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Vinson & Elkins Report Evaluates a Decade of Private Market Investment Trends in Renewable Energy

Key Trends in Private Investment Across the Energy Space Background Image

According to a new report from Vinson & Elkins, Power Play: How Private Capital Is Shaping the Energy Evolution, multiple factors are combining to produce a dynamic dealmaking environment amid the backdrop of accelerating technological innovation and changing investor attitudes as the energy ecosystem evolves.

The report leverages data from PitchBook and analyzes private equity and venture capital investments since 2010 to show the changing financial landscape in energy and infrastructure, and how the increased focus on emerging renewable and clean energy sources is impacting the industry. Key takeaways from the report include:

  • Due to broad-based and sweeping changes in investor demand, there has been a substantial shift in private equity dealmaking to less carbon-intensive or lower-carbon sources of energy and, more recently, technologies designed to capture carbon. From 2010 through 2020, PE fundraising for renewables reached $90 billion invested in the space.
  • Investors face pressures on profit margins and yields due to a highly competitive marketplace with significant competition for deals and greater availability of lower-cost capital. Both factors will influence private equity investing, particularly in the overheated renewable and sustainable energy markets.
  • Venture capital investments in clean energy have already set a record in 2021, reaching an aggregate value of $24.1 billion. At 957 completed financings worldwide, this year is also likely to experience record volume. These investments have enabled and accelerated the scaling of technological advancements, resulting in the potential for increased exit strategies as well as public market listings and SPAC combinations (What’s Driving Transition Energy IPOs and SPAC Combinations?).
  • Increased consolidation across the traditional energy sector should continue, as larger companies merge with one another in hopes of achieving synergies, cementing market positions and creating scale.
  • Even while investor and public pressure to decarbonize intensifies, new participants in the traditional energy sector may be required to provide capital for continued production, which is essential to the energy transition already underway.

“We work with the world’s preeminent and longest-standing investors in energy, and have witnessed how our clients’ investment strategies have been reshaped due to structural shifts in public and private attitudes regarding energy sources, decarbonization and environmental degradation. The last decade in particular has seen a rapid increase in investment in both renewable and sustainable energy, generally, as well as the technologies driving this shift. As the transition into a less carbon-intensive energy economy accelerates, the impact of intense competition from investors, private sources of capital, corporations and emerging venture capital will intensify and play one of the most important roles in building our energy future,” Kaam Sahely, head of the Renewable and Sustainable Energy and Infrastructure practices, Vinson & Elkins.

“We are at a point in time where investments in renewable energy are occurring at such a pace and scale that it is impacting not only the energy industry, but nearly every economic sector, with businesses at all levels of the economy feeding into the demand for energy transition. Traditional sources of capital continue to be freely available for mature renewable products, like solar, wind and, increasingly, battery storage, but we are also seeing capital provider willingness to structure products in other more nascent technologies that are viewed with optimism, such as green hydrogen and carbon capture and storage strategies,” Eamon Nolan, project and finance development partner, Vinson & Elkins.

“The pace and volume of venture capital flowing into the energy transition is providing clean tech private companies a longer timeline to develop technology and a greater ability to achieve commercialization. These new energy-related technologies are key to decarbonization, and it’s an exciting time for our practice as we leverage our longstanding capabilities in the energy industry to guide the clients financing these initiatives,” Milam Newby, head of the Technology practice, Vinson & Elkins.

For more insights and to see the full report go to: https://www.velaw.com/insights/how-private-capital-is-shaping-the-energy-evolution/

Vinson & Elkins has been guiding clients through the renewable and sustainable energy evolution since its beginning. The firm’s multidisciplinary team regularly advises a broad range of clients ranging from start-ups to Fortune 500 companies to venture capital and private equity sponsors on acquisition, divestment, financing (including tax equity financings), development, tax, regulatory, dispute, environmental, real estate, labor, national security and intellectual property matters related to clean and renewable energy assets and projects. The firm also has deep experience advising clients on challenging alternative and sustainable energy projects, including solar, wind, hydro, energy storage, renewable fuels, hydrogen, carbon capture and sequestration, fuel cells, electric vehicles, geothermal, smart grid applications, biofuels, biomass, waste-to-energy and other state-of-the-art technologies.

About Vinson & Elkins
For more than a century, Vinson & Elkins has provided outstanding client service across important industries that drive the global economy. Built on a strong culture of collaboration across 12 offices worldwide, V&E lawyers are committed to excellence, offering clients decades of legal experience in handling transactions, investments, projects and disputes across the globe. Learn more by visiting www.velaw.com or follow us on Twitter @VinsonandElkins or connect with us on LinkedIn.

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