Joint venture partnering on renewable energy projects

Amr Omran Jon Gilbert Richard Johnson Sara Barin Annie Whiteside

Joint ventures (JVs) are an increasingly popular form of business partnership on renewable energy projects, and play an important role in the energy transition process. In this blog post, we consider the involvement of oil and gas majors as JV partners on renewable energy projects, the risks JV partnering can give rise to, and the steps that can be taken to mitigate them.

The context

The JV model allows businesses to tap into their collective resources, including funding, know-how, technology, network and knowledge of the local market. JVs typically take the form of a special purpose vehicle (the project company) which is incorporated to enter into the principal contracts for the project and own the resulting assets.

A number of oil and gas majors have announced ambitious plans to focus on renewable energy. In recent years, these players are forming some of the largest consortiums in the renewable energy sector, in some cases partnering with smaller partners brought in for strategic reasons – for example their technological expertise – or financial sponsors.

The majors are also able to leverage their own expertise to propel alternative renewable energy technologies. For example, the broad experience of offshore activity in deep water, harsh environment operations and floating structures, along with their access to vast funds, is spurring further growth in offshore wind farms.

Risks of JV partnering on renewable energy projects

While JV partnering presents clear benefits, interested parties should be aware of potential risks and mitigating measures. In the context of renewable energy projects, some of the key risks to consider are as follows:

Conclusion

While the exact pace and magnitude of effort required for the energy transition is hard to measure, the end goal of a low-carbon energy system is certain. Oil and gas companies’ dedication to the energy transition through the diversification of their investment portfolios marks an important step to addressing climate change. JV partnering may well be key to unlocking more of this potential.