‘Clients in the tech space are more interested in energy than they’ve ever been, and clients in the energy and infrastructure space are taking a greater interest in tech.’

The energy sector is in sharp focus right now, and as Herbert Smith Freehills Kramer global energy co-head Lewis McDonald notes, its convergence with big tech is a key factor behind that.

According to a recent report by Goldman Sachs, demand for power for data centres is expected to accelerate by 175% from 2023 to 2030, as tech giants race to build capacity to support the rise of AI.

This has set the stage for a lively lateral market, as top law firms position themselves to take advantage. Paul Hastings has been among the busiest firms of late, hiring a team of nine energy and infrastructure partners around the world, while other notable moves have included former Linklaters infrastructure heads Jessamy Gallagher and Stuart Rowson landing at Freshfields after two years at Paul Hastings, and Jones Day recruiting ex-Eversheds Sutherland duo Michelle Davies and Rob McNabb from EY Law.

‘The scale is simply massive’

‘The biggest change has been the rise of data centres and the pressure it’s putting on the system,’ says HSFK’s McDonald (pictured right). ‘It’s been bubbling away for some time, and in the last 12 months it’s become a really big issue, and a really big opportunity.’

Sebastien Bonneau, a digital infrastructure specialist in McDermott Will & Schulte’s London office, puts it into numbers: ‘Ten years ago, a 10 megawatt (MW) data centre was considered large, and a 15-25 MW facility was very large. Today, a typical campus consists of several buildings, each ranging from around 30 MW to 100 MW – and we’ve seen some as high as 1.5 to 3.5 gigawatts in the US for a single campus. The scale is simply massive.’

This enormous demand for power forms a large part of an energy market that is staggering in its size. ‘In the last twelve months, more than $2trn was spent globally on energy transition technologies across the board,’ says McDonald. ‘In the same time period, less than $1trn was spent on conventional fuels.’

The question that now needs to be addressed, according to Hillary Holmes, who co-leads Gibson Dunn’s capital markets practice group and Houston office, is where the energy is going to come from to power the exponential growth of technology. ‘We went through the industrial age, and now we’re in the computer age, and we don’t yet know what we’re going to need for that.’

As McDonald and others note, this convergence of priorities has seen many firms bring together energy and infrastructure expertise with their tech practices to more effectively cater to clients spanning both sectors.

‘Data centre expertise can’t be housed in one person – it’s ten different types of practice, so you need ten different lawyers’

This view of ever-greater overlap between tech and energy is core to the strategy of not just HSF Kramer, but Ashurst, which recently announced a transatlantic merger with Perkins Coie to form a 3,000-lawyer, $2.7bn global firm.

The two firms set out the combination of the two sectors as central to the pitch for the merger, citing the convergence of tech, energy and infrastructure, and financial services.

‘The digitalisation of everything has had a huge impact in the energy space,’ says Michael Burns (pictured right), global energy industry co-chair at Ashurst. ‘One of the exciting journeys we’ve been on over the last few years has been working with practices that we might not have worked with as much in the past. As an example, today our digital team are a fundamental part of our offering in the energy sector.’

McDonald points to a trend of ‘energy projects integrated with tech projects, where you’re generating energy and delivering it all the way to bits at the end.’ To capture the full value available from advising on such a project, a law firm must be able to cover the needs of tech, investment, and traditional energy clients across a range of disciplines, from finance and development through construction, permitting, and more.

‘Data centre expertise can’t be housed in one person, because it’s a multidisciplinary function,’ says Holmes. ‘It’s ten different types of practices, so you need ten different lawyers, and you need them to work as one unit.’ To this end, many firms, Gibson Dunn included, are organizing their lawyers into teams and groups focused on data centre work.

‘Staying the course’ – still room for oil and gas

Big tech’s enormous appetite for power makes it the perfect investor to fund large-scale projects. And this ready source of capital makes investment more attractive to other investors too.

Sovereign wealth funds and pension funds have been pumping money into energy and infrastructure, while top private equity houses have also doubled down on the sector, with Brookfield closing a record $30bn infrastructure fund in late 2023, and BlackRock acquiring Global Infrastructure Partners in 2024.

Conventional power majors are also in on the action. Holmes (pictured right) notes: ‘We have clients that have traditionally been in the oil and gas space who are taking advantage of the fact that they have access to a lot of land and regulatory expertise, and the ability to build lots of infrastructure quickly and efficiently, to leverage that towards data centres.’

The ongoing importance of oil and gas majors has been another major trend. Chris Strong, corporate partner at Vinson & Elkins, does not mince words: ‘A major trend over the last 12 months has been reality setting in around the energy transition,’ he says.

‘It’s going to be a longer transition than people thought it would be a few years ago. We’re going to need hydrocarbons for longer than people were thinking or hoping we would, and that’s just a reality that people are going to have to adapt to.’

He continues: ‘Clients that might not have been interested in investing in hydrocarbons a year ago are now more willing to. The old supermajors stayed in hydrocarbons, banks are more willing to invest, and a lot of investment funds that had been pulling away from hydrocarbon investment are also now much more willing to invest.’

In this environment, it is crucial that firms maintain a presence in conventional power. ‘Staying the course is important,’ says Ashurst’s Burns. ‘We haven’t made any strong negative moves on oil and gas.’

It ain’t easy being green

This shift in sentiment has been accompanied by a shift in policy, perhaps most pronounced in the United States. ‘It’s very clear that in the US, the focus is on fossil fuels,’ says Strong, noting the high number of administration staff that have backgrounds in the fossil fuel industry.

‘There’s less willingness to provide subsidies to renewables,’ he concludes.

Katie Williams (pictured right), a projects partner at Ashurst, notes that a heavy reliance on subsidies is not unusual for a sector so defined by new and novel technologies. ‘You can’t just build and switch on new technologies overnight,’ she says. ‘Development, construction and commissioning takes time and money, and investors need to be comfortable with how certain risks (including with respect to new technology and offtake revenues) will be addressed or otherwise mitigated; sometimes this needs the support of government.’

This also means some reallocation of assets. ‘Different buckets of capital need to find their right home,’ says Burns, ‘and we have seen a changing of focus and strategies which are resulting in more of the right types of assets ending up in the right hands.’

‘Europe is the major economy that’s still clinging the hardest to net zero’

At HSF Kramer, meanwhile, McDonald sees opportunities even in distress: ‘Issues with support for renewables in the US are causing businesses operating in that space to think about how they structure or restructure,’ he says.

‘Through the merger we have a large bankruptcy practice, and we’re trying to join up those capabilities to our broader energy capabilities, to make sure we can support those clients as well.’

For Alex Msimang, who served as managing partner of V&E’s London office for 13 years, and recently moved to Baker Botts alongside fellow projects partner Nadine Amr, this process of reallocation also presents opportunities around the world. ‘There’s a theme of localisation,’ he says. ‘In regions like Africa and Latin America, you have more homegrown companies buying and investing in the energy space.’

In Europe, meanwhile, while changing energy needs are not as prominent a topic as they were a year or two ago, energy security remains a concern. ‘There’s no doubt that the switching off of Russia as an energy source in Europe has heightened the importance of energy from sources in Africa and the Middle East,’ says Msimang.

Still, the question of how long clean energy policy can be sustained looms. ‘Among the major economies, Europe is the one that’s still clinging the hardest to net zero,’ says one London-based partner. ‘That’s caused rapid increases in prices for consumers and industry, and that’s driving some industry out.’

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