The U.S. has been tagged with the dubious title of advanced global economy with the worst policies in place to promote investment in renewable energy.

This designation, KPMG said in a recent report, comes while “M&A activity in the renewable energy sector is extremely strong and, in some jurisdictions, it has become almost feverish.”

The report is based on a survey of 200 senior-level investors in the worldwide sector. Those investors tend to seek large-scale projects in countries with welcoming regulatory environments in which to sink their money.

The two countries most likely to experience 2018’s largest year-over-year increase in M&A activity, according to the survey, are Germany and China. Only 10% of those surveyed thought the U.S. would garner the biggest increase.

Investors do have long-term confidence in the U.S. market, which possesses a renewable power capacity that is surpassed only by China. But investors are leery about the short term, in part because of the Trump administration’s retreat from the Paris climate accords.

“A lot of generators believe that their renewable power is going to be worth more than traditional power in the future,” said Henry Berling, U.S.-based managing director of KPMG. “But buyers have no way of knowing what renewable power capacity in this country will be worth five to seven years from now and therefore they’re not willing to pay a premium.”

That said, the three top deals in renewables in 2017 involved U.S. companies:

  • Toronto-based Brookfield Asset Management Inc. (NYSE: BAM) purchased 38.84% of Maryland-based TerraForm Power Inc. (NASDAQ: TERP) for $4.8 billion;
  • Arlington, Va.-based AES Corp. (NYSE: AES) and Edmonton, Alberta-based Alberta Investment Management Corp. bought Salt Lake City-based Sustainable Power Group for $1.79 billion; and
  • Brookfield bought TerraForm Global Inc. for $1.4 billion.

Corporate and financial buyers are pursuing different objectives, KPMG said. Corporate acquisitions are usually assets that are technically complex to operate, include some technology risk or are commercially new to the market. Financial buyers, however, are attracted by proven technologies and low operating risk.

Some respondents to the survey saw the advantage in today’s limited marketplace as tilting toward financial buyers.

“[Private equity firms] and other financial buyers are looking for new assets to invest their capital and will seek out infrastructure assets based in the energy sector,” said the managing director of a U.S. fund.

Within the sector, certain sub-sectors appeal to investors more than others. Offshore wind is expected to see the biggest increase in M&A this year, followed by hydropower, photovoltaic solar and thermal solar. Biogas garners less enthusiasm.

Storage technology gets attention, though.

“Innovation in secondary technology like storage and energy aggregators is also proving to be important in investment decisions, as they contribute to stability and security of supply,” said KPMG.

The authors advise investors to be cautiously optimistic about the sector, noting there are obstacles that need to be overcome and risks to be mitigated.

The transition from feed-in tariffs (FITs), a policy mechanism to encourage deployment of renewable electricity technologies, to auction-based regimes could increase the risk that some low-price projects won’t be built, said 40% of respondents.

It also encourages consolidation, which in turn creates uncertainty and can lower the fixed price for sale of a stock. That kind of risk can discourage those who are depending on their investment to raise capital.

Joseph Markman can be reached at and @JHMarkman.