Over the last decade, the cost of solar-powered electricity has fallen by 85%, transforming PV from a fledgling technology into what we see as a crucial part of the energy transition.
By capitalising on this shift to scale up production, which is driven partially by the Paris Agreement's goal of limiting global warming to 1.5 degrees C by 2050, we can create value and resiliency for companies.
One example is rooftop solar. Despite being one of the cheapest forms of energy, only 6% of European residential, commercial, and industrial buildings and only around 4% of those in the US are powered by rooftop solar.
The total surface area of all the rooftops in the world is 0.2 million square kilometres — an area almost the size of the UK. If all the surface area was covered with solar photovoltaic panels, they could generate a total of 27 petawatt hours of electricity per year — more than the combined electricity consumption of the world in 2018.
With improved accessibility, rooftop solar presents a significant value-creation opportunity.
Policymakers across Europe are already making significant strides in scaling up solar deployment, with the European Commission proposing a solar rooftop mandate for all commercial and public buildings by 2027, and for new residential buildings from 2029.
However, widespread adoption can only happen when it is cheap, easy and effective to incorporate renewable energy technologies into local communities and businesses. Scaling up solar and other renewables requires significant investment into energy infrastructure.
As the IEA has said, meeting global carbon reduction goals requires more than $3.5trn in capital investment every year to reach net-zero emissions by 2050. So, whilst governmental support is important, private capital will be essential to investing in economically attractive businesses and technologies that potentially support the global energy transition when the public debt and equity markets are not sufficient.
Last year, Blackstone announced the acquisition of a significant ownership position in Esdec, a privately held, Netherlands-based leading global manufacturer of mounting systems for rooftop solar installations. Esdec’s focus on helping solar power scale means there is significant growth potential in the business.
As the largest owner of commercial real estate globally and, combined with our existing investments in the rooftop solar industry, we believe that Esdec will be able to offer access to reliable, inexpensive rooftop solar solutions for other businesses that Blackstone invests in, simultaneously creating opportunities to generate value for Esdec and our investors.
Outside of Europe, Blackstone is bringing together two of its portfolio companies – Link Logistics and Altus Power – to transform empty warehouse rooftops across New Jersey into community solar projects.
By championing renewable energy, we saw a chance to create value by acting as a convener, bringing together portfolio companies in different industries to form an innovative partnership that contributes to advancing the state’s renewable power plans and removing nearly 30,000 tonnes of carbon dioxide from the atmosphere each year.
We believe renewable energy will be crucial over the next 30 years. We see the opportunity to invest an estimated $100bn over the next decade in the businesses and technologies that support the global energy transition and climate change solutions projects across our businesses, and we believe renewable energy will be an important part of this opportunity to drive value.
The potential is enormous, and it can be met with the right investment, innovation, and partnerships.
Juergen Pinker is senior managing director in Blackstone’s Private Equity Group