CALGARY, Alberta (Dec. 18, 2024) — Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has released an analysis on strategies driving M&A activity in alternative fuels and how they will influence future capital deployment.
In the report, EIR shows that deal flow in the alternative fuels sector has surged over the past four years, driven by regulatory incentives and the maturation of technologies that lower investment risk. The report takes a deep dive into notable deals across five fuel types to determine the most dominant strategies driving M&A activity and speculates on the implications for future capital deployment in the sector. Overall, regulatory incentives emerged as the clear driving force behind alternative fuel M&A, followed in importance by vertical integration, sustainability goals, feedstock availability and technology advancements.
“Regulatory incentives emerged as the clear driving force behind alternative fuel deals, reflecting the sector’s dependence on government support for momentum and market stability,” said Heather Leahey, principal analyst at EIR.
“Recent transactions are increasingly targeting credit stacking opportunities and/or voluntary market support to cushion against policy uncertainty and weaker credit fundamentals. Furthermore, industry decarbonization targets are enhancing demand for low-carbon fuels by drawing in a wider range of offtakers with longer time horizons and buyers for the associated carbon credits,” Leahey said.
Key takeaways from the report:
- Regulatory incentives are the clear driving force behind alternative fuels M&A, reflecting the sector’s dependence on government support for momentum and market stability.
- Recent transactions are increasingly targeting credit stacking opportunities and/or voluntary market support to cushion against policy uncertainty and weaker credit fundamentals.
- Industry decarbonization targets are enhancing demand for low-carbon fuels by drawing in a wider range of offtakers with longer time horizons.
- Landfill gas-to-RNG developers may be more amendable to 120% IRRs in the voluntary market at $25/Mcf premiums, 60%-70% lower than in the transportation market, because of longer-term, stable contract structures.
- Value chain integration enables acquirers to unlock operational and supply chain enhancements, access complementary technologies and compound credit stacking opportunities.
- Cumulative alternative fuels deal flow sits at $28 billion since the start of 2021, more than double that of all other carbon innovation technologies combined. RNG and renewable diesel dominated the space, while more novel technologies like sustainable aviation fuel are gaining momentum.
EIR’s analysis pulls from a variety of Enverus products including Enverus Intelligence® Research and Enverus Energy Transition M&A.
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About Enverus Intelligence® Research
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, energy-dedicated SaaS company, with a platform built to create value from generative AI, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 95% of U.S. energy producers and more than 40,000 suppliers. Learn more at Enverus.com.
