Over the last decade, renewable energy generation has emerged as a distinct industry sector for investors.
What’s is all about?
Over the last decade, renewable energy generation (i.e. generation of electricity from renewable sources such as wind, water and the sun) has emerged as a distinct industry sector for investors. This is largely due to the nature of the financial incentives that have underpinned the industry, as well as the almost unparalleled room for growth.
A number of law firms have responded by establishing teams that specialise in advising on the issues faced by participants in this sector.
What’s the working culture like in a renewable energy team?
Lawyers working in renewables have a genuine passion for what they do, whether because of its “green” nature or simply because it is such a dynamic industry sector. There is a real entrepreneurial spirit throughout the industry, which means lawyers are often consulted for commercial ideas as well as legal advice.
What’s the typical makeup of a renewable energy lawyer’s client base?
Often very diverse – clients may well include major energy companies, governments, investment and commercial banks, infrastructure funds, construction companies, specialist project developers and providers of technology such as wind turbines and solar panels.
Which other practice areas do you work closely with?
Linklaters uses multi-disciplinary lawyers who work across the transaction. Not all firms work in this way; deals will often be divided up between departments (especially construction, finance, corporate and projects). With both approaches environmental, real estate, planning and tax issues generally require specialist input. We do a lot of cross-border work at Linklaters and so frequently work with lawyers from other jurisdictions.
What skills do you need to make a good renewable energy lawyer?
Attention to detail and an interest in policy are essential – governments’ energy and planning policies, and financial incentives for renewable energy, are constantly evolving and can be complex.
Creative thinking is crucial; many projects are “first of a kind” or have their own peculiarities. Client skills are also key; the best lawyers can and do play a key role in giving investors the confidence to make long-term investments in an ever-changing environment.
It is also a real advantage to have a genuine interest in how things work. Projects get built in challenging locations and depend on unpredictable energy sources. More than one project has run into trouble when practicalities – such as the legal rights necessary to get wind turbine masts to the top of a mountain – were overlooked.
What impact has the recession had on this practice area?
The main drivers behind renewables remain intact (energy security, mitigating volatility of fuel prices, climate change concerns). With government incentive regimes continuing to support the economics of individual projects, the renewables sector is still very attractive to investors.
Access to affordable funding is of course more difficult than before and so there has been a change in emphasis. Less money is being contributed by banks and third party investors overall, particularly regarding newer / riskier technologies. On the other hand, there are some major investments forecast over the next few years. The best deals can still secure funds and investors are also coming together in joint ventures for attractive projects. There has been a slowdown in mergers and acquisitions, but rather than being due to the recession this can largely be explained by the electricity utilities (who were very active buyers) now focusing on building the projects they bought.
What recent key renewables work has your firm been involved in?
Linklaters has been involved in some really interesting work recently – ranging from the first internationally financed wind farm in Turkey (and a similar deal in Bulgaria) to advising on very large hydro power projects in Uganda and Mozambique. We also recently advised on the development of some of the biggest and most challenging offshore wind projects in the UK, biomass and biofuels projects in Brazil, major solar projects in Spain, Italy and Greece and geothermal projects in the Philippines and Costa Rica.
What do you think will be the future shape of renewables departments?
Renewable energy is viewed less “risky” than in the past, and it will become more cost competitive with “conventional” power over time. This, and contracts becoming more “standard form” in nature, will allow clients to use in-house lawyers more. Smaller firms will also play a much bigger role on renewable transactions than they do at the moment.
Aggressive CO2 reduction targets will mean more innovation and more “frontier” transactions involving new technologies, new jurisdictions, new financing structures, major cross-border projects etc. The larger firms will continue to play to their strengths in advising on these groundbreaking transactions.
What phrase is a renewable energy lawyer most likely to use and what does it mean?
“Bankability” – a “bankable” project is one to which a bank would be prepared to lend money in light of the risks being taken by that project. In such a fast-moving market as renewables, “bankability” often falls to lawyers to assess in light of their broad market experience, and plays a key part in negotiating commercial, legal and technical risk allocation.