Energy Pragmatism and Ways Forward: Private Equity Giants All-In on Multiple Paths to Net Zero

March 27, 2024
There’s been a lot of talk about losing the way on the road to net zero. At the same time, big money is still squarely aimed at carbon-free energy projects worldwide.

One of the bigger fish in the energy transition ownership ocean has voluntarily been swallowed by an even bigger fish. Does that mean that, despite turbulent waters currently trying to flood the path, the world’s richest investors are still banking on the clean energy future?

The cast of smart money seems to be saying yes.

Recent news like the World Meteorological Organization’s discouraging report on climate change factors, or rising electricity demand outpacing renewable installation, has put a damper on the optimism once expressed by the energy transition’s leading lights. In the U.S., the Inflation Reduction Act has spurred billions in new microgrid, renewable energy and electrification investment, but contrary economic and political headwinds are worrisome, too.

Microgrid Knowledge 2024 features Special Session on the IRA Impacts

MGK also covering EV Charging, University projects and more

April 22-24 in Baltimore

There’s been a lot of talk about losing the way on the road to net zero. At the same time, big money is still squarely aimed at carbon-free energy projects worldwide.

On the microgrid side, numerous global-scale funds have taken major stakes in microgrid development. The Carlyle Group is in a joint venture with Schneider Electric on public microgrid developer AlphaStruxure, while Warburg Pincus has invested in Scale Microgrid Solutions.

Earlier this year, Global Infrastructure Partners announced it had agreed to be acquired by private investment giant BlackRock in a $12.5 billion cash and stock deal. The combination of GIP and BlackRock’s existing infrastructure division will create a $150 billion business focused partially on energy infrastructure investment.

In addition to owning airports, data centers and conventional power plants, GIP’s investments also include several renewable energy platforms such as Atlas Renewable Energy, Bluepoint Wind, Clearway Energy and Competitive Power Ventures (CPV).

Among those energy investments are several companies focused on natural gas cogeneration or split between conventional and renewable energy aims, such as Clearway and CPV.

For its part, BlackRock has invested more than $170 billion in U.S. public energy companies and startups. In his annual letter to shareholders released this week, BlackRock co-founder and CEO Larry Fink defined the energy transition as a “mega force” economic trend driven by nations which comprise 90% of the world’s gross domestic product.

Earlier this year, BlackRock announced that one of its massive renewable power investment funds was paying $200 million for a solar company, Enviria, based in Germany. The firm also has invested $50 million in off-grid solar, often a centerpiece of microgrid development.

Energy pragmatism: Adaptability is key to transition future

For all of these moves, there are some clouds on the proverbial horizon. Fink acknowledged, for instance, that the issue of an energy transition from fossil fuels to renewables has been more contentious in the U.S. both politically and economically.

His new term for the future is “energy pragmatism,” influenced by recent events such as Russia’s invasion of Ukraine driving the cost of natural gas and other fossil fuels dramatically higher for a period. In Ukraine, solar microgrids have been deployed quickly to help the nation deal with power outages from Russian bombing attacks.

Energy pragmatism, despite contentions that it is a backward move, can still be a path to decarbonization, Fink wrote. It just involves some level of compromise and adaptability.

“Germany is a good example,” Fink wrote. “It’s one of the countries most committed to fighting climate change and has made enormous investments in wind and solar power. But sometimes the wind doesn’t blow in Berlin, and the sun doesn’t shine in Munich.  And during those windless, sunless periods, the country still needs to rely on natural gas for dispatchable power."

The Lone Star State embracing energy pragmatism on all fronts

Texas, meanwhile, likes to consider itself a whole other country, a reference to its status between independence from Mexico and joining the U.S. The Lone Star State is proud of its historical legacy as a global center for oil and gas—the Permian Basin is a hotspot for drilling operations—but it also gains 28% of its electricity from renewable energy, far more than any other state.

Much of that is a national-leading portfolio of utility-scale wind farms, but Texas also is a national leader in solar deployment and microgrids.

Last year, state voters approved a $10 billion energy resource package which included about $1.8 billion for microgrids and aggregated distributed energy resources (DER). The state’s grid operator, ERCOT, is even undertaking virtual power plant pilot projects.

“Texas and Germany are great illustrations of what the energy transition looks like,” Fink wrote in his shareholder letter. “…the transition will only succeed if it’s fair. Nobody will support decarbonization if it means giving up heating their home in the winter or cooling it in the summer. . . Or if the cost of doing so is prohibitive.”

BlackRock is committed to future energy transition investment, including wind power internationally, distributed energy resources and a $550 million stake in a project called STRATOS, which will be the world’s largest direct air carbon capture facility when it’s completed next year—in Texas.

It certainly reads like Fink is saying there are many viable paths to net zero emissions goals.

“Decarbonization and energy security are the two macroeconomic trends driving the demand for more energy infrastructure,” he wrote. “Sometimes they’re competing trends. Other times, they’re complimentary, like when the same advanced battery that decarbonizes your grid can also reduce your dependence on foreign power.”

Microgrids are increasingly valued as an intersection to meet both sustainability and resiliency goals. Global Market Insights recently forecast that demand for off-grid power supply will grow 20% annually to rise from $18 billion in value last year to more than quadruple that by 2032, while Fortune Business Insights calculated it will more than triple to nearly $40 billion by the same year.

The DER side of the commercial and industrial energy transition is a centerpiece of the upcoming Microgrid Knowledge Conference in Baltimore. MGK 2024, happening April 22-24 at the Marriott Waterfront along the city’s Inner Harbor, will feature sessions on microgrid expansion, VPPs, electric vehicle charging infrastructure, financing, multi-customer projects, universities, data centers and more.

Registration is open and the Microgrid Knowledge 2024 schedule can be accessed here.

 

 

About the Author

Rod Walton, Managing Editor | Managing Editor

For Microgrid Knowledge editorial inquiries, please contact Managing Editor Rod Walton at [email protected].

I’ve spent the last 15 years covering the energy industry as a newspaper and trade journalist. I was an energy writer and business editor at the Tulsa World before moving to business-to-business media at PennWell Publishing, which later became Clarion Events, where I covered the electric power industry. I joined Endeavor Business Media in November 2021 to help launch EnergyTech, one of the company’s newest media brands. I joined Microgrid Knowledge in July 2023. 

I earned my Bachelors degree in journalism from the University of Oklahoma. My career stops include the Moore American, Bartlesville Examiner-Enterprise, Wagoner Tribune and Tulsa World, all in Oklahoma . I have been married to Laura for the past 33-plus years and we have four children and one adorable granddaughter. We want the energy transition to make their lives better in the future. 

Microgrid Knowledge and EnergyTech are focused on the mission critical and large-scale energy users and their sustainability and resiliency goals. These include the commercial and industrial sectors, as well as the military, universities, data centers and microgrids. The C&I sectors together account for close to 30 percent of greenhouse gas emissions in the U.S.

Many large-scale energy users such as Fortune 500 companies, and mission-critical users such as military bases, universities, healthcare facilities, public safety and data centers, shifting their energy priorities to reach net-zero carbon goals within the coming decades. These include plans for renewable energy power purchase agreements, but also on-site resiliency projects such as microgrids, combined heat and power, rooftop solar, energy storage, digitalization and building efficiency upgrades.

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