The global energy transition is one of the defining economic shifts of our time. Governments, corporations, and investors have committed billions of dollars to renewable energy projects in order to meet ambitious climate goals. Yet in 2025, a growing number of renewable projects—from large-scale wind farms to solar installations and battery storage facilities—are facing delays, budget overruns, or complete shutdowns.
This raises a pressing legal question: when a renewable energy project stalls, who bears the cost?
The answer often depends on the specific contracts that were signed, the risk allocation agreed between developers, contractors, and investors, and how courts or arbitral tribunals interpret those obligations. In this blog, we’ll explore why renewable projects are struggling, the common disputes that arise, and how companies can protect themselves when entering into energy contracts.
Despite record investment in clean energy, renewable projects are increasingly hitting roadblocks. Understanding these causes is critical for companies evaluating their legal risks.
Global inflation and supply chain disruptions have significantly increased the price of materials needed for renewable energy projects. The cost of steel, solar panels, and wind turbine components has risen sharply, often pushing projects over budget before construction is complete. According to the International Energy Agency, supply chain constraints and inflation continue to drive up the costs of solar, wind, and battery projects worldwide, creating uncertainty for developers and investors.
Energy projects are highly dependent on government approvals. In 2025, many developers are facing delays due to shifting permitting rules, environmental assessments, and new climate policies. A project that was financially viable under one regulatory regime may no longer make sense if subsidies are withdrawn or compliance costs rise. These changes often lead to disputes about whether delays fall under force majeure clauses.
Local community resistance to large-scale renewable projects has also grown. While most support the idea of clean energy, residents often object to wind farms or solar farms near their homes due to environmental or visual impact. This has resulted in lawsuits that slow or halt projects, adding legal costs and uncertainty.
When renewable projects stall, the disagreements almost always come down to the contracts signed between the parties. Several types of disputes are becoming increasingly common:
One of the most frequently disputed provisions in renewable energy contracts is the force majeure clause. These clauses define which events excuse performance without penalty. For example, if a project is delayed because a government suddenly changes its permitting requirements, does that qualify as force majeure? Courts and arbitral panels often have to decide whether supply chain disruptions, inflation, or regulatory changes fall within the definition.
Contracts typically outline under what conditions a project can be terminated and by whom. Developers may argue they should be excused if conditions make the project impossible to complete, while investors may argue for compensation if they have already committed substantial funds.
A central dispute in renewable projects is who pays when costs spiral out of control. Developers often agree to fixed-price construction contracts, while investors expect certainty in returns. When costs exceed projections, disputes arise as each side tries to avoid absorbing the losses.
Many renewable projects include guarantees that the facility will produce a certain amount of electricity. If a wind farm or solar facility fails to deliver on its promised output due to technical problems, developers may be liable for damages. This can quickly escalate into litigation or arbitration, especially when lenders and offtakers are involved.
The allocation of costs depends largely on how risk was assigned in the contracts. However, in practice, several parties often become entangled in disputes:
Developers are typically responsible for delivering the project on time and within budget. If delays or cost overruns occur, they may be liable unless they can rely on force majeure.
Investors and Lenders risk losing their capital if a project stalls or is abandoned. They often sue developers for breach of contract or misrepresentation when projects fail.
Contractors and Suppliers can also be targets of litigation if equipment defects or late deliveries are the cause of delays.
Governments and Regulators are sometimes indirectly involved when policy changes or permitting delays create disputes over who should absorb the additional costs.
Renewable energy disputes are on the rise, and companies need to be aware of how they are being resolved.
Arbitration is becoming the most common forum, especially for cross-border projects where international investors and contractors are involved.
Mediation is often used to resolve disputes before litigation escalates, as parties are usually keen to preserve long-term relationships in the energy sector.
Litigation funding is increasingly used in large renewable disputes, allowing investors or developers to pursue claims without bearing the full financial burden upfront.
Insurance claims are also playing a bigger role, particularly for project delays and construction risks. However, insurers are increasingly disputing coverage, leading to secondary litigation. The World Bank has highlighted the importance of building strong dispute resolution mechanisms into renewable contracts to avoid costly and lengthy litigation.
Given the rising number of disputes, businesses entering renewable contracts in 2025 should consider proactive strategies:
Force majeure provisions should be carefully negotiated to include modern risks such as supply chain disruptions, inflation shocks, pandemics, and regulatory changes.
Instead of fixed-price contracts, companies may include escalation clauses that allow for cost adjustments if certain market conditions change. This reduces the likelihood of disputes over cost overruns.
Contracts should spell out the exact conditions under which a party may exit the agreement and what compensation, if any, is owed. This clarity helps reduce uncertainty if projects fail.
Parties should agree upfront whether disputes will be resolved by arbitration, mediation, or litigation, and in which jurisdiction. Doing this at the start can save years of legal battles later.
The global shift to renewable energy is necessary, but it is not without legal risk. As more projects stall or shut down, disputes over who bears the costs are becoming increasingly common. Developers, investors, and contractors must all recognize that renewable contracts are only as strong as the risk allocation built into them.
By drafting smarter agreements, planning for contingencies, and preparing for potential disputes, companies can better protect their investments and ensure they are not left holding the bill when projects collapse.
Need guidance on renewable energy disputes or contract strategy? Our firm helps U.S. businesses navigate energy transition contracts, litigation, and arbitration. Contact us today or Call us at +1 346 3556 111 to protect your investment and manage risk effectively.