Discover how a Virtual Data Room (VDR) can streamline and secure your renewable energy transactions.
The drivers behind investment growth in renewable energy
Global efforts to combat climate change and achieve net-zero emissions by 2050 are increasingly driving significant investments in energy transition to renewables. The commitment to limiting global warming to 1.5°C is pushing both governments and energy companies to prioritise clean energy technologies over traditional fossil fuels. These efforts are further intensified by geopolitical factors, such as the ongoing war in Ukraine, which has underscored the importance of energy self-sufficiency and security.
Achieving the new target set by the European Environment Agency of 42.5% of all energy coming from renewable sources by 2030, will require more than doubling the deployment rates of renewables seen over the past decade and will necessitate a profound transformation of the European energy system with significant new investment.
The renewable energy “top 3”
The International Energy Agency defines renewable energy as “energy derived from natural sources that are replenished at a higher rate than they are consumed.”
The top three renewable energy types driving the majority of renewable energy transactions, based on global usage, investment, and potential for growth, are:
- Solar Energy: Solar energy, particularly through photovoltaic (PV) panels, is the fastest-growing renewable energy source globally. Its scalability—from small residential installations to large utility-scale solar farms—makes it a key player in the transition to clean energy.
- Wind Energy: Wind energy, both onshore and offshore, is another leading renewable energy source. It is widely deployed due to its cost-effectiveness and the ability to generate significant amounts of electricity, especially in areas with strong wind resources.
- Hydropower: Hydropower remains one of the most established and reliable sources of renewable energy. Large hydroelectric dams and smaller run-of-river projects provide a substantial share of the world’s electricity, particularly in regions with abundant water resources.
Other renewable energy types include Bioenergy, Geothermal, and tidal and wave energy.
The due diligence challenge for renewable energy transactions
Renewable energy transactions often involve complex project financing, including a mix of debt and equity and long-term power purchase agreements. Projects such as wind and solar farms, typically require substantial upfront investment with the resultant fiscal due diligence to minimise tax risk and ensure an accurate return on investment over long periods. Finally, the interaction between the public and private sectors in shaping investment direction adds an additional layer of complexity, especially where regulatory uncertainty – not uncommon in these scenarios – prevails. As a result, these deals demand thorough technical, environmental, legal and regulatory due diligence with the highest levels of data security and document access by all stakeholders throughout the process.
Investors and project developers have a range of options at their disposal to manage due diligence throughout these complex transactions. However, most of these are not specifically set up to manage investment transactions with weaknesses in key areas:
- Physical data rooms offer high security by controlling physical access but are inefficient, time-consuming, and costly due to the need for in-person document review.
- Collaborative platforms such as Microsoft Teams, Basecamp or Slack enable easy communication and integration with other tools but may lack robust document management and pose security and data privacy risks.
- Legal Document Management Systems offer secure, robust handling of sensitive legal documents but can be expensive and less flexible for general transactions.
- Blockchain-based solutions provide secure, transparent, and immutable document sharing but face challenges due to their newness, complexity, integration issues, and varying adoption rates.
Virtual Data Rooms (VDR): Simplifying renewable energy transactions
A Virtual Data Room (VDR) such as Drooms is a proven technology specifically designed for managing renewable energy transactions. VDRs overcome the weaknesses of alternative methods, streamlining the investment process by providing a secure, centralised platform for document sharing and collaboration.
It makes deal preparation, due diligence and post-deal archiving efficient, secure and simple for renewable energy deals:
- Refinancing within energy providers: Drooms makes refinancing easier by securely storing important financial documents, allowing potential lenders or investors to review everything thoroughly without any hassle.
- Acquisition of real assets as additions to existing portfolios: Drooms helps streamline acquisitions by providing a central location for property details, legal documents, and environmental assessments. This makes it easier for investors to evaluate and add new assets to their portfolios.
- Financing of building developments: For renewable energy building projects, Drooms virtual data rooms offer a secure space to share architectural plans, construction timelines, and financing agreements, keeping everyone on the same page and ensuring smooth collaboration.
- Venture capital for renewable-related companies: Virtual data rooms such as Drooms are ideal for venture capital investments. They allow startups and investors to safely exchange business plans, financial projections, and intellectual property, building trust and ensuring transparency.
- Acquisition of plants or subsidiaries: When acquiring energy plants or subsidiaries, Drooms makes the due diligence process simpler by providing a secure area for reviewing operational data, regulatory compliance documents, and financial statements.
- Collection of funds: When raising capital for renewable energy projects, Drooms allows project developers and potential investors to interact seamlessly by securely hosting all the necessary financial documents, investment agreements, and compliance records.
Drooms: Trusted VDR Provider for Industry Leaders
Drooms is a VDR provider with proven experience in setting up and managing data rooms, adding simplicity, security, and structure to every transaction.
If you’d like to learn more about how we can smooth the transaction process for your renewable energy transactions, please contact us!
