Legal and Compliance Strategies for Managing Risks in Renewable Energy Projects

Attorneys David M. Cayce and Monica Wilson Dozier of the Bradley firm write about new risks in renewable energy projects driven by technological advancements and the Inflation Reduction Act of 2022 (IRA) that developers and contractors face. However, these risks provide significant opportunities along with new compliance requirements. 

According to the authors, effective risk management in renewable energy projects necessitates early assessment and careful allocation of risks across various project agreements involving numerous counterparties, including utilities, equipment manufacturers, contractors, and financing parties. Coordinated analysis and negotiation are crucial to ensure that risks are assumed by the parties best positioned to manage them.

The article discusses major risks, including supply chain challenges related to compliance with the Uyghur Forced Labor Prevention Act and ensuring suppliers are not listed on the Office of Foreign Assets Control’s sanctions lists. Developers also need to deal with geopolitical uncertainties, such as changes in international law, import duties, and tariffs, which can affect pricing and supply chain stability. Antidumping and countervailing duties, especially in the solar industry, present additional challenges, with ongoing investigations and legal disputes creating further uncertainty.

Domestically, compliance with IRA requirements, including prevailing wage and apprenticeship mandates, is critical for maximizing tax credits. These requirements involve new compliance programs and thorough recordkeeping. The IRA also offers bonus tax incentives for projects meeting specific criteria, such as being in energy or low-income communities or using domestically manufactured equipment. However, these incentives are subject to ongoing rulemaking.

Ultimately, a renewable energy project’s bankability hinges on acceptable risk allocations that satisfy financing parties. Developers must work closely with experienced legal counsel to craft successful contracting strategies that navigate these complex risks in renewable energy.