By Chairman and Chief Executive Officer Marc Cooper
After reading Solomon’s monthly Energy Transition Market Update, I sat down with Mike Mohamed, a Director in our Infrastructure, Power & Renewables group, to talk about shifts he’s witnessing in this fast-changing sector.
Mike, the energy transition conversation has shifted quickly over the past year — from policy-driven growth to very real questions around power availability. From your vantage point, what is shaping the US power market right now?
Substantial load growth is back for the first time in decades, and the next 10 years are projected to bring a larger magnitude of new demand than any period in US history. Power supply is shaping up to be the key constraining factor as demand driven by data centers, industrial reshoring, and the broader electrification is happening faster than the industry can deliver new generation.
Across most US markets, the core question is how much power can realistically be built and delivered over the coming years to enable this demand growth to materialize.
That dynamic is driving a structural repricing of power, changing how projects are underwritten, and is reshaping development strategies across renewable, conventional, and next-generation technology assets alike.
Data centers are clearly central to that demand story. What are you seeing that feels durable versus speculative?
Near‑term demand is very real. Disclosed data center development pipelines are large — and, in some cases, speculative — but if we realize even just a fraction of those pipelines, the resulting implied load growth is still enormous. Power availability is becoming increasingly scarce and is a major gating factor for data center development.
That’s also why we’re seeing a shift toward “bring‑your‑own‑power” strategies. Hyperscalers and data center developers are increasingly taking power procurement into their own hands through long‑term offtake agreements, direct project investments, and even grid‑supporting investments. The regulatory bodies are in support of this movement as well, and are beginning to implement market constructs that offer an expedited path to interconnect for those willing and able to bring their own power solutions. And this theme doesn’t just support renewables — it spans gas-fired generation, battery storage, transmission, and emerging next-generation technologies like enhanced geothermal and nuclear Small Modular Reactors (SMRs).
Where exactly are the bottlenecks that prevent power from coming online quickly?
It’s a systemwide challenge. Interconnection queues remain the largest delay point in most markets, often extending project timelines to five or six years. Permitting — both federal and local — continues to grow more complex as regulatory scrutiny remains high and also is further compounded by local siting resistance.
Equipment lead times also matter. Gas turbines, transformers, and other grid‑critical components now carry multi‑year delivery schedules. With renewables, Foreign Entity of Concern compliance requirements, ever-changing tariff regimes and supply‑chain constraints can cause immense project complexity. The result is a cumulative friction that makes rapid supply response extremely difficult.
Given those constraints, how are economics adjusting — particularly as tax credits begin to sunset?
We will soon enter a transition period where project economics must increasingly stand on their own. The expiration schedule for tax credits has prompted a rush toward near‑term projects that can be delivered within existing safe‑harbor windows, but the broader point is that the industry is being forced to recalibrate.
Importantly, this doesn’t undermine the long‑term investment thesis. Solar and wind are already cost‑competitive on a levelized basis in many markets. But what is changing is pricing dynamics.
Corporate offtake pricing is rising rapidly, which is ultimately a manifestation of the scarcity value of power, longer development timelines, and the premium being attributed to certainty of power. That pricing support is being driven largely by sustained hyperscaler demand but soon the loss of tax credits will also start to factor in.
How does this environment affect smaller developers versus scaled platforms?
Scale matters more than ever, Marc. Well‑capitalized platforms that can self‑fund development, secure interconnection positions, make the requisite collateral deposits, and lock in long-lead equipment supply early have a meaningful advantage. They can navigate market uncertainties, preserve corporate flexibility, and ultimately operate from a position of strength.
Smaller, undercapitalized developers face tougher tradeoffs. These players have not been able to reliably safe‑harbor projects and have had to make tough decisions about which projects to prioritize, as they typically don’t have the financial wherewithal to meaningfully advance all projects in their pipeline. Which also means sometimes having to sell projects, in many cases, earlier in the development cycle than they otherwise would have preferred. This creates a clear “haves and have‑nots” dynamic, which is increasingly shaping both asset sales and platform‑level M&A.
That leads naturally to consolidation. What does healthy consolidation look like in this sector?
Healthy consolidation is about achieving durable scale. The end goal is to expedite the path to self-funding, but it also presents an opportunity to diversify and/or bolster platforms across markets and technologies. Self-funding is the epitome of project development, as it enables platforms to recycle cash flow back into the platform to fund additional growth while eliminating the need for constant external capital raises.
Execution of consolidation is difficult, though. Integration risk, cultural alignment, management dynamics, and relative valuation considerations all complicate merger transactions. But given how fragmented the renewables development sector remains, consolidation today is largely viewed as constructive — and, in many cases, necessary — for long‑term market stability and success.
Stepping back, what should strategic investors and corporates take away from this moment in the power markets?
The key takeaway is that power has reasserted itself as scarce infrastructure. The availability, timing, and certainty of power are quicky becoming the most valuable factors influencing decision-making. That reality is driving new behaviors across corporate offtakers, renewables, data center developers, and investors — and it’s reshaping valuation, contracting structures, and capital-allocation decisions.
For those positioned with scale, expertise, and patience, the opportunity set remains compelling. But execution discipline — and a deep understanding of local market constraints — has never mattered more.
For more insights, listen to Mike’s interview on Crossroads: The Infrastructure Podcast.