European firms increase their bets in US renewable energy
- Expansion and government incentives are attracting greater volumes of capital to the U.S. renewable energy market
Subsidies to renewable energy in Europe attracted a number of U.S. private-capital firms to the region more than a decade ago. Now, their European peers expect to benefit from government incentives to build clean energy in the U.S.
Last week, London-based Glennmont Partners said it is entering the U.S. renewable-energy market through a joint venture with project developer GreenGo Energy US Inc. in Charlotte, N.C. The venture plans to build solar and energy-storage projects with more than 1 gigawatt of capacity, with the first sites expected to come online in 2025, Glennmont said.
The firm joins a small but growing number of European private-capital groups that are expanding their investments in U.S. renewable energy and the clean-energy sector more broadly. Others include Antin Infrastructure Partners, Ardian, EQT AB and Partners Group Holding AG. EQT alone made three clean-energy deals totaling about $12 billion in the U.S. last year, including the acquisition of solar-project developer Cypress Creek Renewables LLC, WSJ Pro Private Equity has reported.
Interest in the U.S. is changing the flow of investor capital into renewable energy funds, with capital raised by North America-focused offerings surpassing that of European ones for the first time in a decade, according to data provider Preqin Ltd. Of the $62.41 billion raised globally for renewable energy funds in the first nine months of the year, around half, or $31.77 billion, went to funds targeting North America, Preqin data show.
“The renewable-energy industry [in the U.S.], while it started later than it did in Europe, has grown very significantly over the past many years," said Scott Lawrence, a partner at Glennmont. “The U.S. is an attractive investment destination and I think more capital will continue to flow there."
For example, Paris-based Ardian earlier this year wrapped up its latest infrastructure fund focused on the Americas with $2.1 billion in commitments, more than 2.5 times the $800 million the strategy’s predecessor vehicle raised in 2018.
Government support for clean energy and an expanding industry are increasingly attracting infrastructure investors to the U.S. as geopolitical tensions raise investment risks elsewhere. The Inflation Reduction Act enacted in August extended existing tax credits to solar and wind power while creating government incentives for other areas such as energy storage, carbon capture, biofuels and hydrogen. In all, the new law is directing nearly $400 billion in federal funding to clean energy, according to consulting firm McKinsey & Co.
In some situations, the law’s incentives can offset as much as 50% of the cost of a project, said Anton Cohen, a partner at advisory and tax firm CohnReznick LLP who specializes in the renewable-energy sector.
The cost of solar and wind projects dropped so much during the past decade that the electricity-price subsidies that some European countries used to boost their renewable-energy sector in the early 2000s aren’t necessary anymore, industry bankers and investors said. Still, they said, investors need assurances to deploy capital at the scale and speed that governments require to meet their carbon emission-reduction goals.
“The [Inflation Reduction Act] has the merit of giving visibility over the long term to people investing in renewable energy," said Marion Calcine, chief investment officer at Ardian’s infrastructure group. “That’s exactly what you need when you are an infrastructure investor."
Firms pouring money into the U.S. renewable-energy sector face various challenges, Mr. Cohen and investors said. They include competition for deals, electricity-price volatility, increased material costs and grid-connection bottlenecks, as well as financing hurdles caused by rising interest rates. New projects also can take time to develop in the U.S., sometimes even 24 months, which could be eased by faster government permitting processes, according to Francesco Cacciabue, a Glennmont partner and its chief financial officer.
“We should be able to build solar and wind projects faster," he said. “It’s about regulation and about making sure that the framework around the development process is quick."
This story has been published from a wire agency feed without modifications to the text
