Dive Brief:
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While prices for most U.S. renewable energy assets have held steady, acquisitions remains depressed with just 42 transactions closed in the first half this year, according to a CRC-IB H1 report.
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Buyers on the LevelTen platform have picked up the pace in recent weeks, but this shift hasn't yet impacted reported trends, Patrick Worrall, vice president of M&A solutions at LevelTen, said.
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Even though the marketplace appears to be regaining some momentum, Worrall said last year's downturn could have long-lasting impacts on renewable energy markets.
Dive Insight:
Buyers of renewable energy assets in the United States remain more selective about the projects they decide to purchase — and have shown considerably less interest in buying development platforms outright in recent months, according to data from LevelTen Energy's renewable energy marketplace.
There have been just 10 renewable energy platform acquisitions in the first six months this year, compared to 33 platform acquisitions in 2023 and 55 in 2022, according to LevelTen. Purchases of individual renewable energy projects have picked up slightly in the last four to six weeks, Worrall said. And while high-dollar bids representing significant premiums for developers may be a thing of the past, prices are holding relatively steady outside the Electric Reliability Council of Texas footprint, where an oversupply of renewable energy assets is putting downward pressure on prices, according to LevelTen.
Overall, the market for renewable energy assets and companies seems to be recovering from the downturn triggered by rising interest rates and costs, but that doesn't mean it will return to norms seen before the price shock, Worrall said.
“For the last five years up to 2022, it was a bit of a land-grab where buyers were aggressively acquiring pipeline for the sake of pipeline, and now we are seeing a transition to a much more strategic management of their development pipelines,” Worrall said.
This shift, Worrall said, is probably an expected result of the maturation of renewable energy markets. But it's also a result of growing interconnection backlogs and delays, which have increased the cost of holding on to less-viable projects for extended periods, according to LevelTen Energy. Interconnection reform may spur greater activity in renewable energy markets in the future by reducing the volume of new projects and weeding out more speculative ventures, Worrall said.
While demand for renewable energy from electrification and data center operators appears to be skyrocketing, it remains unclear what this will mean for the generation assets themselves, Worrall said. Although Worrall said he has heard rumors of data center companies looking to buy or co-locate with early-stage renewable energy projects in order to gain access to the energy they create, the pool of buyers on the LevelTen marketplace remains essentially unchanged outside the addition of some foreign energy developers looking to break into U.S. markets.
What seems most likely at this stage is increased consolidation of renewable energy developers and generators, Worrall said. As developers' ability to flip early-stage renewable energy projects with ease wanes due to limited interest from buyers, smaller to mid-size developers will have to consider scaling back their activities, or else make the leap to becoming owner-operators of their own assets, he said. And at least for the time being, banks' willingness to fund these projects seems to suggest developers who wish to take that plunge will have ready access to the needed capital.
“More developers are looking to transition,” Worrall said. “They have good projects, and they don't see the value in flipping them...and their sources of capital agree with them.”
