Revolution Demands Evolution: How a Maturing Renewable Development Landscape Makes Frictionless Asset M&A More Critical Than Ever

The renewable energy industry is growing at a blistering pace. Wind and solar costs have plummeted over the past decade. New corporate sustainability commitments are announced daily as organizations procure more clean energy than ever before. And support for renewables from the private and public sectors alike is at an all-time high. There’s no question that the transition to a low-carbon future is fully underway. Now, at this crucial moment for our climate, the question we must ask ourselves is: “Will this renewable energy transition occur quickly enough?” At present, the answer is, unequivocally, no. 

Of course, this transition can only occur as fast as we can get utility-scale renewable projects constructed and operational. Amid the headlines, analyses, and politics surrounding this transition is the renewable energy developer community, working tirelessly to get steel in the ground, panels mounted, turbines spinning, and ultimately, clean electrons flowing to our businesses and homes. Developers are the core of the renewable revolution, and as we strive to accelerate the clean energy transition, making their lives easier, and their enterprises more successful, must be a paramount objective.  

Perhaps unsurprisingly, as the renewable industry has grown, the nature of renewable project development has evolved as well. In the early 2000s, a developer often assumed they were going to take a project from its greenfield stage through construction — or at least to the start of construction — before having an opportunity to exit the project. Today, things are very different. Projects routinely change hands once, and sometimes twice, before reaching commercial operation. This maturation of the industry has allowed developers to specialize in specific stages of the development process, rather than attempting to tackle the entire project development cycle. Opportunities now exist to “pass the baton” from one developer to another through a structured monetization, and in doing so, recycle capital back into creating value within a developer’s core competencies. 

This maturing development landscape lacks the transaction infrastructure and long history of precedent deal structures and comparables that facilitate low-friction, speedy execution between project or portfolio buyers and sellers. In LevelTen’s Q2 2021 Developer Survey, we asked renewable energy developers how long it takes them to secure a buyer for one of their projects. The most common answer was “6 to 8 months,” and nearly 40% of respondents indicated that closing a transaction took longer, sometimes much longer, than this. Simply put, we feel that these timeframes are far too long if the renewable energy industry is to adequately scale and meet global climate and business objectives, and it is our mission to improve the efficiency of this process. The LevelTen Asset Marketplace is the transaction infrastructure that will reduce friction and expedite time to close for the pre-construction renewable project M&A market.

For all its recent triumphs, the renewable energy industry is relatively young in age, and M&A for pre-construction projects is even younger. As firms continue to specialize in certain aspects of development, buying and selling assets will become an increasingly integral component of business, and bringing an informed and strategic approach to the negotiation table will only continue to grow in importance. At LevelTen, we believe our industry should benefit from open-source materials. Through creating a greater amount of structure and standardization around previously ambiguous or opaque elements of project development, teams all across our sector can act in a more fluid and collaborative manner, and asset buyers and sellers alike can achieve mutually beneficial outcomes faster and at lower cost than ever before.

In our last Asset Marketplace guide “The Six Pillars of Project Development,” we covered the six project development work streams that must be successfully managed during renewable energy project development. We discussed how the binary risks associated with these six development work streams (risks that can derail a project if inadequately addressed) abate as each leg of the development process advances. With the six pillars complete, a fully “derisked” project is ready to enter the capital markets for construction financing. 

In our latest guide “Cash In/Cash Out: M&A Structuring for Pre-Construction Development Projects,” we address the acquisition and divestiture of pre-operational projects, or in other words, how to “pass the baton” to a new developer who takes on the next step in advancing the project to completion. We establish working definitions for some obvious project development exit points like “early-stage,” “mid-stage,” and “late-stage.” We also address typical transaction structures with a focus on transfer of risk and transfer of project control. Finally, we review some “lessons learned” to help buyers and sellers properly position themselves to transact a pre-construction renewable energy project. 

The success of our developer community is synonymous with the success of the renewable industry as a whole, which itself must thrive and expand rapidly to address the climate crisis we currently face. With the LevelTen Asset Marketplace acting as the centralized, standardized hub for developers — seamlessly matching buyers and sellers — we hope this guide will work to establish some norms and provide best practices so developers of all sizes can gainfully partake in the pre-construction M&A market. Please share this guide widely with those in your network and throughout the developer community, and be sure to follow LevelTen for more resources, both upcoming and already in existence. 


For a deeper dive into how to successfully participate in the asset M&A market, please download our free PDF guide, Cash In/Cash Out: M&A Structuring for Pre-Construction Development Projects by filling out the form below. If you have any questions about participating in the LevelTen Platform, or the Asset Marketplace, you can reach us at info@leveltenenergy.com.

Patrick Worrall

Patrick is an accomplished business development and energy finance leader with broad strategy, capital markets and transaction execution experience. His professional background includes project and acquisition finance, tax equity, commodities structuring, infrastructure private equity, restructuring and M&A. Prior to joining LevelTen, Patrick led teams at Sunnova Energy Corp., Riverstone Holding’s conventional power platform, Constellation Energy and Deutsche Bank. Patrick has closed energy and industrial debt and equity financings in excess of $25B, including multiple renewable energy successes. Patrick received his undergraduate degree in economics from University of Virginia and masters degree in business from Darden. He is an avid conservationist, having served on multiple boards and committees, most recently as an award-winning mentor for the CleanTech Open and as a mentor for Austin Technology Incubator at the University of Texas.

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