Clean Energy’s Surge: Brookfield Acquires Urban Grid

In the latest sign of investor confidence in clean energy, Brookfield Renewable Partners announced its acquisition of Urban Grid for $650 million in an all cash deal that will vastly expand its solar power generation and storage capacity across the eastern United States. While the sector has struggled in 2022, so much investment poured into climate technology during 2021 that some market watchers have deemed it a bubble.

While just $5.1 billion flowed into sustainable energy funds in 2018, that skyrocketed 10 fold by 2020 – and inflows during 2021 had already beaten that by the third quarter. But with the Biden Administration’s “Build Back Better” program, which included additional clean energy funding, stalled in Congress and rising interest rates making funding green energy projects more expensive, the industry has faced a rocky start to this year. 

Previously, clean energy faced a bubble in the 2000s as investors’ exuberance about new solar and wind technologies sent funds pouring into the industry. Back then, battery maker A123 went public to great fanfare, soaring 50% on its first day of trading. But after defects surfaced, the company went bankrupt within three years and investors fled the industry during the early 2010s. Whether clean energy’s rocky start to 2022 is simply headwinds that the industry will quickly overcome or the beginning of the bursting of a second bubble remains to be seen

Brookfield is betting on the former. The listed renewable power company of Brookfield Asset Management, a global alternative asset manager with approximately $650 billion of assets under management, Brookfield Renewable is already one of the world’s largest publicly traded, pure-play renewable power platforms. And the company’s CEO lauded the acquisition, stating, “adding Urban Grid’s high-quality pipeline of clean energy projects presents an exceptional opportunity for Brookfield Renewable to further establish itself as the leading renewable energy provider in the country.” This is in addition to Brookfield Renewable’s hydroelectric, wind, solar and storage facilities across North America, South America, Europe, and Asia. 

With its strong market presence in the US, Urban Grid will retain its brand name. According to the press release, Urban Grid has a “reputation for expertise in taking utility-scale solar and energy storage projects through the full development process, from site acquisition through to interconnection, permitting, and commercialization.” 

There is cause to be optimistic about the fundamentals of the industry this time around. Analysts point to the shift in public support for clean energy – and accompanying political winds – as a sign of the industry’s future growth. And it appears that the technology has caught up with the hype as companies such Tesla have developed more powerful batteries to hold onto electricity when the sun sets or wind subsides. According to Matterhorn’s M&A database, which harnesses AI and attorneys to track publicly-announced deals over $25 million in value, Brookfield was advised by law firm Sidley Austin LLP. Urban Grid was advised by law firm Kirkland Ellis LLP, and financial advisor Nomura Greentech.