Power and renewables mergers and acquisitions: key commercial due diligence considerations

Industry context and challenge

The US electricity sector is at an inflection point. After years of next to no growth, US power demand is expected to grow by over 2% annually through 2030. To meet nearly unprecedented demand growth, renewable energy development has flourished. From 2015 to 2025, more than 111 GW of solar capacity and 105 GW of onshore wind capacity was added to the US grid.

Rapid growth and policy support has created an environment where M&A activity in the sector has accelerated. Approximately 11% of renewable capacity in the US changed hands from June 2024 to June 2025.

While M&A activity has increased, assessing development projects continues to be challenging. The industry lacks a standard framework defining the milestones for different development stages. No publicly accessible method exists to verify the capacity expected to come online. The power and renewables industry continues to be a field where unlisted asset owners overwhelmingly dominate listed ones. These conditions make it hard for potential buyers to separate real capacity from mere claims.

Wood Mackenzie has advised on over US$20 billion of renewable transactions between 2020 and 2025. As a result, we have developed a playbook for assessing portfolios across various development stages and different technologies. This paper outlines our framework and discusses common red flags identified during buy-side transaction processes.

Summary of our portfolio diligence methodology

Our methodology addresses three critical valuation challenges: accurately assessing development pipeline capacity, forecasting technology-specific price curves, and determining appropriate development premiums across project stages. We introduce a probability-weighted pipeline capacity analysis that combines interconnection queue data with expert developer insights. This reveals that up to 93% of prospecting-phase capacity may not reach commercial operation. Our approach reclassifies assets using standardised development stages and applies empirically-derived success probabilities, providing more realistic capacity forecasts than seller projections.

The framework incorporates regional price curve analysis across over 100 utility-scale price zones and more than 12,000 distributed generation market rates. This is coupled with region-specific development premium benchmarking. For distributed generation assets, we identify channel fees depending on development stage and location.

Common red flags

We distil lessons learned from our transaction advisory experience and identify critical risk categories that commonly emerge during due diligence including:

• Interconnection and deliverability challenges
• Revenue structure complexity
• Development fee benchmarking
• Portfolio integration risks
• and others

Our analysis demonstrates that disciplined diligence addressing these themes enables sponsors to secure better financing terms. It also achieves smoother transaction execution in a market where qualified deals command double-digit EBITDA multiples.

This framework provides investors, developers, and utilities with a systematic approach to navigate the increasingly complex renewable M&A landscape. It moves beyond traditional capacity-based valuations to deliver market-informed, risk-adjusted portfolio assessments.

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