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GreenStruxure gets $500M to grow distributed-energy-as-a-service’ to gigawatt scale

Blackstone’s ClearGen puts its money behind commercial-building solar, batteries and energy systems controlled from the cloud.
By Jeff St. John

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Jose Lorenzo, CEO of GreenStruxure, thinks that on-site solar PV and batteries, plus the occasional generator or combined-heat-and-power system, can give commercial buildings across the United States cheaper, cleaner and more reliable energy — particularly if they can be deployed at no cost to the building owners in question.

He also thinks those projects can yield even greater returns for investors than utility-scale renewables — as long as they’re carefully operated and maintained over their lifetime via GreenStruxure’s cloud computing control platform.

This is going to be a multibillion-dollar market soon,” he said. It is solar, storage, [power purchase agreements] and energy services, all combined.”

On Tuesday, GreenStruxure — a joint venture of global electric equipment giant Schneider Electric and sustainable energy private equity investor Huck Capital — landed its first publicly disclosed investor for this proposition, with a $500 million commitment from ClearGen, a subsidiary of private equity giant Blackstone.

That’s enough capital for GreenStruxure to build about 250 to 300 megawatts’ worth of projects, or about two to three years of its current pipeline, Lorenzo estimated. (The joint venture has also received an undisclosed amount of capital from Inclusive Capital Partners’ Spring Fund.)

Its focus is on 500-kilowatt to 5-megawatt projects for the medium-size commercial market. This has been a harder market for solar and batteries to crack than larger-scale corporate or utility projects on one hand, and mass-market residential solar-battery systems on the other.

That’s because it’s much harder to standardize project design and financing for a diverse mix of mid-sized businesses, industry analysts agree. Solar and battery costs may be falling, but the soft costs and uncertainties of identifying, installing and operating on-site systems remain challenging.

Even when installed, the cheaper energy they produce is only part of the equation. Controlling peak grid demands, and thus the demand charges that can make up a significant portion of commercial utility bills, is another key step. That requires minute-to-minute coordination of batteries and electricity loads, something most mid-sized businesses lack the technology and time to manage.

A cloud platform to standardize the midsize commercial market

That’s where GreenStruxure’s cloud-based control platform comes in, Lorenzo said. Built on Schneider Electric’s on-site energy system management expertise, it will balance on-site generation, storage and loads to cut demand charges and reduce reliance on grid power when electricity costs are higher, he said.

It will also monitor those assets over time to catch degrading performance or equipment failures that could wreck their payback, with a round-the-clock network operations center to respond remotely or dispatch maintenance crews to fix problems.

That’s a much simpler customer proposition than asking building owners to integrate and manage separate systems on their own. But it’s also central to GreenStruxure’s business model of building projects that it sells to investors like ClearGen.

Delivering contracted cash flows is what makes it possible to deploy capital behind the meter,” he said. The customer is committing to buy the energy we produce. Ninety percent of the value is paid on contracted cash flows,” with GreenStruxure taking a cut to pay off its installation and construction costs.

There’s also opportunity for GreenStruxure and the investors that take ownership of its projects to share revenues for grid services, such as demand response or wholesale energy market participation, he noted.

We believe the need for grid flexibility will be growing,” he said, particularly as Federal Energy Regulatory Commission Order 2222 requires the country’s interstate grid operators to open their wholesale energy markets to distributed energy resources. But those markets are volatile,” and aren’t vital to its business model, as they are for demand response or virtual power plant aggregators.

A standardized approach also allows GreenStruxure to simplify the commercial relationship with its customers. It looks very similar to the utility bill,” he said. You have an energy term, and a demand term, which we manage with the batteries. IF a customer wants to buy the voluntary RECs” — the renewable energy certificates to meet corporate sustainability goals — we manage that as another part of the PPA.”

Adding combined-heat-and-power systems or generators can add backup power to the list of billable items for customers interested in resiliency against power outages. But Lorenzo highlighted that GreenStruxure isn’t building its offering around backup generators, as is the case for modular microgrid offerings from providers like Enchanted Rock and Scale Microgrid Solutions.

A more typical GreenStruxure project will replace about half of a customer’s utility demand, based largely on how much room there is on-site for solar PV, he said. We see our contracts as an alternative source of energy for the customer. The systems are always grid-connected.”

The competitive landscape for distributed-energy-as-a-service

GreenStruxure faces a rising number of competitors in the no-money-down, distributed-energy-as-a-service space, each with slightly different approaches to the market. Siemens and private equity firm Macquarie Capital formed a joint venture last year called Calibrant Energy that is targeting similar commercial distributed energy opportunities.

LS Power, a developer of power plants, renewable energy projects, battery farms and transmission infrastructure, is planning to invest in microgrid and distributed energy projects built by GI Energy, the developer it bought and rebranded as Endurant Energy earlier this month. And Schneider Electric has formed another joint venture with private equity giant Carlyle Group, dubbed AlphaStruxure, that goes after larger-scale microgrid projects.

GreenStruxure’s approach of managing the design, installation and operations of its systems and passing investment and ownership to other parties does differentiate it from some of similar offerings in the market that combine both from the same party, Lorenzo noted. That could yield greater efficiencies from each party involved specializing in what they do best — although it’s also taken quite a bit of work to standardize the structures involved.

Schneider and Huck started working on GreenStruxure about two years ago and officially launched the joint venture in August 2020. It hasn’t yet publicly announced a project, although Lorenzo said it expects the first projects to close in this quarter. The company is also working with microgrid developer Instant On to identify projects in wildfire and blackout-prone California, as well as with commercial energy advisory firm TruEnergy to seek out potential customers across North America.

California and the U.S. Northeast are its earliest target markets, based on the price of electricity and aggressive state decarbonization goals. But depending on the value of the outcomes of some customers, we will go to other geographies,” he said. We’re thinking about Texas as a tier-two market, for obvious reasons” — namely, the state’s weeklong blackouts this February.

Eventually, the company’s target will be to reach about 35 percent of the market,” or about 350 gigawatts of total power demand, he said. That’s a seemingly massive estimate of future market potential, but it lines up with other predictions of massive growth of distributed energy over the coming years, from rooftop solar and batteries to electric vehicle chargers and electric-powered heating systems.

We see that the market is ready because the total cost of ownership of these kinds of technologies behind the meter is very competitive. We can operate at scale with our cloud platform,” he said. And we see a big drive, much larger than we saw when we launched this two years ago, in terms of sustainability.”

At the same time, energy as a service is a new concept,” he said, and it requires a commitment to decades-long contracts. GreenStruxure’s target customers are likely to remain those with the highest energy costs and demands and those with very ambitious sustainability goals.”

The fact that the service comes with no up-front cost and no burden on operations should expand adoption over time, however, particularly for customers seeking ways to reduce the cost of installing EV chargers and switching from fossil-fueled to electric-powered heating, he said. We believe the barriers will be lower and lower, as soon as the market knows more about this option.”

(Article image courtesy of GreenStruxure)

Jeff St. John is director of news and special projects at Canary Media. He covers innovative grid technologies, rooftop solar and batteries, clean hydrogen, EV charging and more.