At a Glance
Welcome to the latest edition of our Energy Insights – Energy Financial Services quarterly update. For this issue, Aurex Group had the pleasure of having a virtual discussion with AlphaStruxure, a Carlyle Group and Schneider Electric joint-venture, on the fast-growing energy infrastructure and Energy as a Service (EaaS) microgrid sector.
Juan Macias, CEO of AlphaStruxure, discusses a series of topics related to market trends, sector investment, and the future of the industry. As usual, we will also be highlighting notable market moves from the last quarter.
We hope you enjoy the latest review. For a discussion around recent mandates, compensation, or other hiring trends, please do not hesitate to get in touch.
Q&A with Juan Macias
What is the EaaS microgrid business model, and why is it important?
Energy-intensive and energy-sensitive organizations are facing growing pressures to enhance sustainability, improve resilience, manage energy costs; and often prefer to keep resources and mindshare focused on their core mission.
In the past, there have been limited options available to meet long-term energy and sustainability goals. These have included the local utilities, off-site PPAs, a traditional Energy Services Company, or taking on complex, capital-intensive and often piecemeal deployment of distributed energy resources. By contrast, EaaS brings together energy and financial offerings into an integrated solution, delivering specified outcomes for energy cost optimization, sustainability, reliability and resilience.
To make that happen, the EaaS partner designs, builds, finances, owns, and operates on-site energy infrastructure – usually in the form of a microgrid – with the client signing a long-term o take agreement. That way, a client avoids the large upfront capital outlay required for the energy infrastructure and eliminates the complexity and risk of building and managing the system. Instead, the client leverages the capabilities of the EaaS partner, continues to pay OpEx for energy services as they have in the past, and also receives guaranteed outcomes for cost optimization, resilience, sustainability, and other priorities.
The sector is seeing significant investment as well as the emergence of innovative, newly created ventures. Why was AlphaStruxture formed and why now?
The Carlyle Group and Schneider Electric created AlphaStruxure to be the trusted partner in energy transformation. To do EaaS successfully requires major energy and financial capabilities, and AlphaStruxure aligns those elements within one organization. Schneider is a global leader in sustainability, energy management, automation and microgrids, and Carlyle is one of the largest and most diversified investors with a major emphasis on infrastructure and energy. There is no one company in the market today that has both the in-house energy capabilities and the in-house financial capabilities – that’s why a joint venture makes sense in this space. We are at an infection point in the global energy transition. The pressures of energy cost, sustainability and climate resilience are coming to a head. At the same time, the cost declines for distributed energy solutions are dramatic – the cost of solar PV and batteries have dropped 90 percent in the past decade. These drivers are spurring dramatic growth in the adoption of EaaS and make the timing right to expand the EaaS solution set by bringing Carlyle and Schneider together.
What are the strategic advantages of The Carlyle Group and Schneider Electric’s combined capabilities?
As a global leader in behind-the-meter energy hardware and software, Schneider Electric has been deploying microgrids long before the term came into vogue. However, as an industrial manufacturer, Schneider is not built to deploy capital into infrastructure projects directly. That is where Carlyle comes in. Globally, Carlyle has over US$230 billion in assets managed by a team of 3,500 investment professionals, and Carlyle’s Real Assets segment has over US$40 billion in assets under management, with a diversity of investments across real estate, infrastructure and energy. AlphaStruxure augments these global strengths with dedicated teams for development, design, finance, execution and operation.
How is the industry adapting to anticipated challenges? For example, regulatory uncertainty, educating stakeholders and disarming concerns over risk, COVID/power consumption, and cybersecurity risks around critical infrastructure such as power and distribution.
Regulatory uncertainty: At the state level, the past few years have seen a dramatic proliferation of clean energy standards, economy-wide greenhouse gas reduction targets, ‘clean peak’ standards, and a broad range of other sustainability policies. As more policies emerge, they are uniformly pulling toward sustainability, accelerating timelines, and enhancing ambition. More and more states are also making climate resilience a priority. While there are uncertainties and complexities in meeting these targets, the overall trajectory is sound – and though the pace has arguably slowed by COVID, the tide is not being turned back.
Educating stakeholders and disarming concerns over risk: The EaaS model only works when the EaaS solution provider is trusted, credible, and has the staying power to stand behind the system for the long-term. AlphaStruxure was formed to deliver the trust and staying power of Schneider Electric and The Carlyle Group to back its EaaS projects. AlphaStruxure uses a technology-agnostic “Art of the Possible” approach to map out the best method to achieve stakeholder goals of cost optimization, sustainability and resilience.
COVID/power consumption: There’s no question that the effects of COVID have been felt unequally. While there has been an aggregate reduction in power consumption in many geographies and segments, there has also been an acceleration of digital infrastructure, a focus on securing food supply chains, a dramatic acceleration of eCommerce and intra logistics. Other key aspects of the energy transition have been resilient to the effects of COVID – including the march toward vehicle electrification.
Cybersecurity risks around critical infrastructure such as power and distribution: Despite the steady news of major ongoing cyber attacks, many organizations still lack basic visibility and protection of their energy infrastructure and operational integrity. That means a holistic cybersecurity strategy is not just a technology issue, but rather an urgent business imperative. Leveraging Schneider Electric’s capabilities, AlphaStruxure applies rigorous cybersecurity mindset, policies and methodologies in the development of our EaaS solutions, identifying threats and protecting the end-to-end ecosystem.
What opportunities do you see over the next few years for EaaS and microgrids?
We are currently seeing a confluence of massive long-term trends: decarbonization, climate resilience, an increasingly digitized economy, and a sea change toward electrification of vehicles and other end uses. The breadth of opportunity is dramatic: data centers, electric vehicle fleets, food production, commercial buildings, healthcare, municipalities, advanced industry and manufacturing, and infrastructure projects all have growing energy and sustainability pressures that can be addressed with EaaS. In terms of technologies, there are a lot of exciting developments in long-duration storage and increasingly sophisticated Distributed Energy Resources Management Systems (DERMS) controls. Deployment, however, will always be driven by solving for those tangible pain points of energy cost, sustainability and resilience for clients.
Recently Completed Mandates
Managing Director, Turnaround & Restructuring
Associate, Battery Storage Development
Director, M&A Transactions Services
Notable Market Moves