Key Valuation Multiples in Renewable Energy Deals

Valuation multiples are essential for comparing renewable energy projects and understanding market trends. Here's what you need to know:

• EV/EBITDA: Measures operational performance. Median multiple in Q4 2024 was 11.1x, down from 18.2x in 2020.
• EV/Revenue: Focuses on sales performance. Median multiple in Q4 2024 was 5.7x, signaling market maturity.
• EV/MW: Assesses capacity. Varies by technology, e.g., onshore wind projects average $300,000/MW.

Quick Highlights:

• Declining Multiples: Reflect market normalization after a 2020 boom.
• Technology Variance: Offshore wind projects have lower EV/MW multiples at early stages.
• Growth Outlook: Rising demand for solar, wind, and battery storage signals strong long-term potential.

Understanding these metrics helps investors choose the right projects based on maturity, technology, and market conditions.

EV/EBITDA Multiple Analysis

The Enterprise Value to EBITDA (EV/EBITDA) multiple is a widely used metric for evaluating renewable energy assets. It provides a way to compare companies without being influenced by their capital structures. Essentially, it shows how much investors are paying for each dollar of EBITDA.

EV/EBITDA Calculation Method

Here’s how it’s calculated:

• Enterprise Value (EV) = Market Capitalization + Total Debt – Cash and Cash Equivalents
• EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization

This method focuses on operational performance while ignoring the effects of financing, making it especially useful for companies with varying debt levels. For instance, in the environmental services segment of renewable energy, the median EV/EBITDA multiple was about 12.8x in 2025. In comparison, environmental and waste services companies were valued higher, at around 16.1x. These basics help in understanding valuation trends in the renewable energy sector.

EV/EBITDA in Renewable Energy

During the renewable energy surge in late 2020, EV/EBITDA multiples hit a high of 18.2x. As the industry matured, these multiples settled at more moderate levels, reflecting a more stable market.

EV/EBITDA Ranges by Technology

Valuations also vary depending on the type of renewable energy technology. Established technologies tend to have lower multiples, while companies with hybrid or differentiated solutions often see higher valuations. Firms that combine multiple renewable sources can command premium multiples, sometimes exceeding 20x or even 30x EBITDA. This reflects the strategic edge of a diversified renewable energy portfolio.

[1] Source: Energy & Environmental Services Sector Data, 2025.

EV/MW Multiple Analysis

The Enterprise Value per Megawatt (EV/MW) multiple is a key metric for assessing renewable energy assets. It evaluates power generation capacity, making it a useful tool for project development and acquisitions.

EV/MW Basics

The formula for calculating the EV/MW multiple is:

EV/MW = Enterprise Value ÷ Capacity (in megawatts)

For example, a 100-MW onshore wind project nearing construction, priced at $300,000/MW, would have an enterprise value of around $30 million. This simple calculation provides a foundation for industry-specific comparisons.

EV/MW by Energy Type

Different renewable energy technologies exhibit varying EV/MW multiples, depending on development stage and associated risks. Here's a snapshot of current trends:

For instance, early-stage offshore wind projects often have lower multiples due to higher risks and longer timelines before becoming operational.

Current EV/MW Market Data

Market conditions also play a significant role in shaping EV/MW multiples. Recent developments influencing these metrics include:

• Supply Chain Challenges: Ongoing constraints have squeezed margins, even as renewable energy accounted for nearly 30% of global production in 2023.
• Interest Rates: Rising rates since 2020 have cooled investor sentiment.
• Project-Specific Factors: Costs tied to grid connection, land leases, and location continue to heavily influence valuations.

These elements highlight the importance of a comprehensive approach to valuation. Experts, like those at Phoenix Strategy Group, suggest pairing the EV/MW multiple with discounted cash flow (DCF) analysis. This combined approach captures both the numerical data and qualitative aspects that affect a project's overall value.

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Revenue Multiple Analysis

Revenue multiples are a useful tool for assessing the value of renewable energy companies, particularly those in the growth stage. The Enterprise Value to Revenue (EV/Revenue) multiple is a common benchmark in this space, offering insight into market expectations and growth prospects. Unlike capacity-based metrics, which focus on operational or production capabilities, revenue multiples emphasize sales performance, making them especially relevant for gauging market sentiment and future potential.

Revenue Multiples Usage

In Q4 2024, the median EV/Revenue multiple for renewable energy companies was 5.7x, signaling a more mature sector. This metric is particularly helpful for businesses with fluctuating profitability or early-stage projects. Across different renewable technologies, revenue multiples generally hover around 5x.

Smaller companies, those with revenue under $10 million, tend to have higher multiples - averaging 7.4x compared to the broader industry average of 5.3x. This reflects their potential for higher growth.

Revenue Multiple Drivers

To understand revenue multiples better, it’s important to look at what influences them. Key factors include:

• Market conditions: Recent trends show stabilization in multiples, pointing to more balanced valuations.
• Diversity in energy sources: Companies that utilize multiple renewable technologies often achieve higher valuations. For example, Innergex in Canada and Renova Inc. in Japan have consistently been valued at EBITDA multiples of 20x to 30x due to their diversified strategies.

Here’s a snapshot of how revenue multiples have evolved in recent years:

"We believe that the current rise in capital costs is only a temporary setback for the renewable energy sector, as growth prospects in this decade remain strong and financing is still widely available. This creates attractive entry points for the medium to long term", explains Fabrizio Arusa, Finesco ETF specialist.

Even with recent adjustments, revenue multiples in the renewable energy sector continue to signal solid long-term growth prospects. These metrics complement other valuation tools, offering a broader perspective for comparing renewable energy investments.

Multiple Comparison Guide

Choosing the right valuation multiple for renewable energy deals depends on factors like the project's stage, the quality of available data, and current market trends. Each multiple sheds light on different aspects of asset value.

Choosing the Right Multiple

The selection of a valuation multiple should match the project's characteristics and the data at hand. For early-stage development projects, EV/MW multiples are useful benchmarks when financial data is scarce. On the other hand, EV/EBITDA multiples are better suited for mature, operational assets. High-growth companies often lean on revenue multiples due to their focus on expansion rather than profitability.

Key factors for selecting a multiple include:

• Project Stage: Use EV/MW for development projects and earnings-based multiples for operational assets.
• Technology Type: Solar and wind projects typically have similar ranges, while hydroelectric assets often show higher revenue multiples.
• Company Size: Smaller companies (under $10 million in revenue) tend to trade at higher multiples.
• Data Quality: The reliability of financial data determines which multiple is most appropriate.

Multiple Comparison Table

These multiples allow for tailored valuation approaches based on the specifics of each asset.

Example Valuations

Here are some practical examples of how these multiples apply to different renewable energy assets:

1. Mature Utility-Scale Solar A utility-scale solar project with steady cash flows and established operations might show the following 2024 metrics:
   • Revenue Multiple: 3.0x
   • EBITDA Multiple: 5.9x
2. Diversified Renewable Portfolio Companies with a mix of renewable technologies often achieve higher valuations. This is due to the strategic integration of various technologies and reduced risks through diversification.
3. Alternative Energy Assets Projects like biofuel and biomass typically exhibit:
   • Revenue Multiple: 2.3x
   • EBITDA Multiple: 6.4x

These examples highlight how the choice of multiple depends on both market dynamics and the unique features of each asset.

"We believe that the current rise in capital costs is only a temporary setback for the renewable energy sector, as growth prospects in this decade remain strong and financing is still widely available. This creates attractive entry points for the medium to long term." - Fabrizio Arusa, Finesco ETF specialist

Conclusion

Main Points Review

Valuing renewable energy assets effectively comes down to selecting the appropriate multiples. For operational assets, the EV/EBITDA multiple (11.1x in Q4 2024) is a key metric. For development projects, EV/MW is more relevant, while revenue multiples (5.7x in Q4 2024) are often used to assess high-growth companies.

Smaller renewable energy firms (those with revenue under $10 million) tend to see higher valuation multiples compared to their larger counterparts. Additionally, there are noticeable differences across technologies: solar companies usually have the highest EBITDA multiples, while hydroelectric companies often show the lowest revenue multiples.

Market Outlook

The renewable energy sector is undergoing rapid growth, driven by several critical factors:

• Data centers are expected to add 44 GW by 2030.
• Utility-scale solar and wind accounted for almost 90% of new capacity additions in early 2024.
• Battery storage capacity saw a 64% increase, reaching 7.4 GW in 2024.

Valuation trends are also being shaped by the rise of ESG-focused investments, which are projected to grow by 84% and hit $33.9 trillion by 2026. Alongside this, advancements in 24/7 renewable solutions and the rising demand from cleantech manufacturing - set to add 11 GW of demand by 2030 - point to a strong future for renewable energy valuations, even amid current market challenges.

With robust policy support and growing industrial demand, the sector remains resilient. These factors suggest valuation multiples will continue to grow, despite short-term interest rate pressures.

For tailored advice on renewable energy transactions, consider reaching out to financial advisors like Phoenix Strategy Group (https://phoenixstrategy.group).

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