Marcia Hook and Ty’Meka Reeves-Sobers, associates with the Cabinet of World Lawyers Clifford Chance, evaluate the evolution of prospects for energy producers and investors.
Global finance:: How have the perspectives of the energy industry moved under the new American administration?
Marcia Hook: Under the Biden administration, we have seen significant investments in the American energy space. The company was booming, there was a lot of excitement from a range of investors, which was considerably strengthened by IRA incentives [Inflation Reduction Act of 2022] and a number of other favorable economic factors.
Now, we are in a place where what will happen with IRA is not clear, which is undoubtedly one of the main engines of the boom that we have seen in the past two years. Many people are waiting for uncertainty to go out; Because at the end of the day, the energy industry is the one that thrives on certainty.
Investors make investment decisions on the scale of decades, not the years. And these investments are sometimes in billions of dollars. Currently, we see many people – the two investors in the United States and to investors abroad – held and waiting for them to have a little more certainty about what will happen with IRA in particular.
Ty’Meka Reeves-Sobers: With global customers, we see more requests and requests for requests for interpretation advice. They ask, “What does that mean?” We try to read the tea leaves and find some certainty to add a balance. It’s really a waiting game and see, because every day something new happens, and I find that we really try to stay informed.
Girlfriend:: Given the request of new data centers, is it likely that the Trump administration will take a few steps back and will remain in place some of the measures approved by the previous administration?
Hook: It is an area close and dear to my heart because it is at the intersection of power and data centers. There is an enormous projected growth in energy demand, and a large part of this is attributable to data centers. It becomes a practical question: “How do you put as much power on the system so quickly?” And in a realistic way, would the administration take direct and unfavorable actions against renewable energies?
From a practical point of view, even if the administration had to try to do so, renewable energies can be the most realistic means of responding to this request within the necessary time.
There is a lot of excitement, for example, SMRS [small modular reactors] And other types of nuclear units that come back online, potentially. But the authorization calendar and the deployment calendar for this is more like the end of this decade. Realwayly, renewable energies are always the best answer. Solar is the fastest to deploy. People in renewable space are still very optimistic.
To be clear, there must probably be a completely absent approach. We will also need more gas installations. I am not saying that these projects are not part of the solution; But certainly, even if the administration was to eliminate all the credits from renewable energies, I do not know that we will see that all these projects evaporate. There is always the need, and they are always the fastest solution.
Reeves-Sobers: It will be a solutions toolbox. It will not be a single size. In the meantime, I think operators take on themselves to find other creative solutions to this problem.
Girlfriend:: Other countries do not move away from renewable energies and environmentally friendly projects. Is it likely to change?
Hook: Outside the United States, we generally see a tendency to continue to continue renewable energy resources. That being said, I think there are practical constraints worldwide to meet all new power needs thanks to renewable energies. So, just like in the United States, I think there are practical considerations that could encourage countries to consider gas and even coal, in some cases, within the framework of the strategy to obtain enough power within the necessary time. Although we have not seen anyone specifically turn away from renewable energies, I suspect that it is possible to see an increase in non -renewable sources, simply due to the practical need to provide so much power.
Girlfriend:: Do we see an increase in interest in the nuclear industry?
Hook: There is certainly an increased interest in nuclear energy, both on the side of the administration and the private sector; And we see installations that discuss the recovery or that emerge essentially from retirement. The best known is the Microsoft-Three Mile Island agreement, where three thousand islands [a power plant near Middletown, Pennsylvania, that in 1979 was the scene of the worst commercial nuclear accident in the US] will be brought back online to serve the Microsoft [energy] load.
There is a lot of excitement in the nuclear community at the moment. People are very optimistic about it. There is also a lot of attention to SMRs. It will take a while to deploy nuclear; And as we have heard of the Microsoft-TMI agreement, it is an expensive resource with which to contract. But these installations operate continuously for very long periods without needing maintenance, so it’s quite attractive.
Girlfriend:: There are many cats on how law firms use megadata analysis and AI to make some of their business practices more effective. What is your experience?
Reeves-Sobers: At least from an environmental point of view, the more information there is, the better, because it clarifies some of the unknowns that support environmental responsibility. And it’s always better when you think of an investment and if you want to press the trigger on a particular project.
Hook: More information is better; More data is better. I would point out two discreet impacts. One is to find potentially material problems for evaluation purposes much more easily. And then, two, just the effectiveness of doing it.
There is now a platform, Enerknol, which we regularly use to aggregate the regulatory documents and the emissions of each American commission of public services, the Federal Energy Regulatory Commission, the Ministry of Energy and all the major government agencies, including the Environmental Protection Agency.
In the past, when I was a younger lawyer, if I had wanted to carry out a reasonable diligence on an entity that has operations in the United States, I should go to each website of the State and use their sometimes anti-anti-anti-anti-anti-anti-sex functions-and it is very difficult in these cases to find material problems. Now we can go to a platform and look for everything. And then in addition, this platform experiences AI tools to try to make it even better. I am very optimistic about how AI and other technological developments will improve our ability to advise our customers in the United States.
Girlfriend:: How does the current climate affect mergers and consolidations and consolidations, not only in the energy sector but in others? Do you see a gel?
Hook: This is an interesting period because there are certainly still mergers and acquisition activities. The expectation is that the activity of mergers and acquisitions will increase, because market players will seek to leave various investments or projects they developed. The feeling that I have obtained to speak to people in the industry is the expectation that it will be a buyer market, when perhaps three years ago, it was more of a seller’s market.
We expect to see an increase in the activity of mergers and acquisitions. I’m not sure what the time scale is for that, because we always see it. I do not know that there has still been a significant increase, but it is certainly the wait.