A ‘rain delay’ for the energy transition [partner content]

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2025 tossed the energy world a series of unexpected curveballs. Load growth surged, policy shifted, deals got harder, and in moments like this it's worth turning to someone who spent decades studying the rulebook. That someone is Tom Burton. He leads the sustainable energy and infrastructure practice at the law firm Mint. It's been quite a chaotic year, uh, to say the least, although there's no guarantee that twenty six won't be any more challenging than twenty five.

So you and I talked about a year ago, last fall, we talked about where we are in the energy transition. And you said we're entering the third inning of this transition. And you defined that stage as this period of scale and execution. What inning does it feel like right now? Well, to be honest with you, uh, Steve, I think I'd say that we're in a rain delay.

For now, the US market is still delivering. Renewables are racing to the finish line under the current tax rules, and we'll see a wave of projects come online over the next year. But beyond 2026, the pipeline thins out. And so it really will be in the out years twenty seven and twenty eight where we're going to see substantially less renewables coming online. So so there's definitely going to be a slowdown.

Not that long ago, the industry was enjoying a streak of clean innings, strong economics, broad support, and momentum that seemed hard to disrupt. But in 2025, everything got messier. The clean energy sector or the energy transition sector was, you know, pitching a no hitter for a little bit. They've gotten knocked around um by by the batters on the uh political spectrum and now the game is getting tighter.

Politics have created tension everywhere. Deals are harder and more expensive. Funding is tightened, and every project carries more risk than it used to. Tom sees it in every corner of the market. So much more creative finance. So much more you know, how do you do deal with a challenging environment from uh the client's customers? You know, how do you deal with r reductions in valuation, disappointments in terms of uh losing grants, for example, things like that.

And that pressure shows up in Mintz's practice, as clean energy companies navigate more roadblocks, more questions, more complications. There's been more disputes, you know, that have come up and there's been a lot more challenge, you know, in that regard. So the smooth sailing that we experienced in the prior years uh and the onward and upward, you know, seemingly to the moon, uh has been you know called into question.

I'm Stephen Lacey, and in this episode produced in partnership with Mintz, we're trying to read the field as we head into the new year. Tom Burton and I explore the forces reshaping the market, where energy meets digital infrastructure. How development strategies are shifting, and the question hanging over every company right now, how do you stay prepared when the game shifts around you?

In a bit of a rain delay, and you know, we maybe uh may need to uh change uh pictures to uh implement new policy, etc., in order to keep.

I love that metaphor. I'm gonna continue that metaphor. So if we've got uh two storylines here, let's call them two teams clashing. That is uh team load growth. And then uh team federal government uh that is increasingly hostile toward clean energy. So you have these two clashing teams. How do you make sense of those competing dynamics? Where clearly load growth and the expansion of digital infrastructure

is a tailwind for the energy sector and for clean energy potentially. And then you have this headwind of um, you know, weaponization of regulations from the federal government. How are those two interplaying?

I think it's really hard to reconcile, to to be a hundred percent honest with you. It it it it doesn't make sense that you would you know, knock back thirty-two billion dollars w of of incentives that were intended to create domestic manufacturing onshoring, uh, as well as, you know, modernization, the grid, et cetera, the things, the very things that would help meet the demand growth. It's a to me a very political environment.

What I think ultimately will happen is that there will be a recognition at the government level that we are in an all of the above world. In order to meet demand, um, we will need to, you know, bring out, you know, all of our stars. And the political environment will probably not reflect that publicly, but ultimately we will see continued growth and development, you know, of renewables in order to meet some of these needs.

We saw a bit of a pullback um during uh the first Trump administration. So I'm not surprised by some of the pullback and maybe it is ultimately uh a healthy thing to separate the wheat from the chaff, maybe the highest quality companies come out of this in the same way that, you know, the Googles of the World came out of the internet darkness, you know, if that makes some sense.

You know, so I'm hopeful that what we'll see is uh a recognition that renewables and storage play a very important role to meeting grid demand and grid needs. We may not see that in the news, but we'll actually see it happen in reality, you know, over the course of the next few years, albeit at a slower pace than what we were experiencing in the last three or four years, which were frankly really an anomaly in the last twenty.

Yeah, well let's talk about what will potentially separate the strong from the weaker companies. We of course have seen already a shake up in the developer world in um renewables and batteries in the wake of the one big beautiful bill. Um we saw alterations to the tax credit schedules, new foreign sourcing rules.

What are the wh what kind of developers have been most negatively impacted? Do you see more of a shakeout coming? And what characterizes the stronger companies that will come out of the other side of this?

Yeah, so I I do think that there there uh will be a shakeout. There'll be consolidation, you know, for sure. What we've seen is that the companies that are You know, the most well capitalized, the ones that have been at it longer, um, who can pivot more rapidly, you know, are able to absorb these these changes in rules.

You know, those who are, you know, latest to the game, who maybe not be as capitalized, you know, or whose projects are, you know, the earliest uh along, you know, or the ones that are going to suffer the most, uh unfortunately. There'll be then, I think, a a new crop of

you know, developers, so to speak, or or companies that will be, you know, deploying renewables. Uh and and that new crop is going to figure out how to model projects that will work without tax credits or will work with less tax credits. And at least that's that's my hope. The Fiat rules, which are not final yet, throw a curveball on all that to some degree because if the lowest cost

components are coming from places like China, it's tough to work around the tax credit loss while not having access to the lower cost components. So that's where, you know, I think there's a fair amount of uncertainty that's going to have to be sorted out.

Well one of the big stories, hopefully that will materialize this year, and we were hoping for last year before the election was permitting reform. Um and so, you know, these companies across the energy spectrum, they just need to see Uh streamlined permitting to make it easier to build things. Of course, we've just seen a lot of local pushbacks. Um we saw stalled permitting reform.

seen some weaponization of the permitting process under the current administration and in general I think that there's just a a a a desire across the political spectrum to make permitting easier. How is all this impacting the permitting story right now?

Yeah, you know, that's another great question because you've got you can think about permitting from the perspective of environmental permitting. Uh you've got you you've got energy, you know, transmission, for example, FERC and in in their rulemaking.

There's a variety of regulatory elements, but federal, right? And then you've got state and local. So the permitting morass is a real challenge. Uh i there is a I think bipartisan support to do something to streamline these processes. And At least, you know, in Massachusetts, for example, you know, we uh passed a permitting reform uh law in in the last year that really cut down the time in which renewable energy projects could be permitted.

Pretty substantially, you know, with you know, deadlines within a year, you know, fifteen months, automatic approvals if deadlines are missed, things like that, you know, appeals going straight to the our our Supreme Court, our state Supreme Court as opposed to working their way through the poor court systems. So the intention is to really compress that time frame while also, you know, honoring what are often fair uh protests for fair objections.

It but it's only in year one. So I I can't say yes, it worked. We're hopeful that it is working and maybe it can be a template for how to think about it from the federal perspective. But no doubt we need to see it happen and we need to see it, you know, applied uniformly, right, across the board. So, you know, allowing for, you know, fossil fuels or base load to jump the line, for example, it's in, you know, disingenuous. But to have these

If you've got a shovel ready project and it's it's ready to go, you know, and you need and you're that's your uh obstruction, let's find a way to get through it quickly. What I do see, you know, is these rollbacks. You know, I'm looking out at the window of my office, right, and I see blue sky. My parents when they were young, uh did not see blue sky. They saw gray skies. You know, if you were in Los Angeles it was all smog, right? The reason why we have blue skies and clean water today

is because of the actions taken, you know, fifty some odd years ago, sixty years ago to ensure that we would have that today. And it took a long time to ultimately get to that place. And so rapid rollbacks uh without consideration for their impacts on on people's health really, you know, we'll have serious

uh oppositional impacts, you know, on on future generations. And so we can't take for granted what we have and we have to recognize that we have it because we were intentional about having it. And we need to make sure that we keep that intention for the future. Absolutely. Where does permitting stack up with the

puzzle pieces of project development in terms of importance. When you think about tax credits or foreign sourcing rules or some of these other b big ticket items, um how how much anxiety does it produce in developers?

I think it produces a lot of anxiety, particularly if you have uncertainty, right? In the sense of, you know, what we've seen in the wind when the wind uh targeting of the you know, the of the weaponization appropriating in the in the wind industry, right? Where you seemingly had approvals and now you don't. You know, so um I do think that permitting probably is as important, if not more important, than, you know, tax credits and and uh and other incentives. You know, the incentives

You can model without in with, right? So you can at least figure out what the answer is when you don't have certainty around permitting you don't have a project, right? So it really doesn't even let you get out of the gate.

So let's talk about the other big story of the year, and that is the rise of data center infrastructure. Um you have an expanding digital infrastructure practice. And and what we're seeing now is is again digital infrastructure and energy infrastructure are becoming really connected. Um and the traditional data center model has been, you know, very much a real estate

business and is now more of an energy infrastructure business. How are you sealing seeing that play out and how is it shifting the way deals are getting structured? Well, that is exactly I mean you you you nailed it on the head. We have had a team on our real estate group that's been doing data center real estate work for over twenty years, maybe twenty five years at this point. Um and

Just recently in the last two or three years, you know, they've been calling upon our project finance and and development team to assist on the power side. You know, so the power side has become very, very important and in fact so important It's almost the tail that wags the dog. You know, if you can't have access to power, you don't have interconnect or you don't have your own backup power or your own DG site, then you can't do the data center. There's plenty of space.

There appear to be plenty of chips, um, but there isn't enough power. So um our team is increasingly called upon to be helpful in uh in structuring those arrangements, you know, for our our data center clients. And so do you think that this is a very important thing? s digital infrastructure sector is complementary to the energy business or is the ener is the energy business competing for resources?

Um, I think it's complimentary, to be honest. Um, you know, there is uh an enormous amount of capital sitting in private equity funds and pensions and otherwise that, you know, can be deployed, you know, for these these kinds of infrastructure projects. The competition comes down to

really where, you know, the say the ratepayer sits, you know, the individual homeowner. Um and we we've seen this in places like Ireland where there's a moratorium now in data centers. Energy prices have gone up so much. Ratepayers have been forced to to bear those extra costs.

And and people are revolting, right? And so we hopefully if we can get enough generation online and we can do it at the right pricing, and and this is really un unclear, we wouldn't have that same thing happen in the United States. But, you know, I suspect that there will come a day when

the average, you know, homeowner is gonna look at their bill and say, wait a minute, I can't, you know, I can't afford this. Many will argue that it's not so much a generation problem as much as it's an infrastructure problem. So it's a transmission problem, a distribution problem. And if you look at certainly in this region, how electricity costs have increased for us and and actually our our gas costs as well. It has been largely on the transmission and distribution side.

So not so much, you know, on the generation side. So it feels like, you know, there's a there's enough power out there being generated, we've got to find a way to deliver it much more effectively and with better technology. So there's a lot of capital pouring into both of these sectors right now. How is it changing the way projects are being financed? You know, we talked last year about this missing middle, the capital stack that can, you know, get

companies from first of a kind projects to nth of a kind projects. Are you seeing the capital stack itself changing and and kind of fitting into that crucial missing middle? Yeah, I I've certainly seen in the last couple of years and in you know, the slider is no exception, more of those growth equity or gap filling, you know, investors uh come into the marketplace and and make bets and investments. Overall though, you know, when it comes to clean energy, certainly this year

You know, the last three years really have been declining. Overall dollars have declined, you know, each year. And this year is no exception. And it will probably be a similar thing next year as well. However, if those Businesses that build the first project, you know, build the second, you know, they're going to then flip to the, you know, to the a need on the infrastructure side. So the infrastructure funds.

at that point, you know, we'll be comfortable that, you know, risk has been run out and that scale is really all that's left for some of these businesses, particularly when you talk about like storage, for example, which I think there's a real need for. There's plenty of capital available there. So my perspective on it is that those who were able to Find capital in that gap in the last year or two stand a really good chance of, you know, making it through on a future basis.

There's a lot of concern that US companies, because of the current policy uncertainty, are gonna start moving overseas. They might, you know, have partnerships in China, they might move to Europe, Australia, the UK. There's a lot of courting of American companies. Do you see that happening among your clients or other companies that you're talking to? And are you concerned that once again America will innovate technologies but not fully commercialize them?

Yeah, no, I I think this whole risk of innovate and not commercialize is very real and it cuts across a variety of industries, you know. Um, not just renewables or clean energy side. I think it's gonna be a real issue potentially over in the life sciences and, you know, the medical field, healthcare.

It's something we've got to figure out how to produce, you know, at scale inexpensively, without a doubt. What we're seeing on on our side is foreign businesses that were investing in the US, buying projects, buying companies, operating companies, and establishing a US presence are putting those on hold and they're pulling out.

So similar to, you know, the like the the Canadi the Canadian tourism, you know, in Boston dropped substantially this last summer. You know, folks are staying home, so to speak. So I think that's having a a a real impact here. Will US companies, you know, move overseas or leave the US?

I don't know if they would leave at any greater rate than they have been, if that makes sense. Certainly if we don't have reasonably priced inputs, you know, on the supply side, you know, whether it be energy or components or what have you. There is incentive for businesses, you know, to leave. This is something we have seen in places like Europe. That is a risk for us.

if our costs continue to rise dramatically. So we do have to come up with answers to meet this demand because there is risk it'll happen. May not happen this year or next year, but it will happen in the out years.

You have been focused on this industry for a few decades now. Have you ever seen a moment like this where we have so many competing pressures and opportunities in the system? Great question. Absolutely not. I've not seen anything like this before. And it could go in a variety of different directions, you know. Um The pessimist in me says that, you know, we have a a government which is um trying to change the culture of America around energy. This whole idea of internalizing costs, understanding

that emissions do have impacts, you know, and pricing for those is not, you know, is not a thing anymore. It's it's early all about, you know, just making the dollar externalizing as many costs as possible and future health impacts can be, you know, whatever they are.

the optimist in me says, you know, there couldn't be more opportunity uh available uh now than than in the last forty years, right? That, you know, with this increasing demand, it's gonna create a ton of opportunity for businesses that solve the grid optimization problem that create software and again AI. So this data center and AI growth can actually contribute to improving delivery on the grid. You know, so we could see

some really interesting businesses come out of that to solve those problems. We'll finally see hopefully deployment of geothermal in the US. We really haven't had a a macro level deployment of geothermal. So certain areas and and types of power may ultimately now

um, you know, see the light of day. So so it's it's a time of never been greater opportunity and a time of never been greater challenge. This is a transition that's going to take generations. And uh we we are very lucky to have a ringside seat for it. Do your clients, your the companies you work with, do they retain that same sense of optimism? Depends on the client. Yeah.

You know, I I I think uh some do for sure. Um, and I you know, I can think of a few that are their technologies still qualify for credits. Uh they can transfer those credits, they can they can fund their operations using the uh the those credits uh in uh in the in monetizing them. So there's real opportunity for them there. You know, and we've got we've got others that the economics just aren't penciling out right now. And so if that's the case, then you know, it's it's hard to be optimistic.

But like I said, if you can pivot, you can you can think hard about what the needs are, you know, and anticipate that, then like I said, I think there's really a lot of opportunity. Tom Burton, always a pleasure chatting. I know when the rain delay stops, you'll be right there in the middle of the game. Absolutely. Thank you. I really appreciate it Steve. Talk to you soon. Tom Burton is the chair of the sustainable energy and infrastructure practice at the law firm Mintz.

If you want to follow the insights Tom and his team are tracking in policy, markets, finance, and development, visit the Mintz website and get in touch. The link is right there in the show notes. Thanks so much for listening.