“Greenifying” Energy Sector Starts with Strong Finances

The energy industry, particularly the renewable energy sector, faced significant challenges in 2025. The enactment of the new tax law, the One Big Beautiful Bill Act, pressured early-stage wind and solar projects by rolling back many clean energy tax credits and imposing new restrictions. This led to an 18% decline in wind and solar investments in the first half of 2025, falling to nearly US$35 billion (before the law took effect) compared to the same period in 2024. [1]

Despite these hurdles, renewables remained the dominant source of US capacity growth, accounting for 93% of additions (30.2 gigawatts) through September 2025, with solar and storage making up 83% of that growth. [1]

In 2026, deployment is expected to surge. Developers are anticipated to shift focus to safe-harbour projects, even as new foreign entity of concern (FEOC) sourcing rules imposing strict limitations on China, Russia, Iran, and North Korea come into effect. While only 35% of the pipeline is currently under construction, renewable starts are still projected to accelerate. [1]

A substantial shift in energy sources is underway

McKinsey projects that oil demand could peak in the 2030s and then dip from 3% to nearly 50% (depending on the speed of the transition) through 2050. Gas demand is expected to peak later, possibly in the 2040s, and could subsequently plateau or continue to rise at a slower pace. Simultaneously, renewable and other low-emission energy sources are forecasted to grow strongly, potentially accounting for 65 to 85 per cent of global power generation by 2050. [2]

Nevertheless,even in scenarios where the world approaches net zero by 2050, the International Energy Agency (IEA) projects that fossil fuels, predominantly oil and gas, will still account for a quarter of energy demand. [2]

Therefore, despite our collective attempt to move away from traditional power sources, the world cannot simply switch off fossil fuels. As the UN has perfectly framed this predicament, “Energy is at the heart of the climate challenge – and key to the solution” [3], the journey to a more sustainable future is underscored by an effective transition built on affordability, reliability, and the public trust.

The oil and gas industry consequently faces a dual mandate:

Ensuring the existing energy system reliably powers people’s lives and livelihoods

The new, low-emissions system is constructed in parallel to minimise emissions

Renewable energy – The sustainable future that the world needs?

Renewable energy is a sub-sector of the Energy industry, concentrating on natural resources, such as sunlight, water, heat, hydroelectric power, etc.

For renewable energy businesses, the path to sustainability is paved with unique accounting and data challenges:

Managing multiple assets and jurisdictions: Renewable energy finance teams are required to manage numerous assets, often through Special Purpose Vehicles (SPVs), across various legal jurisdictions. This creates difficulties in controlling entities at different stages and adhering to diverse ownership regulations.
Differentiating capital vs. operating expenses (CAPEX vs. OPEX): Particularly in long-term or multi-year projects. Costs like maintenance, repairs, and capital-related expenditures may not be immediately obvious or easily categorised. Misclassification risks violating regulations or reporting incorrect financial information.
Accounting for incentives and tax: Businesses must also accurately track and account for various incentives, such as tax credits or subsidies, which significantly impact profitability. Furthermore, the industry’s nature introduces unique tax considerations for financial statements and filings.
Lack of standardisation: Differences in national regulations and accounting standards for renewable energy make cross-regional comparison difficult. Standardising benchmarking and reporting is crucial for policy decisions and resource utilisation.
Data complexity: Renewable energy sources generate vast amounts of data that can be challenging to interpret and analyse. Obtaining reliable data is further complicated by varying international regulations on the collection and use of accounting information for these projects.
Long-term planning: Accurate accounting necessitates long-term planning to predict future demand and guarantee sufficient supply. This planning must factor in seasonal and annual energy demand variations, along with external factors affecting supply.

The industry’s success requires more than just innovative technology in the field; it demands financial intelligence and operational agility.

Building a strong financial foundation for renewable energy businesses

Stability, capital deployment, and returns for stakeholders start with a robust financial foundation, which encompasses several critical components.

Cash flow management

Given the capital-intensive nature of operations, an effective working capital strategy is vital across the entire energy industry, directly impacting virtually every facet of activity. For the renewables sector, achieving greater control over working capital and the flexibility to rapidly adjust to changing circumstances provides a significant competitive edge.

This requires businesses to form a strong base for their cash flow management processes, starting with clearly defining goals and committing to ongoing optimisation. Advanced tools, such as AI-powered forecasting and financial modelling software can help enhance accuracy, while scenario testing and expert advisory services help mitigate risks, securing the long-term financial viability of renewable energy projects.

Forecasting and budgeting

Budgeting and forecasting are crucial for the success of multi-year renewable energy businesses, whose projects are lengthy (often spanning years or even decades) with rising capital costs and tight funding controls.

Most projects use SPVs and involve significant multi-year capital costs, high debt financing, and revenue from Power Purchase Agreements (PPAs)/CfDs. Inaccurate forecasts risk debt covenant breaches, VAT reclaim delays, and potential insolvency. A disciplined multi-year budgeting approach builds funder trust and mitigates these risks.

Power purchase agreements

Power Purchase Agreements (PPAs) are fundamental, long-term contracts implemented to govern the sale of electricity and are highly crucial for financing new generation projects. A PPA clearly defines all commercial terms, including the agreed-upon volume, price, and specified delivery points for the electricity.

The global focus on sustainability has significantly amplified the demand for green energy and, consequently, for PPAs. These agreements serve as an invaluable mechanism for corporations to fulfil their green energy requirements. However, they typically span a long duration, often 10 to 20 years, and can involve intricate structures. This complexity necessitates thorough analysis during the negotiation phase and requires organisations to establish robust processes for contract accounting and readiness.

Asset management

In the challenging operational environment of the renewable energy sector, asset management is indispensable. Adopting effective asset management practices is fundamental for improving performance, lowering operational costs, and securing the long-term sustainability of solar assets. Furthermore, this management discipline is inextricably linked to cost optimisation and planning.

By leveraging advanced monitoring, data analytics, predictive maintenance, and efficient lifecycle management, solar industry stakeholders can foster a more sustainable, economically and environmentally responsible energy future.

Treasury management

Ultimately, digital transformation, especially through real-time treasury, is essential for renewable energy companies. It allows for real-time cash flow monitoring, working capital optimisation, and the flexibility needed to navigate rapid changes. Real-time treasury is becoming standard practice in the energy sector, and companies that fail to keep pace with these trends risk falling behind their competitors.

Implementing real-time treasury requires a deep understanding of a commodity trader’s business, operating, and technology models. Success depends on using the right tools for the right cash flow, with intraday functionality often being a critical first step toward achieving near-real-time visibility across multiple accounts.

ESG & compliance reporting

Investors, regulators, and the public now expect these companies to go far beyond their core mission of clean energy generation; they must now prove comprehensive leadership in ESG practices. This demands robust, transparent reporting on a range of critical factors, from the provider’s full carbon footprint to encompassing supply chain emissions, disposal practices, fair labour conditions across the entire value chain, diversity and inclusion within the workforce, ethical business conduct, anti-corruption measures, and more.

The primary challenges often involve collecting large quantities of consistent, accurate, yet disparate ESG data. Furthermore, aligning this data with the various complex and evolving global frameworks, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), or the Task Force on Climate-related Financial Disclosures (TCFD), etc., requires specialised expertise and robust data management systems.

Procurement

Renewable energy projects often face significant vulnerability due to their dependence on a global supply chain for key components like panels, inverters, and turbines. This reliance exposes businesses to risks like geopolitical instability, price volatility, and supply delays.

Procurement teams need to enforce strict vendor compliance, covering ethical sourcing, trade regulations, and environmental standards. Failure to adhere to these mandates or a single supply disruption can lead to regulatory scrutiny and timeline failures.

To ensure continuity, mitigation strategies can include implementing robust procurement solutions with built-in vendor compliance programs. This ensures that all third-party partners adhere to strict operational, ethical, and quality standards from the outset. Additionally, this must be coupled with the proactive strategy of diversifying sourcing to avoid overreliance on a single region, supplier, or type of material, thereby significantly reducing disruptions.

Risk management

While the investment case for this emerging industry remains compelling, the sector is exposed to various significant risks and challenges:

Market volatility: Fluctuations in prices can directly impact company revenues and profitability.

Regulatory burden: Increasing environmental regulations pose a risk to operations and could raise costs.

Energy transition: The global shift toward renewable energy introduces long-term transition risks, potentially leading to stranded assets or reduced demand for fossil fuels.

Reputational scrutiny: Environmental concerns place renewable energy businesses under continuous scrutiny, creating a risk of reputational damage.

As such, effective and proactive risk management is crucial to maintain project stability and achieve long-term financial success.

Invest in modern, cloud-based financial management solutions

Transitioning from outdated, siloed legacy systems or basic spreadsheets to a modern, cloud-based financial management solution that offers multi-entity, multi-currency capabilities right out of the box is invaluable for managing diverse project entities, joint ventures, and international operations while simplifying consolidation and ensuring consistent reporting across the entire portfolio.

The chosen platform must feature robust security measures and compliance with industry-specific data privacy regulations to safeguard the businesses from the slightest of threats. Furthermore, the software should also be able to automate manual and time-consuming processes. By offloading these repetitive tasks, your high-value Finance team can redirect its focus to strategic initiatives, such as:

Identifying opportunities for operational efficiency through real-time data analysis

Forecasting and modelling future growth scenarios and capital requirements

Ensuring proactive compliance with evolving tax codes and environmental regulations

Analysing project profitability and performance against key metrics

Ultimately, your goal is to select a scalable platform that not only handles your current financial needs but also possesses the flexibility to integrate new modules (like Asset Management or Field Service) and scale seamlessly as your business expands into new markets.

If you ever come across a major roadblock on your journey to financial efficiency, having a trusted IT partner alongside is a huge relief. With more than 30 years of implementing financial solutions for clients across different industries, TRG International has curated a comprehensive library of tools that are guaranteed to help you meet your sustainable goals. For a deeper look into how we can help you, contact us today!

Sources:

1. https://www.deloitte.com/us/en/insights/industry/renewable-energy/renewable-energy-industry-outlook.html#Policy-shifts

2. https://www.mckinsey.com/industries/oil-and-gas/our-insights/oil-and-gas-blog/the-energy-transition-is-happening-what-role-can-the-oil-and-gas-industry-play

3. https://www.un.org/en/climatechange/raising-ambition/renewable-energy