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Five Takeaways: What’s New in Energy Private Equity? Trends and Developments in a Shifting Investment Landscape

McDermott recently hosted Andrew Ellenbogen of EIG Partners and Jeff Hunter of Apollo Global Management for a lively discussion about the trends and developments in today’s shifting investment landscape.

Below are key takeaways from this week’s webinar.

      1. The most impactful changes in energy investment over the last decade have been the drop in natural gas prices, the decrease in the cost of capital for renewable investments and the increase in renewable capacity factors (and a dramatic decrease in equipment pricing).
      2. As the energy market has become crowded for traditional operating assets, some investors are seeking opportunities in non-traditional spaces, such as investing in non-traditional technologies (such as solar plus storage or offshore wind) or investing in service providers or construction companies.
      3. In search of returns, some investors are continuing to take a greater amount of merchant risk or development risk than they previously would have accepted, and some investors are investing in platforms rather than projects.
      4. There are smart investments in power to be made in areas with higher barriers to entry (if you can make reasonable projections on the regulatory environment). For example, California peaking resources have provided interesting opportunities in recent years. Larger returns come from taking thoughtful positions on the market and taking carefully analyzed risks.
      5. Prudent investors pay attention to intrinsic risks of power investments, including risks that the market may not be pricing correctly. A successful investment in power assets requires realistic (and conservative) estimates of both basis risk and the merchant tail (and a view on back-end electricity prices).

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Three Takeaways: Tensions in the Renewable Energy and Environmental Markets


McDermott recently hosted Jonathan Burnston, Managing Partner of the energy sector financial services firm Karbone, for a discussion of recent developments affecting environmental, social and governance (ESG) investing, renewable energy and carbon offsets.

Three takeaways from this week’s webinar below:

      1. Interest in ESG investing is unlikely to fade. ESG indices have performed relatively well in the COVID-19 environment and the concerns that motivate ESG investing are not going away.
      2. ESG investing is different from reducing emissions or pursuing carbon neutrality. Positive returns from ESG investments do not themselves reduce emissions or mitigate the impacts of climate change.
      3. Corporate interest in becoming “carbon neutral” is also likely to continue. Due to recent economic disruptions, there may be some delays in achieving some previously announced commitments. However, the pressures and concerns that have motivated the interest in carbon neutrality remain powerful forces.

Listen to the full webinar.

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Five Takeaways: Early Moves and Current Trends in Energy Storage

McDermott continues its dialogue with renewable industry leaders to provide the latest market updates on the disruption, challenges and opportunities COVID-19 presents to the industry. This week, we focused on the energy storage market and hosted Chris McKissack, CEO at GlidePath Power Solutions. Glidepath was an early mover in energy storage. GlidePath is now one of the largest energy storage developers and independent power producers in the US, with over 100MW of commercially operating battery projects, 445 MW of battery storage and renewable energy projects, and 2.1 GW of greenfield development pipeline of battery storage projects across the US. We had an engaging discussion spanning the benefits of being an early mover in the storage space, the current state of the dynamic energy storage market, and successful strategies you can use to approach the opportunities and challenges stemming from COVID-19.

1. Batteries Can Now Serve as “Shock Absorbers” for the Grid

Batteries are capable of doing much more than just “energy shifting,” where a developer simply stores energy from a solar project from one time of day and dispatches it onto the grid at another time of day. For instance, we are now able to place stand-alone batteries closer to load than most large-scale wind and solar projects. This provides an opportunity for frequency response and regulation in that it allows grid operators to dispatch generators more efficiently. This is important to today’s market. 60 years ago, we had an unpredictable load, but very predictable generation. You could ramp-up and ramp-down generation by turning a dial. Today, we have more and more intermittent resources and renewables dispatching the grid resulting in more demand response. We now have both unpredictable load and unpredictable generation, making it much more difficult for the operators of the grid to balance the two. There is an opportunity for batteries act like shock absorbers for the grid and keep things stable.

2. Batteries Remain Key to Energy Shifting and Financial Energy Arbitrage

Despite the versatility of batteries, energy shifting remains an important use for batteries, particularly for financial energy arbitrage. Batteries provide an opportunity for load customers to marry their purchase of energy with their load and shape it to a particular financial profile. We see a lot of this usage by datacenters today and this trend will continue.

3. Early Movers in Energy Storage Will Likely Emerge from COVID-19 Even Stronger

The battery energy storage market was poised for a period of sustained growth in 2020 and 2021, but it is unlikely to emerge totally unscathed from COVID-19. According to some forecasts, market growth is now forecast to decline for 2020. The pace of the recovery will depend how quickly the COVID-19 crisis is resolved. However, depending on the agility of the company’s management and the status of the development of its projects going into COVID-19, some battery storage companies may come out of COVID-19 even [...]

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Five Takeaways: Navigating President Trump’s Executive Order on US Bulk Power System Electric Equipment

President Trump’s May 1, 2020 Executive Order prohibiting certain transactions involving bulk-power system electric equipment developed, manufactured or supplied by a foreign adversary could have far-reaching implications for both the renewable and conventional power industries. It has also raised a high level of uncertainty and risk while the industry awaits the actual implementation of the Executive Order. This interim period, as well as the breadth of the Executive Order, raises key questions and concerns for sponsors and developers of energy projects, construction contractors and energy project investors. Read our latest On the Subject for more in-depth information.

Yesterday, after the Department of Energy’s stakeholder call, we hosted a webinar that addressed important considerations as to how the Executive Order may impact your business. In particular, our hosts provided a step-by-step framework on navigating the Executive Order based on their prior US Government experience in this area and current “boots on the ground” in Washington, DC on this issue.

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Six Takeaways: Shifting Market Dynamics in Corporate PPAs


On Thursday, May 7, McDermott Partners Ed Zaelke and Carl Fleming were joined by Christen Blum, head of the Renewable & Analytics Advisory practices at Edison Energy, to hear her thoughts on the current effects of COVID-19 on the corporate power purchase agreement (PPA) market.

Below are six takeaways from this week’s webinar:

    1. Despite COVID-19, there is still a strong appetite for corporate renewable procurement: market leaders (such as tech, pharma, and food and beverage companies) have been less impacted by COVID-19 and remain interested in renewable procurement. On the other hand, companies that have been hit the hardest by COVID-19 (such as services and hospitality businesses) have traditionally demonstrated limited interest in renewables; but industrial companies have seen the largest effect of COVID-19—they remain interested in renewables, but are delaying their procurement as they focus on their core business.

    2. Although the trend for buyer-friendly PPA terms remains strong, the market has seen a recent uptick in prices over 2019 such that they no longer remain as buyer-friendly as they have been in the recent past, but the impact of COVID-19 on these prices remains to be seen.

    3. In order to maintain more competitive PPA prices, developers are employing a number of price mitigation strategies, including price collars, upside sharing and developers bearing more merchant risk.

    4. Most corporate buyers are less time-sensitive than more traditional buyers; as such near-term wind projects are often losing out on opportunities to cheaper solar projects which are coming online later.

    5. Force majeure terms have become a major emphasis in PPA negotiations now.

    6. The best advice for developers is to treat their relationships with corporate partners as a long-term partnership and to act accordingly in negotiations.

Listen to the full webinar here.

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President Trump’s Executive Order on US Bulk Power System Electric Equipment: Questions and Analysis

President Trump’s May 1, 2020, Executive Order prohibiting certain transactions involving bulk-power system electric equipment developed, manufactured or supplied by a foreign adversary could have far-reaching implications for both the renewable and conventional power industries. The breadth of the Executive Order raises key questions and concerns for sponsors and developers of energy projects, construction contractors and energy project investors.

Access the full article.




Six Takeaways: How Utilities and IPPs Are Responding to COVID-19

On Thursday, April 30, McDermott was joined by Brett Kerr, vice president of external affairs at Calpine, Drew Murphy, senior vice president of strategy and corporate development at Edison International, and Andrew Campbell, director of regulatory support and planning at NiSource who shared their perspectives on how investor-owned utilities and independent power producers are managing the COVID-19 crisis.

Below are six takeaways from this week’s webinar:

      1. As businesses go back to work, it is essential that they carefully plan for a new normal, including consideration of travel restrictions, acquisition of personal protective equipment, maintaining social distancing of employees and contractors, and compliance with new rules and regulations.
      2. Utilities have been and will continue to optimize their maintenance schedules to balance safety and reliability concerns considering the essential nature of electricity and risks potentially associated with deferred maintenance.
      3. Although it is too soon to see the permanent effects of COVID-19, there has been a five to seven percent reduction in weather-normalized demand: this includes both an increase in residential demand and a larger reduction in commercial and industrial demand.
      4. Utilities are watching cash flow more closely as more customers are either not paying or deferring payment, and as commercial and industrial customers reduce demand. In California, where revenues are decoupled from electricity demand, this should not affect total revenues, but may lead to reallocation of rates across customer classes.
      5. A number of large commercial and industrial corporate customers with renewable and sustainability commitments are talking about placing these commitments on hold or rethinking them as recessionary impacts become clearer.
      6. Drops in load and low natural gas prices could detrimentally impact the economics of new renewable projects seeking financing and prevent the projects from moving forward. However, as renewables often dominate interconnection queues, if some of these projects do not come online, prices could actually remain constant.

Listen to the full webinar.

To begin receiving Energy updates, including invitations to the Renewables Roundtable and Q&A Webinar Series, please click here.

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COVID-19 and Wind Projects: A Legal and Commercial Checklist for Tax Equity, Debt Financing and Project Documentation

The Coronavirus (COVID-19) pandemic has severely disrupted the wind market’s supply chain and labor resources, resulting in significant project delay risk. This legal and commercial checklist is a comprehensive practitioner’s guide to help sponsors and borrowers review their tax equity, financing, offtake and material project documents to ensure compliance with obligations, prevent unnecessary default triggers, and manage relationships with banks, tax equity and other stakeholders.

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Community Choice Aggregators on the Rise as an Alternative Electricity Provider

Community choice aggregators (CCAs) are growing in popularity as an alternative electricity provider for communities that want more local control over their energy mix. And so, financiers, CCAs and other business leaders must assess what this growth means for the electric grid, utility business models and project finance. While there’s a primary focus on California, increasing energy loads being served by CCAs and other non-utility suppliers have been trending across the country.

The recent American Council on Renewable Energy (ACORE) Forum united dealmakers, policymakers and systems experts to confront the business opportunities, policy and regulatory issues, and technology challenges associated with integrating high-penetration renewable electricity on the grid. The goal of ACORE’s 2019 forum was to advance efforts for a modernized grid that values flexibility, reliability and resilience. One important session was Community Choice Aggregation: Impacts on Project Finance and Grid Management, which was moderated by Ed Zaelke of McDermott Will & Emery and included panelists Nick Chaset of East Bay Community Energy, Daniela Shapiro of ENGIE, N.A. and Britta von Oesen of CohnReznick Capital.

A Brief History

The first CCA formed in 2010 in Marin County, CA, and since then, the CCA movement has grown very quickly to 19 agencies (19 of California’s 58 counties). Notably, CCAs serve over 10 million Californians today. Helping local governments accelerate climate action is foundational to CCAs, with many seeing CCAs as a positive catalyst in promoting climate action, cleaner energy and finding ways to make the necessary energy investments to actuate transportation electrification and building electrification.

In a nutshell? They want to offer lower-cost energy that is cleaner and find ways to invest in local communities. (more…)




FERC Announces Tax Reform Actions and Eliminates Income Tax Allowance for Master Limited Partnerships

FERC announced actions in response to the 2017 tax reform legislation and a revised income tax policy, which eliminates the income tax allowance for Master Limited Partnerships. Regulated entities should ensure that they comply with FERC’s orders regarding the treatment of income taxes and consider whether to file comments on the proposed rulemaking and notice of inquiry.

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