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- [00:03]
A
This is partner content from Latitude Studios.
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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 rule book. That someone is Tom Burton. He leads the sustainable energy and infrastructure practice at the law firm Mintz.
- [00:27]
A
It's been quite a chaotic year to say the least, although there's no guarantee that 26 won't be any more challenging than 25.
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C
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?
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A
Well, to be honest with you, Steve, I think I'd say that we're in a rain delay.
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B
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.
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A
And so it really will be in the out years 27 and 28 where we're going to see substantially less renewables coming online. So there's definitely going to be a slowdown.
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B
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.
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A
The clean energy sector, or the energy transition sector was pitching a no hitter for a little bit. They've gotten knocked around by the batters on the political spectrum. And now the game is getting tighter.
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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.
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So much more creative finance, so much more, you know, how do you deal with a challenging environment from the client's customers? You know, how do you deal with reductions in valuation, disappointments in terms of losing grants, for example, things like that.
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And that pressure shows up in Mintz's practice as clean energy companies navigate more roadblocks, more questions, more complications.
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A
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 and the onward and upward seemingly to the moon, has been called into question.
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I'm Stephen Lacy, 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?
- [02:51]
A
We're in a bit of a rain delay and we maybe may need to change pitchers to implement new policy, et cetera, in order to keep that momentum going.
- [03:09]
C
I love that metaphor. I'm going to continue that metaphor. So if we've got two storylines here, let's call them two teams clashing. That is team load growth and then team federal government 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 weaponization of regulations from the federal government. How are those two interplaying?
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A
I think it's really hard to reconcile. To be 100% honest with you, it doesn't make sense that you would knock back $32 billion of incentives that were intended to create domestic manufacturing on shoring as well as modernization, the grid, et cetera, the very things that would help meet the demand growth. It's 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, we will need to bring out all of our stars, and the political environment will probably not reflect that publicly, but ultimately we will see continued growth and development of renewables in order to meet some of these needs. We saw a bit of a pullback during the first Trump administration, so I'm not surprised by some of the pullback. And maybe it is ultimately 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 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 20.
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C
Yeah. Well, let's talk about what will potentially separate the strong from the Weaker companies. We, of course, have seen already a shakeup in the developer world in renewables and batteries. In the wake of the one big beautiful bill. We saw alterations to the tax credit schedules, new foreign sourcing rules. 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?
- [05:47]
A
Yeah, so I do think that there, there 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, who can pivot more rapidly, you know, are able to absorb these changes in roles, those who are latest to the game, who maybe not be as capitalized or whose projects are the earliest along or the ones that are going to suffer the most. Unfortunately, there'll be then, I think, a new crop of developers, so to speak, or companies that will be deploying renewables 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 FIAC 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.
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C
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. And so, you know, these companies across the energy spectrum, they just need to see streamlined permitting to make it easier to build things. Of course, we've just seen a lot of local pushback. We saw stalled permitting reform, we've seen some weaponization of the permitting process under the current administration. And in general, I think that there's just a desire across the political spectrum to make permitting easier. How is all this impacting the permitting story right now?
- [07:36]
A
Yeah, you know, that's another great question because you've got, you can think about permitting from perspective of environmental permitting. You've got, you've got energy transmission, for example, FERC and 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. 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 passed a permitting reform law in the last year that really cut down the time in which renewable energy projects could be permitted pretty substantially. You know, you know, deadlines within a year, you know, 15 months, automatic approvals if deadlines are missed, things like that, you know, appeals going straight to the, our Supreme Court, our state supreme Court, as opposed to working their way through the court systems. So the intention is to really compress that timeframe while also honoring what are often fair protests for fair objections. But it's only in year one, so 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 applied uniformly right across the board. So allowing for fossil fuels or baseload to jump the line, for example, it's, you know, disingenuous. But to have these, if you've got a shovel ready project and it's ready to go, you know, and you need, and you're, that's your 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 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, 50 some odd years ago, 60 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 without consideration for their impacts on people's health really will have serious oppositional impacts 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.
- [09:52]
C
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 big ticket items, how much anxiety does it produce in developers?
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A
I think it produces a lot of anxiety, particularly if you have uncertainty in the sense of what we've seen in the wind targeting, of the weaponization of permitting in the wind industry, where you seemingly had approvals and now you don't, you know, so I Do think that permitting probably is as important, if not more important than, you know, tax credits 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.
- [10:46]
C
So let's talk about the other big story of the year, and that is the rise of data center infrastructure. You have an expanding digital infrastructure practice. What we're seeing now is again, digital infrastructure and energy infrastructure are becoming really connected. And the traditional data center model has been very much a real estate business and is now more of an energy infrastructure business. How are you seeing that play out and how is it shifting the way deals are getting structured?
- [11:14]
A
Well, that is exactly. I mean, you nailed it on the head. We have had a team in our real estate group that's been doing data center real estate work for over 20 years, maybe 25 years at this point. And just recently in the last two or three years, you know, they've been calling upon our project finance 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, but there isn't enough power. So our team is increasingly called upon to be helpful in structuring those arrangements for our data center clients.
- [11:58]
C
And so do you think that this digital infrastructure sector is complementary to the energy business or is the energy business competing for resources?
- [12:09]
A
I think it's complimentary, to be honest. There is an enormous amount of capital sitting in private equity funds and pensions and otherwise that can be deployed for these kinds of infrastructure projects. The competition comes down to really where say, the rate payer sits, the individual homeowner. We've seen this in places like Ireland where there's a moratorium now on data centers. Energy prices have gone up so much, ratepayers have been forced to to bear those extra costs 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 this is really 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 homeowner is going to 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 actually our gas costs as well, it has been largely on the transmission and distribution side, so not so much on the generation side. So it feels like 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.
- [13:26]
C
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? 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 kind of fitting into that crucial missing middle?
- [13:48]
A
Yeah, I've certainly seen in the last couple of years and you know, the slicer is no exception. More of those growth equity or gap filling, you know, investors come into the marketplace 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, build the second, you know, they're going to then flip to the, you know, to a need on the infrastructure side. So the infrastructure funds at that point, you know, will be comfortable that, you know, risk has been wrung out and that scale is really all that's left for some of these businesses. Particularly when you talk about 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 making it through on a future basis.
- [14:51]
C
There's a lot of concern that US Companies, because of the current policy uncertainty, are going to start moving overseas. They might 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?
- [15:17]
A
Yeah, no, I think this whole risk of innovate and not commercialize is very real and it cuts across a variety of industries. You know, not just renewables or clean energy side. I think it's going to be a real issue potentially 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 U.S. buying projects, buying companies, operating companies and establishing a U.S. presence are putting those on hold and they're pulling out. So similar to, you know, like the, 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 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 will happen. May not happen this year or next year, but it will happen in the out years.
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C
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?
- [16:57]
A
Great question. Absolutely not. I've not seen anything like this before. And it could go in a variety of different directions. You know, the pessimist in me says that, you know, we have a government which is 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 whatever they are. The optimist in me says there couldn't be more opportunity available now than in the last 40 years. Right. That with this increasing demand, it's going to 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 types of power may ultimately now, 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 we, we are very lucky to have a ringside seat for it.
- [18:27]
C
Do your clients or the companies you work with, do they retain that same sense of optimism?
- [18:32]
A
Depends on the client. You know, I think some do for sure. And I, you know, I can think of a few that are, their technology still qualify for credits. They can transfer those credits. They can, they can fund their operations using that, those credits in monetizing them. So there's real opportunity for them there. And we've got others that the economics just aren't penciling out right now. And so if that's the case, then it's hard to be optimistic. But like I said, if you can pivot, you can think hard about what the needs are and anticipate that, then like I said, I think there's really a lot of opportunity.
- [19:10]
C
Tom Burton, always a pleasure chatting. I know when the rain delay stops, you'll be right there in the middle of the game.
- [19:15]
A
Absolutely. Thank you. I really appreciate it, Steve. Talk to you soon.
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Tom Burton is the chair of the sustainable energy and infrastructure practice at the law firm Mintz.
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C
If you want to follow the insights.
- [19:29]
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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.
- [19:37]
C
Thanks so much for listening.