U.S. Renewables M&A: A Review of 2020 and Outlook for 2021

2020 was another strong year for U.S. renewable energy M&A, notwithstanding the dislocations caused by the global COVID-19 pandemic and a tumultuous U.S. election cycle. The industry demonstrated resilience throughout the year, and acquirers were empowered by sustained technology cost declines, comparatively stable rates of return and a heightened focus on Environmental, Social, and Governance (ESG) considerations.

As we transition into 2021, we expect renewable deal flow to accelerate, underpinned by the new Biden administration and a Democratic majority in the Senate. Activity should be further bolstered by the recent extension of federal tax credits, ever increasing renewables targets and mandates, and the sheer magnitude of public and private capital earmarked for deployment into renewables. The universe of capital providers continues to expand as the shift toward decarbonization intensifies, with new technology alternatives providing opportunities for traditionally higher cost of capital providers. While we expect sustained emphasis on incumbent renewables, such as PV solar and onshore wind, we also anticipate meaningful growth opportunities for emerging renewable technologies including standalone battery storage, hybrid storage, offshore wind and hydrogen.

2020 Review

The shock of COVID-19 and subsequent monetary policy responses were prominent in 2020, with reverberations that will be felt for years. Though not as pronounced as other industries, tightening capital market access in the earlier stages of the pandemic forced certain developers to offload capital constrained projects.1 At the same time, a perpetual low interest rate environment provided capital-rich acquirers access to low cost financing.

Footnotes:

1: Source: Mergermarket Energy M&A Forum (December 2020)