Power & Pipes

An earnout provision in mergers and acquisitions contracts entitles the seller of the target company to additional compensation in the future if the target performs well after closing. Such a provision is often used when a gap exists between the buyer’s lower valuation and the seller’s higher valuation. Essentially, it is a way for the buyer to say, “if you think your company is really worth as much as you say it is, prove it.”

ESG. Net zero. Carbon sequestration. In 2023, all of these terms will continue to be widely referenced in mainstream media publications, corporate governance and shareholder materials, and regulatory filings and issuances. Although the terms are technically unrelated, at their core they reflect a growing social consciousness, both in the United States and abroad, concerning carbon dioxide (CO2) presence in the atmosphere and the impact of individual and corporate actions on greenhouse gas (GHG) emissions.

The solar power industry seems to be caught in the crosshairs of competing legislative agendas. The US Inflation Reduction Act (IRA) created incentives to increase solar capacity via tax credits. The Uyghur Forced Labor Prevention Act (UFLPA) creates a rebuttable presumption that any goods that were mined, produced, or manufactured, wholly or in part, in the Xinjiang Uyghur Autonomous Region (XUAR) were made with forced labor, and bars their importation into the United States. More than 90% of the world's ingots and wafers (made from polysilicon) are produced in China, and 80% of solar panels going into both residential and commercial projects in the United States come from abroad. The push for more solar capacity is potentially hindered by supply chain–based trade restrictions, resulting in competing agendas.

Contracting parties sometimes attempt to rely on merger clauses to avoid future claims arising from reliance on extra-contractual representations such as fraudulent inducement. But in Texas, the inclusion of a standard merger clause does not preclude such a claim. See Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 327 (Tex. 2011).

There are no unimportant North American Electric Reliability Corporation (NERC) reliability standards, but from time to time, NERC and the Regional Entities (Regions) place greater emphasis on certain reliability standards in response to events affecting the grid. With headline-grabbing physical attacks on power substations across the country in recent months, one of NERC’s greatest current priorities is evaluating the effectiveness of its physical security standards, most notably CIP-014.

Choice of law and forum provisions are standard clauses often found buried in the back of a contract, easily overlooked and frequently ignored. Although these provisions do not typically come up unless there is a dispute between the parties, they should not be an afterthought for drafters because they can play a significant role in the outcome of a dispute.

Indemnity clauses can give rise to a duty to defend or duty to indemnify. This post reviews some basics of when such duties arise under Texas, New York, and California law: Can the duty to defend or to indemnify be determined before all losses are tallied?

The US Department of Energy’s (DOE’s) Office of Energy Efficiency and Renewable Energy (EERE) issued a funding opportunity announcement (FOA) on January 27, 2023, on behalf of the Hydrogen and Fuel Cell Technologies Office that makes available $47 million to support the research, development, and demonstration of affordable hydrogen and fuel cell technologies. The FOA further advances the Biden administration’s goals to achieve carbon pollution-free electricity by 2035 and to achieve net-zero emissions by 2050. It also supports the goals of the H2@Scale Initiative, which aims to advance affordable hydrogen production, transport, storage, and utilization, and aligns with DOE’s Hydrogen Shot, which targets affordable clean hydrogen production at $1/kg within the decade.

While no one has a crystal ball for what 2023 will hold for the energy industry, the seemingly widespread support for green technology and clean energy is expected to carry through this year. In our industry outlook, “The Trends—and Traps—That Will Shape 2023,” we highlight some of the major green energy tax credit trends.

The Federal Energy Regulatory Commission (FERC) issued a final rule on January 12 amending its regulations governing the maximum civil monetary penalties assessable for violations of statutes, rules, and orders within FERC’s jurisdiction.