GE and BlackRock, the giant investment firm with trillions in assets under management, have agreed to build a new solar industry powerhouse. Called Distributed Solar Development, the company will design, build, own and operate distributed solar and storage solutions for customers.
The new firm will stand on a bedrock of GE’s solar business launched by GE executive Erik Schiemann in 2012. He launched GE Solar as a nimble startup looking to design and build renewable onsite energy solutions for customers. Today, the business has more than 60 employees — with a collective experience exceeding 3 gigawatts — that have developed more than 125 solar-power sites for customers in industrial, commercial and government sectors. GE will retain 20% of the business; BlackRock takes an 80% stake.
The BlackRock deal is intended to put Distributed Solar Development, or DSD, in a good position to build on the demand for new distributed solar generating capacity. Indeed, DSD has ambitious growth targets. Currently, it builds about 100 megawatts of on-site solar projects each year; in five years, it hopes to quadruple that project pipeline. “
BlackRock Real Assets will supercharge this development expertise with capital. The firm, which manages $6 trillion in assets, operates one of the largest renewable power equity investment platforms in the world with $5 billion invested in over 250 solar and wind projects across the globe, with a total generation capacity of over 5.2 GW. “This investment will deepen our clients’ access to the tremendous growth potential in the U.S. solar industry,” says David Giordano, global head of renewable power at BlackRock. “DSD offers end-to-end in-house capabilities and a strong team of experts from across the commercial and industrial value chain. We look forward to working with the DSD team to capitalize on the development opportunities presented by the growing interest in renewable energy on behalf of our clients.”
Operating as a standalone company will also streamline DSD’s operations. “Separating ourselves from GE in this fashion means I can now do things more simply, with lower costs of capital, lower transaction costs, [greater] speed to execution and kind of that one-throat-to-choke from our customers’ perspective,” Schiemann says.
When DSD got started seven years ago, the market for on-site solar power plants was served mainly by local solar firms that sometimes promised more than they could deliver. The prevailing business model was centered on building installations that customers would finance and own. The idea behind DSD was to lower the relatively high barrier to entry. By bringing GE’s resources to bear, DSD sought to provide consistent, high-quality soup-to-nuts service that would make solar a slam-dunk decision.
DSD would not only build and operate solar installations for its customers, but also finance them and retain ownership, and early success provided proof of this concept. Schiemann recalls getting wind of a paper manufacturer, just north of New York City, that was looking to supplement its energy supply with on-site solar energy. “First we focused on whether we could build an on-site solar field for them. Then we went ahead and figured out how to do it (as a business).”
Once the deal went through, employees at competing energy development firms began to reach out to Schiemann to see what GE was up to. “People in the market started to say, ‘Wow, you might be on to something,’” he says.
From the beginning, DSD was not a standard GE venture. It offered to put together optimal solutions for its customers even if that meant using products not manufactured by GE. It had no factories or big service contracts. Some executives saw distributed solar power as a threat to the traditional power business, which has been based on a hub-and-spoke model of energy transmission ever since GE and its customers pioneered it a century ago. “There was a lot of debate about what I was doing,” says Schiemann. “I argued that if we don’t try to disrupt our own business, someone else will.”
He got it right. Schiemann’s customers, in the end, wanted the benefits of having a power source on-site, tailored to their needs, requiring no large capital outlay. When Home Depot agreed to allow DSD to build more than 10 megawatts of solar plants on its East Coast stores, the logic of distributed power was well on its way to becoming mainstream. Now it’s conventional wisdom.
Top image credit: Distributed Solar Development