Submitted by Blackstone
Leaders from two Blackstone portfolio companies and Global Head of ESG Jean Rogers sat down with Vik Sawhney, Global Head of Institutional Client Solutions, for a conversation on renewable energy, opportunities for private capital in decarbonization and more.
Each quarter, Blackstone convenes industry leaders to discuss the trends, challenges and opportunities they’re seeing in their sector in our webinar series, Alternative Views. The result: unique insights, gleaned from the scale and breadth of the world’s largest alternative asset manager.
Today, the energy transition — the ongoing process of converting to a low-carbon economy — is top of mind for many companies and investors. Jeff Sprau, CEO of Legence, Gregg Felton, co-CEO of Altus Power, and Jean Rogers, Blackstone’s Global Head of ESG, recently joined Vik Sawhney, Blackstone’s Global Head of Institutional Client Solutions, for a discussion on the energy transition and where they see opportunities for growth. Here are four key takeaways from their conversation.
Legence works with high performance facilities such as schools, data centers, healthcare facilities and government buildings to reduce carbon emissions, implement renewables, lower utility costs through increased efficiency, enhance system operation and improve the wellbeing of occupants.
Altus Power is a renewable energy company that develops, owns and operates locally-sited, commercial-scale solar generation, energy storage and EV charging infrastructure across 18 states, with expansion into four additional states recently announced.
This version has been edited and condensed.
1. A meaningful energy transition won’t be possible without private capital.
The world will need more than $3.5 trillion in capital investment every year to reach net-zero emissions by 2050. “There is federal support, but the private sector will need to invest substantial capital in order to facilitate the energy transition,” says Felton. Since 2019, Blackstone has committed approximately $16 billion in investments that the firm believes are consistent with the broader energy transition as of the first quarter of 2022.
2. The appetite for energy transition solutions is here — and growing.
As certain conventional energy prices continue to rise, “renewable power [gets] more competitive every year,” says Felton. Despite recent inflationary pressures, prices of certain renewable goods and services have dropped remarkably over the past decade, making them attractive alternatives for consumers — solar panel prices, for example, have gone down 95%. Recent supply chain issues may have tested some companies, but they’ve also created opportunities for the industry to “invest locally and scale up our manufacturing base here in the US,” Felton adds.
In the long-term, “reducing reliance on conventional energy can help mitigate inflation,” says Rogers, “and these investments will alleviate the bottlenecks in supply and demand that we’re experiencing due to under-investment in climate solutions.”
3. We don’t have to look far for big energy savings.
“40% of all carbon emissions are related to buildings,” Sprau says. Outdated building systems and inefficient equipment provide an opportunity to significantly reduce carbon emissions with relatively simple solutions like motion sensors and programmable thermostats, as well as routine preventative maintenance of HVAC equipment.
Sprau also recommends onsite renewables like solar or geothermal energy. “The technology and providers are available today – all we really need is the conviction to implement and impact at scale,” he says.
"The technology and providers are available today — all we really need is the conviction to impact and implement at scale.”JEFF SPRAU, CEO OF LEGENCE
4. Energy investors can beat challenges with a smart strategy.
“We are still facing a patchwork of regulations, incentives and tariffs for renewable energy and energy efficiency,” says Rogers. The most successful investors will take advantage of deregulated energy markets and move from a single-asset approach to work with diversified assets across portfolios and regions.
She thinks two metrics are particularly useful for mapping the success of an energy transition investment: The first is carbon delta, which is the change in a company’s greenhouse gas emissions over the investment period. The second is the cost to abate or the dollars needed to mitigate one ton of carbon. Rogers says these metrics are more than a compliance or disclosure exercise — they’re tools for understanding true progress against goals. By lowering their emissions, companies free up valuable capital they can deploy elsewhere to confront more complex energy challenges.
The views expressed in this commentary are the personal views of Jeff Sprau, Gregg Felton, Jean Rogers and Vik Sawhney and do not necessarily reflect the views of Blackstone Inc. (together with its affiliates, “Blackstone”). The views expressed reflect the current views of Jeff Sprau, Gregg Felton, Jean Rogers and Vik Sawhney as of the date hereof, and none of Jeff Sprau, Gregg Felton, Jean Rogers and Vik Sawhney or Blackstone undertake any responsibility to advise you of any changes in the views expressed herein.
This commentary does not constitute an offer to sell any securities or the solicitation of an offer to purchase any securities. This commentary discusses broad market, industry or sector trends, or other general economic, market or political conditions and has not been provided in a fiduciary capacity under ERISA and should not be construed as research, investment advice, or any investment recommendation. Past performance is not necessarily indicative of future performance.
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