Global renewable energy drive brings arbitration to the fore

As countries accelerate decarbonisation efforts and adopt new technologies, projects face challenges from price volatility and regulatory changes to complex supply chains. These pressures, combined with evolving contractual structures such as joint ventures and multi-package contracting models, create fertile ground for disagreements over risk allocation and performance.

Arbitration has emerged as the preferred mechanism for resolving such energy disputes, offering neutrality, technical expertise, and procedural flexibility. Understanding these dynamics is essential for businesses navigating the energy transition.

The many causes of energy disputes

Across many parts of the world, there is a drive to increase renewable energy generation – an April 2025 report by the World Economic Forum found global renewable energy capacity grew by 15.1% in 2024 to account for more than 46% of total energy capacity. This drive is part of a broader agenda focused on decarbonisation of the energy sector and alignment of global economies with climate targets, notwithstanding the role for oil and gas production in the global energy mix in the short-to-medium term.

The increased risk of disputes arising from the energy transition was something that was apparent from the findings of a major energy arbitration study that Pinsent Masons partnered with Queen Mary University of London (QMUL) on in 2022 (50-page / 20MB PDF).

The study identified a range of factors leading to disputes: the impact of the volatile price of raw materials and energy supply; a changing regulatory and policy environment; the deployment of new technologies; along with concerns about the construction of energy infrastructure and sourcing of equipment and materials via supply chains. In the context of the energy transition specifically, changes in regulation, infrastructure and technology were considered most likely to give rise to disputes.

In the context of price volatility, in recent years we have seen two extremes: a sharp rise in costs in the installation of the global supply chain – not just wind turbines generators but also vessel suppliers, foundations and other components – contrasted with a significant fall in the price of solar panels.

With regard to solar panels, the problem has been exacerbated by manufacturing capacity having outplaced demand. For wind developers, it has been the opposite, with delays in the manufacturing of important components and a lack of availability of heavy lift vessels pushing up prices and, in turn, increasing the cost of finance. These issues can – and have – hit project timelines and led to disputes.

Another issue we highlighted last year was how the adoption of new technology and design can result in performance issues and become a major driver of disputes in renewable projects. Deploying often new and largely untested technology can make it difficult to properly assess and allocate risks. Our message for developers and contractors then and now is to carefully review your contracts to proactively identify who bears what risk and not assume that liability for a failure in the design process will be borne by your counterparty.

Geopolitical risks can also encourage disputes due to, for example, trade tensions and tariffs, the impact of conflict, and the imposition of sanctions – all of which can hit supply routes, availability, prices and timing.

The many types of energy disputes

As with any type of project, the scope of work, technical specifications, and deliverables under the contract can be matters of dispute, along with price and payment terms. However, there are certain types of disputes that are prone to arise in the context of renewables projects – aside from those linked to design defects as mentioned above.

For example, often, the preferred corporate structure for delivering renewable projects is a joint venture (JV), where global businesses offering finance, technology and scale, partner with local companies that have knowledge of, and skills in, the market. As we have previously highlighted, JVs most often fail due to a breakdown in communication that breeds mistrust between members. This can spur siloed, defensive and adversarial behaviour. A lack of clarity over the scope of the respective parties’ responsibilities is another central cause of JV failure and disputes.

In addition, the fractured nature of renewables project procurement, where there are typically multiple contracts signed with multiple parties for different interfacing phases of a project at different times, can lead to a breach of preferred supplier agreements if the employer or main contractor is not careful.

The anticipated performance of works by different parties on a sequential basis also creates interfacing risks. For example, equipment, vessels or experts that are in high demand might be lined up to support with works during a small weather window, but unable to do so because materials have not been supplied on time or because other engineering or construction works to be carried out by other contractors have not been completed on time. This can add cost and delay to projects and cause claims for recovery of that value. These interface risks need to be carefully considered when contracts are being negotiated, so risk can be appropriately allocated and appropriate contractual milestones agreed from the outset.

Another type of dispute that could arise in renewables projects relates to the engagement of specialists when projects are in operation. Care must be taken to ensure there is clarity over their responsibilities and in relation to their liability if something goes wrong, as well as over issues such as those specialists’ rights to access and use data or technology that is subject to license.

Arbitration emerges as the most chosen dispute resolution mechanism in energy disputes

Many of the standard form contracts that underpin renewable energy project contracts, like those developed by FIDIC, provide for disputes to be resolved by arbitration rather than via the courts.

Indeed, the procedural rules of most arbitration institutions provide for mechanisms which are useful for large complex projects such as renewable energy projects: in particular, consolidation, coordination, joinder, early determination and preliminary protective order.

For multi-contract, multi-party energy projects, consolidation avoids parallel proceedings and conflicting awards. Instead of separate tribunals interpreting overlapping facts and obligations, consolidation creates a unified process, saving time and cost while enhancing consistency. However, parties must weigh the trade-off: agreeing upfront to consolidation may limit flexibility in appointing arbitrators with niche technical expertise.

Joinder is also a particularly useful mechanism where liability chains are intertwined, for example where defects or delays implicate multiple tiers of contractors. It reduces duplication and ensures related claims are heard together mitigating inconsistent findings.

Recent changes in many modern arbitral institutional rules, such as those of SIAC, have codified the use of preliminary determination procedure. Preliminary determination can be helpful in the context of multi-tiered dispute resolution clauses which are common in renewable energy contracts: if a party by-passes a tier (e.g. negotiation/mediation or adjudication) in the dispute resolution process, the other party may argue that the claim is inadmissible. In this situation, a preliminary determination process will help to swiftly resolve these issues at the outset. Where multiple substantive issues arise, it may be best for strategic reasons to stagger their determination, for example when there is an underlying issue such as a design change that is common to multiple claims. In such a situation it is more efficient to have a preliminary determination of that common underlying issue.

Contractors on complex projects such as renewable energy projects are often required to provide on-demand bonds, usually from banks, as security for their contractual obligations including timely completion and performance. ‘Ex parte’ preliminary protective orders (PPO), which were traditionally the exclusive domain of the courts, are now available in emergency arbitration proceedings under the SIAC rules. PPOs can be used in the context of resisting bond calls to maintain the status quo to permit the parties to complete the arbitration proceedings without the aggravation of the dispute that would ensue from the bond call. Arbitration presents a distinct advantage compared to courts, in particular because emergency arbitrators may rely on international principles to supplement the law of the contract.

Renewable energy projects typically span decades, requiring ongoing collaboration between developers, contractors and financiers. Arbitration offers confidentiality, shielding sensitive technical and commercial information from public scrutiny. This privacy helps maintain trust and preserves business relationships, which is critical when parties must continue working together after a dispute is resolved.

When asked which features of international arbitration are most important for resolving energy-related disputes, 63% of survey respondents from our QMUL survey said neutrality. Cross-border projects often involve foreign investors partnering with local entities (such as a JV with a local partner), including state-owned enterprises. Arbitration provides a neutral forum, avoiding the perception of bias that can arise in local courts.

We mentioned above that renewable energy contracts frequently incorporate new and untested technologies, such as advanced turbine designs or battery storage systems. Arbitrators with sector-specific experience and the ability to appoint technical experts ensure that disputes are resolved by decision-makers who understand the complexities of engineering, performance warranties and grid integration.

Our expectation is that the continued drive to scale-up renewables generation will result in an increase in the proportion of disputes that arbitral institutions handle that concern renewables projects over the next decade.

Co-written by Johanne Brocas of Pinsent Masons.