What’s Ahead for Solar and Wind in 2025: Insights from Infocast Summit

What role will solar, wind and storage technologies play in addressing the pending “energy emergency” in the United States, and how is the industry responding to heightened policy uncertainty stemming from the new federal administration? Attorneys from Ropes & Gray recently joined over 3,000 industry professionals at the Infocast Solar + Wind Finance & Investment Summit in Phoenix, Arizona, on March 16–19.

Here are a few insights we’d like to share.

State of the Industry

• 2024 saw significant industry milestones, including the first large-scale offshore wind project in the U.S. coming online. 
• The wind and solar market remained robust, with continued interest from banks and investors, including for solar and storage projects, and significant investment across the industry in the supply chain. There was significant growth and innovation in the battery energy storage systems (BESS) market, with utility-scale BESS becoming crucial for grid stability.
• Renewables have accounted for 80% of the new grid capacity in the last two years, playing a key role in meeting the increased energy demand driven, in part, by data centers and the artificial intelligence boom.
• Key industry challenges in 2024 included clogged interconnection queues and associated delays, along with transmission challenges hampering the ability to match load and generation. 
• Executive orders and potential legislative reforms have created significant uncertainty for the U.S. renewables industry. The direction of the coming policy reform and the necessity for all industry participants to adjust and recalibrate is clear.
• While many investors and other participants have adopted a “wait and see approach,” other investors view this as the right market to invest given the huge amount of load growth forecasted and the five–ten year timeline for most investments. Further, many developers have been rushing to commence construction on as many projects as possible  to be insulated from any rollbacks to currently available tax credits and other regulatory changes.

Unprecedented Energy Demand and Load Growth Ahead

• Domestic energy demand is forecast to grow between 1–3% year-on-year. This forecast represents a staggering increase in growth after a prolonged period of stagnant energy demand growth. While the much-publicized AI boom and related energy demand from data centers is a key contributor to this forecasted growth, the electrification of a range of U.S. industries and systems and increased onshoring of manufacturing in the U.S. are also key contributors.
• In order to meet this demand and address what has been referred to by the new administration as an “energy emergency,” a mix of energy sources will be required. With new nuclear, gas or other more traditional power sources requiring many years to develop and come online, the solar, wind and storage projects have a much more favorable time to generation and are critical to meeting these immediate energy needs. 

Transferability of Tax Credits with the IRA Continues to Have a Big Impact

• While tax credits have been available for qualifying renewables projects for decades, they were only allowed to be traded/transferred in 2023 following the introduction of the IRA. This development has had a profound impact on the renewables market, allowing the monetization of tax credits and facilitating more creative financing structures. Rather than being beholden to the tax equity timeline, bridge financing can now be obtained before tax equity is in place, allowing project financing to be in place up to 18 months pre-COD. 
• In 2024, the market for tax credit transfers was estimated to be approximately $24 billion, outpacing the market for traditional tax equity. The total energy tax credit monetization market in 2024 was estimated to reach approximately $40 billion, up from an estimated $20 billion tax equity market in 2022. 
• The transferability of tax credits has also been a value driver of M&A deals in the renewables industry. The market has adjusted very quickly to the new deal and financing structures resulting from the IRA with standardization quickly established, allowing deals to be done on much tighter timelines.

Data Centers and Hyperscalers Consider New Solutions

• Data center developers, particularly “hyperscalers” such as AWS, Google Cloud and Microsoft Azure, have sought to move very quickly to support their AI and data efforts and are extremely focused on securing reliable power for their data centers without the risk of downtime.
• In the long term, this will require a mix of energy sources. However, in order to meet the urgent increase in demand from the rapid data center development, the fastest such source is solar and storage.
• Given the interconnection queue issues that delay the process to bring new energy sources online, data centers and hyperscalers are increasingly looking to “go behind the meter” in an effort to avoid interconnection, transmission and queue issues. However such projects may face political risks, particularly in the event of disruptions to, or increased costs for, retail energy supplies. It seems that the most likely and logical behind-the-meter solution is to supplant some grid-sourced power.

Looking Ahead

• Repowering. Panelists predicted heightened activity in the repower market in the coming years. As some of the best domestic wind assets were developed 15–20 years ago, they are expected to become attractive “repower” targets—referring to the combined process of dismantling and upgrading existing energy generation projects to restore and bolster performance with new technology and equipment. This may be particularly attractive as an alternative to greenfield development in the current uncertain regulatory environment, particularly with the potential to benefit from restated production tax credits (PTCs). Further, the ideal or optimal investor in a greenfield wind project is not the same as an investor in an existing project, so the option to repower existing assets may also be a driver of M&A activity.
• Flight to quality. In the current uncertain regulatory environment, which seems likely to continue for most of 2025, financing counterparties will increasingly be looking for high-quality developers with strong balance sheets and liquidity. In other words, projects with the right team, reputation and right capital backing will receive the most favorable valuations and access to capital/finance.
• New and Emerging Technologies. While there is general consensus that gas and nuclear are likely to play a part in the energy solution long-term, industry participants also see potential for fusion, CMR, geothermal, green hydrogen and blue hydrogen to play key roles. Despite the pause in funding of a number of research projects into the technologies, fusion power is seen as a potential moonshot. 
• Coupling. Many in the industry see the coupling of natural gas and renewables together as a key solution to meet immediate and long-term energy needs.

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