‘Further Investment in Power’ Will Drive Big Law Business—But What About Clean Energy Projects?

Lawyers who work in the energy sector say demand was strong in 2024, and they expect more of the same in 2025, but the flow of energy transition projects, spurred in 2024 by the Inflation Reduction Act of 2022, is hard to predict under the incoming Trump administration.

You are viewing: ‘Further Investment in Power’ Will Drive Big Law Business—But What About Clean Energy Projects?

Uncertainty is the defining word for clean energy projects, energy lawyers at a number of Big Law firms with Texas operations said, although none of the lawyers foresee the new administration getting rid of the IRA, which is designed to promote clean energy by providing tax incentives for energy transition projects.

Looking ahead to 2025, energy lawyers expect to see demand in a number of areas, including infrastructure projects to construct gas-powered plants to provide energy for a growing number of data centers needed for AI; projects to strengthen the grid in states such as Texas; M&A across the range of the energy sector but including large deals; and a range of infrastructure projects providing clean energy.

“There’s just a massive need to invest in digital infrastructure and that means a further investment in power,” said Breen Haire, a co-managing partner of Simpson Thacher’s Houston office and co-head of the firm’s energy and infrastructure practice.

Jim Bowe, a partner in King & Spalding in Washington, D.C., who works in the energy sector, said his firm was very busy during the first half of 2024 in the effort to move toward cleaner fuels to decarbonize the energy sector, with lawyers in the U.S. the Middle East and London working on energy transition projects. But that work slowed in the second half of the year, partly because some of the incentives provided through the IRA “have taken a long time to sort of get fleshed out.”

But, he said, data center work got very busy during the second half of the year.

“In a way, it was perfect, because as we’ve seen things slowed down in the green space, we’ve seen things accelerate in the data centers and conventional power-generation areas,” he said, noting that even gas storage has gotten busy again.

In 2025, Bowe said, the “scramble” is figuring out how to supply data center electricity needs, either through conventional investment in gas-powered plants, or in the innovative developments such as nuclear plants with small modular reactors, or fuel cells with batteries.

See more : Kelyniam Global, Inc., (“KLYG”) Announces Private Investment to Public Entity (“PIPE”) Closure of Securities Offering

“For ’25, we will also see a lot of uncertainty that will result from the new administration’s emergence onto the scene. I’m concerned that in the zeal to deregulate and push a drill-baby-drill agenda, the incoming administration may actually stumble and do some harm where it’s actually trying to do some good,” he said.

Bowe said that because the benefits of the IRA associated with tax credits and loan programs disproportionately benefit red states, the wholesale repeal of something as massive as the IRA or the Infrastructure Investment & Jobs Act is “unlikely.” However, he said, the new administration may “slow roll” new loans or loan guarantees, or review guidance on rules already issued or issue new rules.

Tariffs that incoming President Donald Trump has said he would impose on trading partners could affect the market for liquified natural gas exports and raise the cost of constructing new energy projects, he said.

Archie Fallon, a Willkie, Farr & Gallagher partner in Houston the corporate and financial services department who is a co-chair of the project finance and investment practice group, said there should be more demand in 2025 for project development of natural-gas generators, but less demand for project development in investments around energy transition businesses such as hydrogen, because of the uncertainty of the future of the IRA and the fact that it has been a “slow road” despite support from the Biden administration.

Also, he said, there’s been a lot of interest around nuclear power generation, but in his view, that’s a wait-and-see situation.

“It’s a long development cycle. It requires a lot of capital and construction risks, and so we just have to see which kind of investor groups are prepared to line up,” he said.

For 2025, Kaam Sahely, an energy transactions and projects partner at Vinson & Elkins in Austin and Houston, anticipates seeing more power generation projects, and growth in LNG projects, but perhaps “some holdback” in offshore wind projects. He said it would be “massively disruptive” if the new administration scales down the use of the core tax credits and transferability under the IRA for clean energy projects.

“Things are being built all over the country,” he said.

Simpson Thacher’s Haire said increased confidence in the business environment, now that the uncertainty of the election is past, will lead to increased M&A activity.

“There are going to be changes in the country’s energy policy, but what I don’t think will change is the broader, longer-term problem that needs to get solved, that’s meeting the country’s demand for digital infrastructure and energy. I don’t think that is something that is determined by election cycles. That is an issue that needs to be addressed by the businesses, by the industry, both the digital and the power industry, on a much longer-term basis,” Haire said.

Steven Torello, a partner in O’Melveny & Myers’ Houston office, expects large-scale acquisitions to continue in 2025, because public companies and private equity funds have “dry capital” and are looking at larger targets.

“We have clients who have told us, we are going big game hunting now,” Torello said, adding that while the acquisitions may be large, buyers may ultimately sell off some of the parts, creating more deal flow from the transactions.

Torello said he gets the sense from conversations with clients that the IRA is “not going anywhere” with the new administration and a “ton” of capital has already been deployed in projects.

His colleague, Jibin Luke, an O’Melveny partner in Houston, said the energy sector investment climate will be an “all-of-the-above” approach.

“The renewable and transition world is here to stay,” he said.

Like other energy lawyers in the Texas market, Eric Otness, head of the M&A/corporate group in Skadden, Arps, Slate, Meagher & Flom’s Houston office, expects activity in the renewable space to remain strong, and he does not expect the tax credits under the IRA to go away. Another interesting development, he said, is the potential for a resurgence of nuclear power plants.

However, he said the potential of new tariffs being imposed on U.S. trading partners — Trump has said he will impose huge tariffs on imports from countries including Canada, Mexico and perhaps China — could impact the energy sector.

“It will be interesting how the tariff thing plays out,” Otness said.