Balch Energy Attorneys Discuss the Future of Renewable Energy Projects during Association of Corporate Counsel Houston Panel
Balch partners Chris Still and Jesse Unkenholz discussed key considerations and legal issues associated with the development of renewable energy and storage projects at the Association of Corporate Counsel (ACC) Houston Energy Practice Group’s CLE, “Renewable Energy and Storage Projects: Developing Projects, Including with Corporate and Industrial Offtakers,” held on June 23,2023.
Featured panelists included Chris and Jesse, partners in the firm’s Energy Transactions and Renewable Energy Practices.
They were joined on the panel by Mike Madison, Balch alumnus and Associate General Counsel for Plus Power, a utility scale battery-storage company.
Some of the key questions and answers from the session are as follows:
How is renewable energy integrating into today’s energy landscape?
Chris: Renewable energy projects provide a lot of opportunity from an economic development perspective, especially when you consider factors like environmental initiatives and tax incentives. Renewable power can be built relatively quickly, compared to some other types of generation. Renewable power is really here to stay. If you're a lawyer in the energy business, you need to know about renewable power because it’s going to be a part of our energy infrastructure going forward.
Jesse: One thing that is driving a lot of renewable development now is internal corporate sustainability programs. A lot of the demand we're seeing across the country is from large companies with large electric loads that want to be 100% renewable. A lot of what we do is helping a utility, a developer or the corporate customer figure out where they can plug into renewable energy programs and where they can create a new program or structure that is built around the current market structure. We also help them navigate how to meet the overwhelming demand from the corporate sustainability perspective.
Mike: Renewable power is going to be key to a lot of economic development initiatives, especially in the tech industry. For example, large data centers want renewable power to be a part of their power supply and they will likely select areas to locate where renewable power is present.
Can you discuss the lifecycle of a renewable project?
Mike: The lifecycle of a renewable energy project includes site acquisition, interconnection, power offtake agreements, equipment procurement, construction, operations and decommissioning.
First, you have site acquisition, where you must decide whether there is easy access to interconnection without high interconnection costs. The site location is very important because you have land intensive needs with both wind and solar. With storage, you've got a much smaller location or land need. Location is really important for all those aspects of cost and timing for the interconnection.
Equipment procurement, especially in renewables, is likely going to be a long lead item for any project. We have several different factors today that restrict the production and delivery of battery components and solar panels, in particular.
Construction timing can vary, with land needs playing a key role. If a solar facility needs 2000 acres to build the site, they will have very different construction costs as compared to a 20 acre storage project.
Operation of the project is what everyone actually thinks about when they think about renewable energy -- operating and producing energy.
Then finally, decommissioning is the stage of the project after the end of the operating life of a project.
Can you talk more about the end of the life cycle?
Jesse: We have two types of end-of-life events happening in the renewable space right now. We've got the end of the life of the renewable project. Second, with the new Inflation Reduction Act (IRA), there was a tax credit multiplier for projects that are located on the site of former fossil generators.
So, we have beginning of life decommissioning for renewable projects, when a fossil plant is decommissioned to then build a renewable plant in the same location. We also have an end-of-life process for the renewable and battery projects.
As we discuss decommissioning, opportunities for monetizing could include reuse of the site and recycling major materials. These are opportunities we are helping companies navigate.
Can you discuss timing and risks of interconnection for projects?
Chris: Each utility has a process for interconnecting a new project. The lead time for conducting the necessary studies and achieving interconnection can vary greatly, depending on where a project is located.
Jesse: The transmission providers are normally regulated and are typically not willing to assume risk of interconnection. When representing developers and negotiating offtake agreements in some markets, we are able to obtain contractual relief for the developer for completion deadlines when the delay is caused by the transmission provider.
Question: What is the impact of supply chain issues on the renewable industry?
Chris: COVID, supply chain constraints, inflation and the price of labor and materials have affected renewable power projects, as they have also affected other parts of our economy. There has been a somewhat limited domestic supply of renewable power equipment, solar panels and batteries. Trade tariffs have also increased the cost of renewable projects in the last couple of years.
In the ten years leading up to 2021, the price curve for renewable power projects was steadily going down. We got to a point in 2021 where you could buy power from a new solar plant for as low as $20 per megawatt hour in some markets. But now, it may be difficult to find a new solar project where you could buy power for less than $40 per megawatt hour. So, it really, really has changed.
But, there have been delays in new projects because of supply chain constraints, and in some parts of the country, the lead time for transmission interconnection has become longer. All of this has affected renewable power.
Can you discuss M&A activity and renewable projects?
Chris: In general, it seems that there has been a decrease in corporate M&A activity for different economic reasons; however, M&A activity in the renewable space has remained busy. The factors driving M&A in renewable power are different than the factors that drive corporate M&A in other sectors. Environmental regulations, tax incentives, and the continuing desire of companies who want renewable power are all still spurring a lot of M&A activity.
Can you discuss how the Inflation Reduction Act is impacting renewables?
Jesse: One of the reasons there might be a little bit of a lull in the space right now is that we have a significant change in the underlying financial model because of the Inflation Reduction Act, which provides new tax credit bonuses and multipliers that are based upon where a project is located, where the materials are sourced and the workforce implemented and wages paid.
More about the moderator and panelists:
Chris Still is a partner in our Birmingham office and member of the Energy Transactions and Renewable Energy Practices. He is an energy lawyer with more than 25 years of experience in representing energy and public utility clients in a broad array of transaction matters involving renewable energy (including solar, wind and battery storage), fossil fuel and transmission assets.
Jesse Unkenholz is a partner in our Birmingham office and member of the Energy Transactions and Renewable Energy Practices. He advises clients in all aspects of the electric industry with a focus on renewable energy generation, battery storage, and natural gas. Jesse also has significant experience developing new wholesale and retail renewable energy products and programs, advising clients on voluntary, state, and federal green energy requirements, compliance with Renewable Energy Credit (REC) mandates and marketing requirements, and energy efficiency legislation and regulations.
Mike Madison is Associate General Counsel at Plus Power who specializes in all manner of commercial transactions associated with the development, ownership, sale, and operation of electric generation and energy storage facilities. Mike also has significant regulatory experience before the Federal Energy Regulatory Commission (FERC) and various state public service commissions.