In your recent TradeTalks interview, you emphasized the importance of energy diversification as power demand increases. Where are you seeing the most investments across renewable and non-renewable energy?
We’re seeing investments across multiple generation types, which is a direct response to the market’s need for a more diverse, resilient energy mix. For example, in Texas, there is a strong push for gas-fired plants to address growing electricity demand and dedicated funding sources via the Texas Energy Fund. At the same time, there’s renewed interest in acquiring and expanding deployment of both hydropower assets and landfill gas-to-power projects.
Another exciting area (yet a longer timeline) is advanced nuclear technology, especially small modular reactors (SMRs). While renewables remain critical for near-term power generation due to their significantly faster development timelines, advanced nuclear plants offer a long-term, stable baseload power solution.
It’s also extremely important to note that battery storage remains a priority target of long-term investment and a key component of energy infrastructure. Storage will continue to be necessary to serve not only data centers but also customer demand in general.
From your perspective, what are the biggest drivers for the current energy transition?
The biggest driver is increased electricity demand, which is mostly due to AI-driven data centers and expansive EV charging needs. These are two applications that consume massive amounts of power. Energy costs for consumers and businesses also continue to increase given the general lack of supply and dated transmission systems. These converging factors are creating a need for efficient, low-cost power generation solutions.
Alongside this surge in demand, legislative and regulatory policies are also driving change, with new laws and incentives having tremendous impact on project development. For example, solar and wind developers in the U.S. now must have projects operational or otherwise “begin construction” by July of next year to secure their final tranche of IRA-driven tax credit subsidies.
Increased project costs are another key driver, leading to higher electricity prices, which in turn have necessarily pushed the market (and regulators across the country) to seek more efficient and strategic solutions for customers.
The critical challenge is balancing this rising demand with transmission infrastructure challenges. Simply put, we need more efficient power generation technologies that can be deployed quickly given that significant transmission upgrades are unlikely to happen in the near future.
You also noted that there is “a lot of market consolidation” happening within the industry, particularly in the distributed generation area. What other areas within the energy industry are you seeing consolidation?
Consolidation is happening primarily in the renewable energy sector, although lately, the same could be said for independent gas-fired plant owners. For renewable developers, it’s something of a “survival of the fittest” environment at the moment, where smaller shops without the balance sheets to get their project pipelines to market are more likely to be acquired.
This trend is driven by two main factors: 1) the expectation that tax credits will no longer be part of the long-term capital stack and 2) increased project costs (for example, due to a tightened equipment supply chain) and longer development timelines. As a result, solar and wind projects now face increased pressure to either be financially viable on their own or otherwise merge into larger, more scaled portfolios in order to remain viable.
We expect generally larger independent power producers and utilities to assume increased market share of U.S. renewables development — these entities maintain the capital strength and operational efficiency to finance and market projects at scale. That said, the upshot is that this consolidation trend is ultimately less about “survival” and more about creating a stabilized network of energy infrastructure, but there are just financial realities associated with that.