The boom in alternative energies is creating new growth opportunities for Midwest law firms willing to expand their expertise into the so-called clean energy sector.
Jim Greenberger, a Chicago partner at the law firm Reed Smith LLP who has practiced private equity law for more than 30 years, made the leap into clean technology. He and his team financed a large-scale wind farm in central Illinois [1] and are currently working with the developer of the largest solar power energy project in California.
Greenberger has also represented venture capital powerhouse Khosla Ventures, the green tech firm founded by Vinod Khosla, the former Kleiner Perkins partner and cofounder of Sun Microsystems Inc.
"Clean tech is one of the richest, most rapidly growing areas in law," Greenberger explains. "Midwest firms will have a distinct advantage as these technologies become more robust in the area."
For area law firms, jumping into clean tech has been a simple matter of following the money. Despite a weak economy and tight credit conditions, venture capital investment in clean tech companies is reaching new highs.
Capital invested in the United States grew by 18 percent to $571.6 million in the first quarter of 2008 compared to $483.9 million for the same period in 2007, according to an Ernst & Young report based on data from Dow Jones VentureOne.
Venture capital firms in North America and Europe poured $5.18 billion into so-called clean technology investments last year alone, up from $3.6 billion in 2006, according to the Ann Arbor, Mich.-based Cleantech Group, which has tracked clean tech investment since 2001.
Attorneys recognize that Illinois has the natural resources to provide for the growth of clean tech projects.
The Matoon, Ill.–based FutureGen project was intended to be the world's first coal fueled, zero emissions power plant, until the $1.8 billion project was shelved temporarily in January of 2008 by the U.S. Department of Energy. The DOE is currently exploring options to restructure the project to accommodate technological advances and control rising costs.
Jane Montgomery, a partner in the sustainable energy and climate change group at Chicago-based Schiff Hardin LLP, was one of the lawyers to work on the FutureGen project and hopes that the deal will soon be resurrected.
"There is absolutely more money in clean technology than there has ever been," Montgomery said. "While we have always had a robust energy practice, we have strengthened our practice areas in sustainable energy and cleantech deals."
With wind emerging as a viable and lucrative energy source in the Midwest, there is an increase in investment in wind energy projects. In 2007, wind power capacity grew by more than six-fold nationwide. Illinois ranks eighth among states with the greatest existing wind energy capacity.
In March, Stamford, Conn.-based GE Energy Financial Services announced its investment in two wind farms in Texas and Illinois, with both projects expected to produce 250 megawatts of emissions-free electricity equivalent to taking 96,000 average US cars off the road.
Chicago-based global wind power developer Invenergy LLC is developing the Grand Ridge wind farm 80 miles southwest of Chicago.
"With an increase in the number of wind projects being developed in the Midwest, there are a number of practices that are specializing in legal work surrounding wind energy development," explained Charlie Kuberp, a senior business specialist with the Chicago-based Environmental Law and Policy Center.
"Wind energy transactions are very capital intensive, involve a lot of negotiations with utility companies, and have a number of tax issues so there is a need for specialized legal work," Kuberp added.
Chicago-based Mayer Brown LLP has one of the leading wind energy practices in the U.S., with deals representing total energy capacity of over 3,000 megawatts. One such deal was the development and financing of the $75 million 30-megawatt Crescent Ridge wind farm located in Bureau County, Ill.
Intellectual property is an additional legal area that intersects with clean energy. Because much of the clean technology has been created and developed in research institutions, there is strong demand for legal patent and licensing expertise.
Still, Chicago law firms face challenges in expansion into clean tech practice. Greenberger said that building relationships in such a new area is difficult, especially since many of the top venture capital groups are on the West and East Coasts.
"One of the biggest challenges we face is that we aren't traditionally a law firm that has a large clean tech practice." Greenberger said. "In order to get clients to trust us, we have to build relationships and we need to be experts."
With clean tech legal practices only emerging in the last decade, the amount of new revenue flowing to Chicago law firms as a result is still unclear. But industry insiders forecast an increase in the number of investment and development deals in clean energy and anticipate more opportunities for law firms.
"I would hate to see the money and expertise going to the East and West Coasts as it did with information technology," Greenberger stated. "Here in the Midwest, we have the resources and knowledge base to make this area a leader in the clean tech legal practice."