We asked Blackstone's Chief Sustainability Officer Don Anderson about our newly deployed solar program. Here is what he had to say.
1. Why put resources behind developing a solar program?
Many Blackstone portfolio companies are interested in solar as both a cost saving and environmentally responsible solution. And in much of the US, the combination of high electricity rates and incentives to move to renewable sources make it a viable and effective option.
Market factors led us to believe that we could come up with a scalable program to implement across our portfolio of companies. Solar installation, typically implemented on a site-by-site basis, results in multiple contracts with too many providers. It also introduces risk and eats up time that could be better spent on core business needs. We believe that implementation across multiple sites within a company provides the best value and path to savings for our portfolio companies.
Blackstone’s Portfolio Operations Group has been very successful in helping the companies we own on behalf of our investors procure products and services at scale, which improves pricing and quality while reducing duplicative effort. 95% of our portfolio companies participate in our program across more than 60 categories of products and services. We are now reaching hundreds of millions in savings, so we know how to apply this approach to new challenges, and solar is a perfect target as our effort becomes more sophisticated.
Our solar program allows companies to work with a carefully selected, established developer to assess and pursue projects across all of sites at once rather than on a site-by-site basis. The developer has the ability to cluster sites, making it faster and easier to capture incentives and obtain project approval and reduce costs over the life of the system. Our approach has the potential to achieve approximately 10% reduction in energy costs and improve environmental performance at as many sites as possible.
2. What was the response from portfolio companies? Do you expect more portfolio companies to sign on?
We are working with six Blackstone companies with the most obvious opportunities –multiple sites with large and accessible roofs in areas with incentives and expensive electricity. Installation of systems is free of charge to our portfolio companies, which has made it as easy as possible for them to sign on. The systems will be owned, operated, and maintained by third-party investors, minimizing operational and economic barriers. As a result, we expect interest to grow, particularly as we generate cost savings.
3. This is a program that was developed across Blackstone’s business units and which reaches a wide portfolio of companies that Blackstone owns on behalf of its investors. To what extent will that factor into making this program successful and replicable?
We have modeled this program on other successful group purchasing programs that are helping current and former Blackstone portfolio companies achieve economies of scale and become more efficient. This is consistent with Blackstone’s history of supporting sustainability and improved energy performance through a coordinated approach shared by Private Equity and Real Estate. Sharing best practices and best in class providers makes sense and helps all of our portfolio companies move faster to achieve optimum benefits. In the case of our new solar program, we can achieve the more compelling results if the program is open to all of our companies.