THE KEYS TO INVESTMENT IN RENEWABLE ENERGY IN THE US FROM 2021 ONWARDS - SPECIAL REPORT
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SPECIAL REPORT
THE KEYS TO INVESTMENT
IN RENEWABLE ENERGY
IN THE US FROM
2021 ONWARDS
February 2021
IN PARTNERSHIP WITH
Contents
3 EXECUTIVE SUMMARY
www.tamarindogroup.com
insight@tamarindogroup.com
T: +44 (0)20 7100 1616
4 INTRODUCTION 3rd Floor, Tyndale House,
134 Cowley Road, Oxford, OX4 1JH
5 THE TASK AHEAD
Managing Director, Tamarindo Group:
6 FINANCING THE TRANSITION
Adam Barber
Managing Director, A Word About Wind:
Ilaria Valtimora
8 ACCELERATING TECHNOLOGIES Editorial & Content Lead: Richard Heap
Business Development Manager: Liza Roure
Design: Sam Pilgrim & Rachael Moreland
9 CONCLUSION
Acknowledgements
Latham & Watkins and Tamarindo Group would like to thank the following industry leaders for their participation in the
Financing Wind Inside Investment 2020 Wind Investment Boardroom debate, and for their permission to be quoted in
this report.
Brandon Sack, Managing Director, Clean Energy Development, Evergy
Eli Katz, Partner and Co-Chair to Energy & Infrastructure Group, Latham & Watkins
Frank Getman, President & CEO, Great Bay Renewables
João Metelo, CEO, Principle Power
Justin DeAngelis, Partner, Denham Capital
Justin Stolte, Partner and Co-Chair to Energy & Infrastructure Group, Latham & Watkins
Lars Thaaning Pedersen, Co-CEO, Copenhagen Offshore Partners
Michael Rucker, CEO, Scout Clean Energy
Ravina Advani, Head of Energy Natural Resources & Renewables, BNP Paribas
William Demas, Managing Director, Stonepeak Infrastructure Partners
THE KEYS TO INVESTMENT IN RENEWABLE ENERGY IN THE US FROM 2021 ONWARDS
Executive summary
It’s an interesting time for The session, held on the eve of
renewables in America. The A Word About Wind’s Financing
country has just had election Wind Inside Investment 2020
where clean energy investment conference, focused on three issues:
was a central policy issue. And
the winner was the candidate ■ What should the incoming
with the greenest agenda. The administration do regarding the
election outcome bodes well energy transition and to what
for renewables. But challenges extent are tools such as tax credits
remain. still needed?
It is yet to be seen how President ■ What role can equity play in
Biden’s policies will fare, and even the transition, what is the best
with bipartisan support, there are point for private capital to enter
questions over how the market renewable markets and what can
will deliver the kind of growth now be done to address competition for
needed to meet global climate goals. equity?
One example: US renewables has ■ How can the industry accelerate
got where it is now largely thanks to technologies such as hydrogen
tax incentives. But in 2020 the solar and carbon capture, and how do
sector’s growth started to outstrip returns in renewables compare to
available tax equity. Utility-scale solar sectors such as oil and gas?
has grown 66% more in 2020 than
2019, creating a requirement for up This paper summarizes the main
to $8 billion of tax capacity from points discussed.
external investors, according to
Wood Mackenzie.
To address challenges such as this, in
December 2020 the law firm Latham
& Watkins led a closed-door Wind
Investment Boardroom round table
meeting with 10 leading figures from
all areas of the US renewables value
chain.
3
Introduction
It’s probably fair to say that This investor sentiment has already
the US renewables industry had led to some historic energy industry
been having a relatively lucky milestones, with a renewables
2020 even before the outcome company, NextEra Energy, overtaking
of the election. The resilience oil major ExxonMobil to become the
of the sector in the face of the most valuable entity in the sector in
coronavirus pandemic helped October.
to buoy its outlook within the
investment community. And Goldman Sachs has forecast
that renewable generation will be the
In July, when the US was seeing largest area of energy spending in
more than 50,000 new coronavirus 2021, overtaking oil and gas for the
cases a day, the American Council on first time in history. But renewables
Renewable Energy put out a report will need all the help it can get if the
on finance that showed investor US is to meet a climate goal of net-
confidence in renewables growth was zero emissions by 2050.
as high in 2020 as it had been in 2019.
“Renewables has held up remarkably
Those with the most confidence in well as an asset class throughout
the market were those looking to COVID,” observes Latham & Watkins
invest $500 million or more into the Partner and Co-Chair to Energy &
industry – the highest spenders. And Infrastructure Group, Eli Katz. “And
94% of investors said the US was certainly it’s the case that a Biden
going to be as attractive as anywhere administration is a net positive.”
else in the world for renewables
investment between 2020 and 2023. However, he adds: “The Biden
administration doesn’t have as much
Only 15% of respondents were of a mandate as people might have
planning to cut their investments hoped. The senate, at best, will be
in renewables, while 53% percent 50:50. So it is entirely possible that
planned to increase investment by some of the Biden administration
more than 10%. agenda gets held back a bit and has to
be horse traded.”
4THE KEYS TO INVESTMENT IN RENEWABLE ENERGY IN THE US FROM 2021 ONWARDS
The task ahead
Biden’s first task will be Advani says, and is seeing booming
to control the coronavirus private equity and infrastructure
pandemic, Katz believes. So it fund interest in asset classes such as
remains to be seen how much renewables.
can be achieved in terms of
energy policy during 2021, Developers are also seeing a change.
before election concerns again At Scout Clean Energy, CEO Michael
muddy the waters. Rucker is hoping to see growing
investments in transmission, in
The most obvious way to support particular. This is a major bottleneck
renewables is through some sort for renewables development.
of infrastructure initiative, which “Unless we address the transmission
could garner bipartisan report. Katz bottlenecks, we’re not going to meet
predicts “nothing earth-shattering” the expectations of the market,”
but says the renewables industry can Rucker says.
at least expect a more supportive
administration. Storage is another area where there
might be bipartisan support, he says.
Ravina Advani, head of energy, natural There is hope for a standalone tax
resources and renewables at BNP credit for storage. Elsewhere, offshore
Paribas, says there had been a growing wind certainly looks set to benefit
trend towards investor alignment from the new outlook.
with climate goals even under the
previous administration. “Many of my “We will probably see a more positive
clients are under constant pressure,” trend with the new administration,”
she says. “A lot of the oil and gas says Lars Thaaning Pedersen, co-CEO
companies are under scrutiny.” of Copenhagen Offshore Partners.
“Some of these projects have just
That’s leading to a growth in been lingering too long.”
conversations about energy transition.
BNP Paribas is now being “very
judicious” about its investment goals,
5Financing the
transition
Overcoming regulatory hurdles Infrastructure Partners. But for
is going to be a major challenge emerging technologies in particular,
for financing US renewables, policy so far “hasn’t really done
Pedersen says. anything to get investors excited or
make it easier to deploy capital.”
Failing to deal with this problem is key
to the incoming administration and There needs to be a better
could leave the US in danger of not environment to deploy capital,
only missing its own climate goals but he says, for example by offering
also missing out on global industrial more stable or visible cash flows
opportunities. for projects. “That’s the biggest
constraint,” he comments. “People
This is the case with floating can’t take revenue risk and technology
offshore wind, a technology that is risk” at the same time, Demas says.
gaining traction worldwide and “is
competitive” today, says João Metelo, Justin DeAngelis, partner at Denham
CEO at Principle Power. Capital, notes how this limitation is
pushing investors to focus on wind
Fostering such technologies could and solar. Yet “tax equity creates an
lead to “real serious opportunities” additional layer of friction and cost
for areas such as the Gulf of Mexico, for financial players who don’t have a
which is stagnating as the oil and gas need for the tax losses,” he says. “You
sector recedes, Metelo says. Financing don’t really need as much of subsidy
the transition is not just about energy, to make it happen.”
he adds, but also transportation,
where there are opportunities for Even with a perfect regulatory
hydrogen as well as electrification. environment, there still needs to be
projects that investors find attractive.
Fortunately, regulatory support is This is one big draw in offshore wind,
already being driven aggressively where technology risks and costs have
at state level, says William Demas, fallen as permitting of US projects has
managing director of Stonepeak dragged on.
6Our mission is to accelerate the global adoption of
renewable energy and clean technology through
better communications and stronger networks.
We do this by giving industry players, from established leaders to
fast-growth pioneers, both voice and stage.
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INFO@TAMARINDOGROUP.COM | +44 (0)20 7100 1616
TAMARINDOGROUP.COMAccelerating
technologies
New financial tools will likely Justin Stolte, Partner and Co-Chair
be needed to mobilize the kind to Energy & Infrastructure Group,
of money that is required not Latham & Watkins, likens the current
just for continued solar and excitement around US renewables
wind growth but also for the to the interest in unconventional
buildout of transmission and hydrocarbons a decade ago. That’s
new technologies such as green a segment that has recently faced
hydrogen and carbon capture, headwinds, he notes, making it
utilization and storage (CCUS). important that renewables investors
see returns on investment matching
One option is royalty investments, a these excitement levels.
model that is well known from the oil
and gas sector. Here, financiers fund The energy transition “certainly has
development and then take a royalty the interest of policymakers,” he says,
off the project. “There is a wall money but “the transition is a marathon being
there but most of it is looking for run at a sprinter's pace, so continued
de-risked value,” says Frank Getman, policy support, as well as execution by
President and CEO at royalty financier the industry, will be key.”
Great Bay Renewables.
Oil and gas players can and should
“There’s been little innovation on be part of the solution, Stolte says,
the financing front,” he says, and this particularly in areas such as CCUS,
needs to change. which is emerging as a potentially key
contributor to deep decarbonization.
Brandon Sack, managing director
for clean energy development at The good news is that large investors
Evergy, says the scene is set for wind, are standing by to support many
solar and battery storage to scale of the potentially transformational
up without subsidies. One missing technologies that are still nascent
piece of the equation is hydrogen to today. At BNP Paribas, for example,
replace carbon fuels. “There’s plenty “the bank is laser-focused on
of opportunity locally to produce hydrogen,” says Advani.
hydrogen,” Sack says.
8THE KEYS TO INVESTMENT IN RENEWABLE ENERGY IN THE US FROM 2021 ONWARDS
Conclusion
Investors are ready and eager solar and wind relevant and almost
to invest in US renewables. boring,” says Demas at Stonepeak
Technology developers are Infrastructure Partners.
keen to get projects up and
running. And now there’s an As a result, he says: “I would expect
administration that has the that the return profile between
energy transition as a key renewables and oil and gas is going
priority. What else is needed to converge. The cost of capital is
for the US to meet its climate going to increase. It’s about having a
ambitions? sophisticated approach to how you
are going to manage merchant risk.”
“It’s the marketplace design,” believes
Pedersen at Copenhagen Offshore What’s required is “someone looking
Partners. “It’s not set up to enable at it holistically,” says Getman at Great
investments. I cannot see how that Bay Renewables, “but it’s working.”
can be solved if not at the federal
level.” Ultimately, and despite the increased
certainty that has come with the
It is an issue that needs to be election outcome, the US renewables
addressed quickly. If an investor community still needs further clarity
sees friction then they will deploy to achieve the ambitious goals of the
capital elsewhere, says DeAngelis at Biden administration.
Denham Capital. “It’s a risk allocation
question,” he says. “If you want to put Asked about what they wished
new technologies forward, you need for 2021, the experts at the Wind
better risk allocation.” Investment Boardroom wished for
clarity in terms of integrated system
The marketplace design also operator plans, improved offshore
needs to address the funding gap permitting and electric vehicle
between technology development standards. “If I could ask Santa for one
and infrastructure finance and, thing, [it’s] a crystal ball,” says Sack at
importantly, how renewables can Evergy.
cater for merchant risk. “We’ve made
9If you'd like to find out more about our Wind Investment Boardroom
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