Blog — May 27, 2025
Webinar Summary: Electrification Drives Dealmaking
By Steve Piper
As we progress through 2025, the landscape of power plant transactions is undergoing a transformative shift, propelled by electrification and the increasing demand for energy. Our recent webinar, "Electrification Drives Dealmaking - A Review of Year-to-Date Power Plant Transactions," provided valuable insights into the current state of the market, notable transactions, and the implications for the future of energy. In this blog post, we will explore these themes in detail, supported by data and findings from the webinar.
A Robust Transaction Environment
The first quarter of 2025 has seen an unprecedented surge in power plant transactions, driven by a combination of cyclical investment patterns and structural changes in the energy market. As highlighted in the webinar, the transaction environment is remarkably active, with billions of dollars being transacted in power plants despite ongoing policy and economic uncertainties.
One of the standout transactions discussed was the partnership between Constellation and Calpine, which involved a monumental 25 gigawatts of generation capacity. This deal exemplifies the robust activity occurring in high-growth markets, particularly in PJM (Pennsylvania-New Jersey-Maryland Interconnection) and ERCOT (Electric Reliability Council of Texas), which are experiencing heightened electricity demand due to factors such as datacenter growth and electrification trends.
The Impact of Electrification on Demand
Electrification is fundamentally reshaping the energy landscape, leading to a significant increase in electricity demand. During the webinar, it was noted that the growth of data centers, heating electrification, and the adoption of electric vehicles are key drivers behind this trend. The anticipated growth in electricity demand should outpace historical levels, creating a favorable environment for existing generating assets.
The structural impact of electrification is evident as more investors look to capitalize on the increasing electricity demand. As Steve Piper, Director of Energy Research at S&P Global, pointed out, "The volume of early investors looking to exit or recapitalize these assets is building up this year." This shift in focus toward existing assets is a strategic response to the uncertainties surrounding new construction, including rising costs and supply chain constraints.
Key Transactions and Market Trends
The webinar highlighted several key transactions that illustrate the current market dynamics. In addition to the Constellation-Calpine partnership, Capital Power's acquisition of gas plants from LS Power Equity Advisors was also discussed. This deal underscores the growing interest in natural gas generation, which is being viewed as a reliable and flexible energy source amid rising demand.
Moreover, the first quarter of 2025 saw a notable increase in power plant valuations, driven by the strong demand for electricity. For instance, the fair market value estimate for two gas plants sold to Capital Power indicated a 20% increase in valuation, reflecting the robust cash flows expected from these assets over time.
Another deal is the Brookfield transaction to buy National Grid Renewables for $1.74 billion. How does the market indicative power forecast valuation compare to the transaction price?
The S&P Global valuation is 25% higher than the transaction price of $1.74 billion. With an estimated 2.7 gigawatts of assets in that transaction, our forecast valuation with our Q1 forecast is higher.
The Brookfield deal breakdown by ISO shows their assets across ERCOT, MISO, PJM and SPP. In ERCOT, three solar and storage projects with a capacity of 1.1 gigawatts have a valuation of about $1 billion for those assets.
In MISO and PJM, there are solar projects with a capacity of about 670 megawatts, both of which are valued at about $500 million. In SPP, there are two projects, a solar project and a wind project, with a total capacity of 328 megawatts and a valuation of about $260 million.
These assets add up to about $2.3 billion, more than the $1.74 billion transaction price, so we are valuing it a little higher. Why is that? In Brookfield's quarterly earnings call, they mentioned that the uncertain macroeconomic situation might have influenced the deal price between Brookfield and National Grid.
The Role of Regulatory Changes
Regulatory changes are also influencing the transaction landscape. The webinar discussed the implications of PJM's capacity price caps, which are expected to limit near-term revenue potential for new projects. However, as Steve Piper noted, the loss of investment tax credits (ITC) and production tax credits (PTC) could lead to fewer renewable energy projects moving forward, ultimately creating a higher price environment for existing green energy.
These regulatory shifts highlight the need for stakeholders to remain vigilant and adaptable to changing market conditions. The potential repeal of the Inflation Reduction Act could further complicate the landscape for renewable energy development, making the case for existing assets even stronger.
Datacenter Growth Propels Energy Demand
Corporate energy capacity contracted was up more than 66% in the 12 months, with clean energy purchases hovering around 120 gigawatts. Big tech continues to dominate the space. The volume contracted by the sector skyrocketed year-over-year, rising 120%. The tech and web service sector contributed about 92% of all new additions, and it represents more than 2/3 of the total accumulated so far. The growing consensus is that renewables and increasingly clean energy will not be enough to meet all datacenter demand for electricity, which is why nuclear energy is back in the spotlight and the reason datacenter owners turned to the technology in a major way last year.
Future Outlook: Nuclear and Natural Gas
As the demand for electricity continues to rise, the role of nuclear energy is gaining renewed attention. The webinar emphasized that nuclear energy presents a reliable, carbon-free option for meeting growing energy needs. Despite challenges such as long permitting processes and high capital intensity, nuclear is being considered a critical component in the energy mix.
Natural gas, too, is being recognized as a vital medium-term solution. As Tony Lenoir, Senior Analyst at S&P Global, pointed out, "Gas has its own advantages. It's reliable and dispatchable, but it's also less costly and faster to develop than nuclear." This positions natural gas as a bridge fuel that can support the transition to a cleaner energy grid while meeting peak demand.
Conclusion
The electrification of our economy is driving significant changes in the power sector, creating a robust environment for transactions and investment in existing generating assets. With ongoing regulatory shifts, evolving market dynamics, and the growing importance of diverse energy sources, stakeholders must remain agile and informed to navigate this changing landscape.
As we look ahead to the remainder of 2025, the power market is poised for continued growth and transformation. We invite you to stay connected with us for further insights, updates, and resources as we explore the future of energy together.
This blog post incorporates data and insights from the webinar, providing a comprehensive analysis of the current state of power plant transactions and the factors influencing the market.