Renewable Market Distress: Preserving Value and Capturing Opportunity

JD Supra Environment & Energy

Published March 27th, 2026

Detected March 28th, 2026

Summary

Sheppard Mullin LLP hosted a panel discussing distress in the renewable energy market due to the One Big Beautiful Bill Act (OBBBA). Panelists warned of potential capital shortfalls and advised proactive contingency planning for project developers and investors facing valuation shifts.

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What changed

This document summarizes key takeaways from a panel discussion hosted by Sheppard Mullin LLP at the Infocast Solar + Wind Finance & Investment Summit. The discussion focused on the distress within the renewable energy market, particularly concerning the impacts of the One Big Beautiful Bill Act (OBBBA) on project pipeline values. Panelists highlighted that recent changes in tax incentives have significantly reduced the value of development pipelines, making it difficult for developers to secure capital for post-tax credit projects. They warned that lenders might face situations requiring them to exercise remedies or take ownership positions in assets.

The panelists urged industry participants, including officers and directors, to move beyond a "growth-era mindset" and proactively address the potential for capital shortfalls within the next 12-18 months. They advised stress-testing financial models to account for future revenue and expense realities, developing contingency plans, and considering cost reductions or restructuring while companies still have financial optionality. The discussion underscored a lack of open dialogue and contingency planning within the industry despite these emerging risks.

What to do next

Stress-test financial models to account for future revenue and expense realities.
Develop contingency plans for potential capital shortfalls and market changes.
Consider cost reductions or restructuring options proactively.

Source document (simplified)

March 27, 2026

Navigating Distress in the Renewable Market - Preserving Value & Capturing Opportunity: Key Takeaways from Infocast’s Solar + Wind Finance & Investment Summit

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[co-author: ** Rob Sternthal]*

Last week, Sheppard hosted a panel at the Infocast Solar + Wind Finance and Investment Summit in Phoenix, Arizona on the topic “Navigating Distress in the Market.” The panel featured Sheppard partners, Benjamin Huffman (moderator) and Edward H. Tillinghast III (panelist) — co-leaders of the firm’s Energy and Infrastructure Team and Finance and Bankruptcy Practice Group, respectively — who were joined by Rob Sternthal* of Expedition Infrastructure Partners. Although the weather was sunny and bright, the panelists provided a more realistic forecast of the One Big Beautiful Bill Act’s (OBBBA) potential impacts on portions of the renewable industry. The panelists urged the industry to proactively address today the potential for capital shortfall in the next 12-18 months stemming from impacts of the OBBBA on project pipeline values. Below is a summary of the key takeaways from the discussion.

1. Policy & Valuation Shifts and the State of Distress

Recent changes by the OBBBA in tax incentives have affected the value of project development pipelines relative to the value they had prior to the legislation. Projects capable of meeting the safe-harbor deadlines are being prioritized, but projects in a post-tax credit world will need higher power prices and changes in how capital is sourced before they will be financially viable. Maintaining those development assets requires spending capital today on projects that have unknown future value; based on today’s power prices, they have no value. A short time ago, when these projects had access to tax credits, developers and investors attributed significant value to those long-term development assets. Now, it is difficult for developers to source capital to spend on the post-tax credit projects they will need to build to keep their platforms going in the future. Rob Sternthal noted that there are a number of utility scale companies that are vulnerable to distress because of the evaporation in value of long-term development pipelines, but that the industry does not appear to be openly discussing this possibility. He also cautioned that lenders could find themselves having to exercise remedies or take ownership positions in assets – an outcome that is rarely beneficial to any stakeholder. Reiterating the general sentiment of the panel, Ed Tillinghast described the sector’s current mood as one of “incurable optimism”, noting that few are developing potential contingency plans to address the effects of the OBBBA. Ed counseled market participants to consider modeling contingency plans to assist with their decision making, emphasizing that while there is no one-size-fits-all contingency plan, the creation of such plans (even if never used) could help companies respond to and meet the changing landscape.

2. Facing Reality, Warning Signs and Potential Solutions

The panel also discussed how the industry’s growth-era mindset – one captured by “we can defer this until next quarter” or “build our way out” – now needs to address the reality of a time when it can’t “defer this until next quarter.” Tillinghast urged companies (particularly officers and directors) to stress-test their financial models and address future revenue and expense realities. He noted that such modeling would enable companies to plan their future when they still have optionality and can decide whether they should begin considering cost reductions or restructuring.

Sternthal agreed and further mentioned that private equity funds, developers and limited partnerships are likely receiving differing perspectives from their advisors about the future of the industry. He underscored that parties need to begin engaging in direct conversations about how they will address future changes and that engaging an outside advisor not just looking to sell the company or its assets could provide greater clarity on value.

3. Value Preservation and Opportunities

The discussion was not entirely pessimistic. Huffman noted that the renewable energy sector is maturing, and as with any maturing sector, the growth-oriented mindset previously held will need to be replaced by one focused on long-term sustainability. Companies will need to reassess time horizons and consider how they want to best maximize and utilize their assets in this changing regulatory environment.

While discussing the tough decisions participants will need to make regarding the future of the sector, the panelists agreed on a core theme: distressed assets will be discounted by the market. Sternthal suggested that one way to address such a dynamic could be for companies to consider selling their best assets before they face further distress or are seen by the market as distressed. As with any distressed market, well positioned participants may find opportunities to acquire assets or platforms while others remain under pressure.

4. Final Takeaway

The panelists expressed confidence that the renewable energy industry will remain significant beyond 2030, but they emphasized the need to address the near-term realities and plan for a post-phaseout environment. An indication of where the market may head is where capital continues to flow. The panel noted that larger independent power producers may be better positioned to benefit from this changing landscape, but that only time will show who is best prepared for the upcoming changes.

Managing Partner, Expedition Infrastructure Partners.

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