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Understanding Energy Storage

One of the US Department of Commerce’s (Commerce) signature contributions to Power Africa has been the Understanding handbook series developed by its Office of the General Counsel’s Commercial Law Development Program (CLDP). This open-source and plain-language knowledge library now includes six handbooks explaining a range of essential topics in power project contracts, financing and procurement. In recent years, the Understanding series has expanded to focus on unique challenges in Africa’s energy market, such as the complex nature of private participation in transmission projects. With 65,000 copies in print and tens of thousands more copies downloaded online, the Understanding series has become a trusted resource in Africa’s power project community.

The most recent addition to the Understanding series, Understanding Energy Storage, comes at a critical time in both the development of the continent and the effort to combat climate change globally. The hope is that this handbook will contribute to Power Africa’s efforts to catalyze new energy storage investment as a core component of overall market development. This handbook supports the Commerce’s Renewable Energy and Energy Efficiency Advisory Committee’s recommendations on (1) Clean Tech Export Competitiveness Strategy, (2) Energy Equity and (3) Technology Risk Mitigation and Financing; and advances the US International Climate Finance Strategy.

This handbook is from Commerce’s Commercial Law Development Program and is co-authored by McDermott Associate Seth Doughty.

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Key Takeaways | The Current State of the US P3 Market

On September 28, McDermott Partner Emeka Chinwuba and Star America Infrastructure Partners’ Michael Rueger and Kamil Seidl discussed the effects of the Infrastructure Investment and Jobs Act (IIJA) on the P3 market and what impact the Inflation Reduction Act will have on future energy projects. They also provided an outlook on secondary and brownfield assets and addressed barriers to bridging the funding gap.

Below are key takeaways from the discussion:

1. There has been an increase in capital raise activity amongst financial sponsors in anticipation of a robust pipeline of infrastructure projects as the impact of IIJA begins to permeate through the US P3 market.

2. Progressive P3 procurement models continue to gain traction as total procurement and project costs can be significantly reduced, especially since the risks can be better defined before pricing is locked in.

3. Political risks remain a concern, especially for user-fee-based infrastructure projects, and the need for P3 champions on a project-by-project basis remains essential to the growth and continued diversification of the market.

To access past webinars in the Navigating the New Energy Landscape series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




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Key Takeaways | Keeping the Lights On: Cyber Threat, Vulnerability and Oversight Considerations for the Energy Sector

During the latest webinar in our Energy Transition series, Partners Carl Fleming and Scott Ferber hosted PWC Principals Brad Bauch, US Power and Utilities Cybersecurity & Privacy Leader, and Mark Ray, Cybersecurity & Privacy, to discuss the cyber threat landscape that the energy sector currently faces, the US government’s oversight of cybersecurity and key considerations for building a robust compliance program.

Below are key takeaways from the webinar:

1. The Cyber Threat Landscape. Threat actors are continually evolving in the tactics, techniques and procedures they are deploying against their targets, making it a daunting threat landscape. Where nation state threat actors are involved, the risk of compromise is heightened. Ransomware continues to be, by far, the most prevalent issue organizations are contending with across all sectors and geographies—followed by supply chain attacks and zero-day exploits. Amid Russia’s invasion of Ukraine and the punishing sanctions being imposed, along with Russia’s demonstrated willingness to use malign cyber means against an array of targets, the energy sector should be on high alert for cyberattacks.

2. US Government Engagement. The US government is using a carrot-and-stick approach with the private sector to encourage and, in some instances, require robust cybersecurity, as well as information sharing. Bottom line, the government is expecting more of the private sector (particularly the energy sector) when it comes to dealing with cybersecurity.

3. Building a Robust Compliance Program. There are unique considerations when building a robust compliance program that encompasses both Information Technology (IT) and Operations Technology (OT) systems. As a starting point, companies should consider:

  • Benchmarking against cybersecurity compliance programs at peer companies and similar industries
  • Creating processes that are enterprise-wide, with a control standards-based approach
  • Avoiding program siloing
  • Ensuring active monitoring and controlled access of IT and OT systems
  • Developing strong protections for legacy OT software that is operationally essential.

To access past webinars in the Energy Transition series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




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Key Takeaways | Commercial, Legal and Policy Responses to Commerce’s Anticircumvention Investigation

The US Department of Commerce (Commerce) recently initiated a circumvention investigation against solar cell and module imports from Cambodia, Malaysia, Thailand and Vietnam. This decision has the potential to profoundly impact the companies that import or rely on imported crystalline silicon photovoltaic cells (CSPs) in the United States. To help companies navigate this investigation, McDermott’s Carl Fleming, Lynn Kamarck and Tyler Kimberly were joined by Brett White, vice president of regulatory affairs for Pine Gate Renewables, for a fireside chat that covered, among other things, the specific issues Commerce will investigate, how to assess the risk of this decision across developer portfolios and the opportunities presented for improving current renewables legislation.

Below are key takeaways from the discussion:

1. Commerce’s decision to initiate a circumvention investigation into whether CSPs imported from Cambodia, Malaysia, Thailand or Vietnam are circumventing antidumping and countervailing duty orders on CSPs from China has generated market uncertainty for companies that import or rely on imported CSPs.

2. Whether any assessment of duties or penalties that result from the investigation will have retroactive effect is currently unclear. Applicable regulations do not require Commerce to apply duties retroactively, providing an opportunity for “interested parties” to offer feedback to Commerce as to why retroactive application would be unfair. (In this context, domestically, importers of record, businesses and trade associations and industrial users are generally recognized as interested parties.)

3. Major legal and factual issues may sway Commerce’s ultimate determination, while certain factual discrepancies in Auxin Solar Inc.’s petition to Commerce may lead to a preliminary decision by Commerce. (The deadline for the preliminary decision is August 29, 2022, and it’s unlikely that Commerce will act before this deadline.) Additionally, certain “country of origin” legal analyses are implicated in any ultimate determination Commerce makes.

4. Auxin’s petition and Commerce’s investigation have given more attention to the issue of importing CSPs and to the Build Back Better Plan (BBB), so there is optimism that this may push US Congress to act more quickly on the adoption of certain tax credits, domestic content credits and other incentives under the BBB.

To access past webinars in the Energy Transition series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




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Key Takeaways | African Markets and Opportunities for Cross-Border Investments in Renewable Energy

On March 30, 2022, Carl Fleming and Emeka Chinwuba, partners in McDermott’s Energy and Project Finance Practice Group, hosted Dr. Abdelilah Chami, head of sustainability Northern & Central Africa at Enel Green Power, and Jay Katatumba, investment director at Africa50 Infrastructure Fund, for a lively discussion on the renewable energy space in Africa and cross-border investments.

The transition to renewable energy in Africa has progressed impressively over the last decade, with many countries working to increase renewable energy capacity in recent years. Forecasts by the International Renewable Energy Agency (IRENA) indicate that with the right policies, regulation, governance and access to financial markets, sub-Saharan Africa could meet up to 67% of its energy needs by 2030. This is reflected by the fact that average annual investments in renewable energy grew ten-fold from less than half a billion dollars during the 2000 – 2009 period to $5 billion during 2010 – 2020.

Below are key takeaways from the webinar:

1. Development Financial Institution (DFI) participation in Africa’s power market is primarily driven by its mandate to make the cost of electricity more affordable, increasing access to electricity and improving the reliability of its power supply.

2. Energy access and consumption in Africa has global ramifications as we look to trade, commerce and development, future demographic trends and geopolitics with respect to energy costs and access.

3. From a power sector policy standpoint, each African country should be taking a holistic view when looking at the specific in-country and regional needs for energy, the entire value chain, related and existing infrastructure, local capabilities and local regulatory and governance frameworks.

4. In accessing various African jurisdictions for investment opportunities, private sponsors are focused on predictability, highest risk weighted returns, existing infrastructure and the whole value chain proposition for a specific asset.

5. Private sponsors are also looking for opportunities where projects are bankable and structured with very limited reliance on subsidies or other credit support from the host governments.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




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6 Key Takeaways from the M&A Activity in the Storage Market Panel at the Energy Storage USA Conference

Carl Fleming, a partner in McDermott’s Energy and Project Finance Practice Group and head of its energy storage team, hosted a panel of industry leaders from KKR & Co. Inc., CohnReznick Capital and Pine Gate Renewables that explored the opportunities and challenges currently facing the energy storage market, as well as the future of the market. Below are key takeaways from the discussion:

1. Valuation: The models underlying energy storage projects are complex, consist of a large number of variables and are mainly reliant on third-party data and analytics in an emerging technology. In uncertain times like now, it is critical that storage teams be extremely thorough in their diligence and flexible in their approach to valuations and developing the revenue stack for these projects.

2. Supply Chain Woes: Supply chain issues have altered the outlook of many in the storage sector in 2022. While demand remains robust, the storage sector is facing global supply chain issues (as is the entire industry) and competition within manufacturers as to whether cells will be allocated for storage or electric vehicles (EV). The accelerated growth of the EV market could negatively impact the growth of the storage market—unless suppliers find ways to ramp up production.

3. Buy or Wait: Right now, the cost of modules, cells, commodities and transportation are through the roof. At the same time, the demand for storage is equally high. It remains to be seen whether purchasing storage assets at a time of such volatility will be a winning or losing proposition. Some have speculated that now is the time to buy, while others have suggested staying on the bench for this round. However, based on the higher cost of solar assets from years ago and recent prices for the sale of those assets, it seems sitting out in this market would be a losing proposition.

4. Assets vs. Human Capital: In several transactions, we’re seeing parties more interested in acquiring the human capital and the team behind a platform of assets rather than acquiring the asset solely on its economic merits. The track record and make-up of the development team remains an essential point when buyers are considering the projects they are willing to purchase.

5. Standalone, Hybrid or Conversion: Although certain buyers are targeting a particular area of the energy storage market and standalone storage remains a hot topic, the industry as a whole has ready and willing buyers for all forms of energy storage projects (e.g., standalone storage, storage plus renewable hybrids, storage plus conventional hybrids).

6. Market FOMO: There is a pervasive sense of “FOMO” in the market right now. However, developers and investors need to remain disciplined and stay true to two essential prerequisites for a project to be purchased: line-of-sight on interconnection and line-of-sight on offtake revenues. These can be easy to lose sight of in today’s frothy market and in new markets that have shifting regulatory regimes for storage.

Carl Fleming and his team of energy [...]

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Key Takeaways | Energy Storage Opportunities and Challenges

What are the opportunities and challenges facing those in the energy storage sector? During the latest webinar in our Energy Transition series, Partner Jim Salerno hosted Perfect Power’s CEO and President Alan Dash and Chief Commercial Officer Douglas Sherman for a 30-minute discussion where they opined on the importance of battery storage and the differences between regulated and unregulated markets within the energy storage industry.


Below are the key takeaways from this discussion:

1. Utility-scale battery storage is necessary for transitioning the grid from fossil fuels to renewables. The surge of renewables across grids has resulted in unpredictability, volatility and intermittency in the energy market, creating a need for a new form of peaking. Batteries are becoming the ideal peaking units as their fast ramping capabilities allow them to adapt to shortfalls in the grid and create stability.

2. Battery storage, unlike renewables, provides capacity as well as ancillary services. This concept is known as “value stacking.” In addition to storage capabilities, ancillary services allow batteries to manage volatility and uncertainty in the grid by providing tools that keep the system in balance and establish the ability to arbitrage the Real Time Market while creating predictability in the Day-Ahead Market.

3. The current regulatory and merchant markets are evolving to facilitate renewables and storage project development. In unregulated markets, such as Texas, the integration of renewables into the grid has grown organically because of the efficiency, speed and economic benefits that are derived from renewables and battery storage. Meanwhile, highly regulated markets, such as California, are focusing on resource adequacy, market certainty and incentives to promote capital investment in the clean energy space—including battery storage.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




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Key Takeaways | Outlook for Competitive Power in 2022

On February 2, Neil Levy and David Tewksbury, partners in McDermott’s Energy Regulatory, Markets & Reliability Practice Group, hosted Todd Snitchler, president and CEO of the Electric Power Supply Association (EPSA), for an in-depth discussion about developments affecting the competitive power sector as we move into 2022.


Below are the key takeaways from this discussion:

  • Competition has benefited consumers by shifting risk from consumers to investors, lowering prices, and reducing emissions, while improving reliability. However, competitive power markets are facing challenges due to recent state actions and FERC decisions.
  • Carbon pricing would be one way to address concerns regarding emissions within a competitive market framework.
  • The federal government and states need to work together to preserve competition and ensure that state goals do not jeopardize reliability.
  • Steps must be taken to ensure that resources required for reliability are not pushed out of the market.
  • States have been focused on emissions reductions by subsidizing certain types of resources, which can result in lower market prices. At the same time, recent FERC actions have also reduced revenues for various resources.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




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Key Takeaways | The Growth of Early Stage Technology Company Investment and Development in Energy and Oil and Gas

How is technology affecting the energy industry? In the latest webinar in the Energy Transition series, McDermott Will & Emery Partner Parker A. Lee hosted Shawn Helms, co-head of McDermott’s Technology and Outsourcing Practice Group, Nadine Herrwerth, managing director at TWTG, and BJ Walker, managing director at Tudor, Pickering, Holt & Co for a 30-minute discussion where they opined on the current and future impact technology plays on conventional and renewable energy companies.

Below are key takeaways from the webinar:

1. Industrial Internet of Things (I-IOT). I-IOT products and services can be used to improve site safety and efficiency. I-IOT products have the capability to monitor equipment, such as valves and temperature sensors on machinery, and record data on external dashboards for analysis and alerting. Through the use of data analysis, data gathered by I-IOT products can identify trends, build models and detect future equipment failure. As a result, I-IOT products and services can increase the efficiency, reliability and safety of equipment.

Though the application of I-IOT devices is relatively new to the industry, these products are capable of being retrofitted to established and already operational sites.

2. Technology Companies and Energy. While technology companies are large consumers of energy output, they can also provide significant insights and intelligence in regard to energy use and production. Synergies between technology and energy industries are continuously evolving and providing improvements in energy investments, efficiencies and reliability. For example, drones are capable of leveraging artificial intelligence to increase efficiency and consistency of equipment monitoring and inspections, particularly equipment that is located in remote areas (such as offshore).

3. Investor Focus on the Energy Space. An important theme in the oil and gas industry is the recent focus on transforming the industry to a generator of cashflow. In attracting new investors to the energy industry, particularly as new technologies are introduced, investors should know there is typically a longer wait period to receive a return on investment than what a general investor would commonly expect. In addition to general investors, technology companies are investing in renewable energy sources for purposes of environmental responsibility and in order to power their own enterprise. It is expected that this trend will continue to grow in energy intensive areas, such as the cryptocurrency space.

4. Technology in Traditional Oil and Gas. Although not widely appreciated, the oil and gas industry has always been heavily reliant on technology and an area where revolutionary technologies are developed—and that is certainly the case today. Because oil and gas professionals are proficient with, and conversant in, the application of new technologies, look to those professionals to be industry leaders in the energy transition as new businesses and products are developed.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




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Key Takeaways | Lender Outlook on the Debt Financing of Renewables and Transactions

During the latest webinar in our Energy Transition series, McDermott Partners Robert da Silva Ashley and John Bridge hosted Paul Pace, SVP and team leader at KeyBank, and Andrew Chen, managing director at CIT, to discuss the current outlook of leading lenders in the US renewables and transactions space. More specifically, they focused on lender outlook regarding the state of debt market support for the growing range of renewable power generation and clean energy infrastructure projects.

Below are key takeaways from the webinar:

1. The financing market for renewable projects remains extremely competitive, compressing pricing for lenders and driving innovations in financing structures with credit increasingly given to shorter tenured power purchased agreements (PPAs) and earlier merchant tails.

2. Current supply chain delays and inflationary pressures are creating significant stress. Solar panels and other major equipment are stuck in ports and sharp rises in project costs (insurance, labor wages, operations and maintenance, etc.) are starting to have a noticeable effect on the viability of certain project developments.

3. Lenders have been leaning heavily on client relationships with established track records of successful project developments, strong financial footing and credibility with industry counterparties helping to navigate the current challenges.

4. Environmental, Social and Governance (ESG) remains a focus for banking institutions driven by regulatory and environmental factors.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




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