8 billion.

A reappraisal of the role of nuclear in many countries' national energy strategies after the Fukushima emergency has provided an extra impulse for renewable generation in certain markets. There was also continued strong momentum behind deal activity in the solar and energy efficiency sectors. Buoyed by the increase in big transactions, deal value in these two sectors nearly doubled year on year.

Together, they account for the vast majority (79%) of the US$15.3 billion increase in the total value of all renewables deals.

"Dealmaking in the renewables and energy efficiency sectors is intensifying as the sector evolves," comments Paul Nillesen, partner, PwC renewables.

Nillesen says sustained high deal numbers and record total value reflect a maturing of the sector. The trend is all the more noteworthy given the uncertainty in the market and in government policies on renewables.

"We believe that deal flow will continue to be significant in the medium term," adds Nillesen.

Falling solar prices are making solar power more economic and closer to grid parity in some markets. 

But the report warns that the sector is facing considerable growing pains.

"US and European manufacturers are coming under cost pressures. They are not alone. Some Chinese manufacturers also face heavy debt and are coming under competitive strain," says Nillesen.