Private Equity and Renewable Energy

The world is rapidly moving in the direction of clean renewable energy solutions, thanks to their burgeoning potential to help mitigate the worst effects of climate change – and their ability to enable a better future overall for our planet.

Perhaps surprisingly, private equity firms are a huge driver of this trend, whether via investments in solar, wind, biomass, or some other type of renewable energy. These companies recognize not only the social, humanitarian benefit but the economic benefit of renewables: low-cost power, reduced dependence on imported fuel, and more secure, reliable energy supply.

The numbers bear out this trend. According to S&P Global Market Intelligence data, private equity and venture capital transactions in the global renewable energy sector reached nearly US$15 billion in 2023, the highest total in the last five years. More so, funds raised in recent years are approaching 25 times the value of fossil fuel asset fundraising, per The Impact Investor.

However, there are challenges inherent in this tectonic shift. With broader strategic change in how we produce and consume energy comes more narrow change – and difficulties – in areas like engineering, manufacturing, procurement, supply chain management, human resources, and finance. These areas make it hard for private equity investors to easily operate and scale businesses, highlighting the present need and opportunity for scalable, cost-effective solutions that truly support the renewable space’s growth and future success.

With Great Power…

A crucial element of today’s state of play in the renewables space is the rapid acceleration in load growth made manifest by today’s technology advancements. Whether it be ChatGPT, Bitcoin, or some other artificial intelligence- or machine learning-related innovation, our tools are requiring more energy production and consumption than ever.

That means there is expansive economic benefit to finding cheaper, faster, less energy-consuming ways to run these tools and solutions – not to mention widespread social benefit.

Companies across the industry are already embracing SAP solutions to use less energy, improve business operations, and meet sustainability goals. One global market leader in energy storage solutions and services recently selected SAP to help it scale faster, improve supply chain visibility, and boost overall efficiency. Another business – an established provider and owner of clean energy solutions nationwide for commercial and industrial businesses – chose SAP to help amplify its growth efforts via the acceleration of its ability to both scale and innovate in the energy space.

By iterating and streamlining processes to meet modern needs, companies like these can not only equip themselves for success today but for success tomorrow, as they grow and change alongside the evolving and progressing energy transition.

…Comes Great Capability

In our current industry moment, renewable energy companies demand unparalleled visibility and insights into financing, projects, operations, and more. Whether it be land acquisition, asset construction, or maintenance, a centralized data model that facilitates intelligent business insights is vital. It’s how you empower everyone in the organization to make informed decisions that drive the company forward.

Take supply chain management. Renewable energy companies can’t just order new parts or materials with a short delivery time. Some of the materials necessary for renewable energy products, like graphite, have order lead times spanning years rather than months. Top technology solutions will meet engineering requirements for things like storage, transportation, and integration of natural resources into the production process so that they can ensure supply chain management goals are met. In short, efficient and effective development and implementation of renewable assets requires careful management of the supply chain.

So, yes, these companies and their private equity backers are innovating toward a cleaner future. But they may not always have the time or resources to fully innovate and advance their business processes, sometimes resorting to manual ones that slow things down and add risk. Companies like SAP can offer a seamless platform for managing these enterprises’ various business needs, in an integrated way that can enable them to focus on their core business and not have to worry about IT risks.

No matter where a renewable company is on their journey, SAP and its partners have solutions that can automate and optimize core business processes to help meet their maximum potential. This is due to elements like:

• Centralized ERP data providing a single source of truth and improved decision-making ability
• Fully managed supply chain procurement and logistics, with deep supplier networks
• Faster ROI thanks to repeatable, trustworthy, and accurate processes empowering business users

These seamless integrations and true end-to-end insights will power renewable companies well into the future, so that they can power us as well.

A Brighter Tomorrow

Leading private equity firms are leading for a reason. They see what’s possible in the renewable energy space and recognize the tremendous economic and social benefits that are available. For them, digital transformation is the skeleton key for unlocking a bigger and better future – one where they can easily scale up or down depending on their needs.

Leading ERP solutions can meet these companies where they are, with the speed and flexibility necessary to streamline business processes and build on them in exponential ways.

For the renewables space, it’s about setting the foundation for whatever comes next – not just for individual companies, but for our world and the way we all consume energy.

Mark Hollis is an industry executive advisor for Renewable Energy & Utilities at SAP.