Carlyle Group commits $374M investment in Amp Energy

Global investment firm, The Carlyle Group, made a $374 million commitment to the global energy transition platform Amp Solar Group. Pooja Goyal, Head of Renewable and Sustainable Energy at The Carlyle Group joins Yahoo Finance Live to discuss.

Video Transcript

MYLES UDLAND: All right, we'll go back to "Yahoo Finance Live." It's Infrastructure Week here on "Yahoo Finance-- the Road to Rebuilding America." Yesterday on the program, we talked about bridges and tunnels, good, old-fashioned, big machine construction. Today we're looking more at the renewable energy space, which is what certainly has been one of the biggest stories in markets over the last year, and we continue to see more money and attention flowing into the space.

Joining us now to discuss is Pooja Goyal. She is a partner at the Carlyle Group, the cohead of the infrastructure group over there, cohead of the Carlyle Group Infrastructure Opportunity Fund and head of Renewable and Sustainable Energy. Pooja, great to speak with you this morning.

I'd love to begin by just talking a bit about how you guys are thinking about the current state of the cycle. How early is it-- middle innings, late innings? What needs to be done to kind of really deliver on a lot of the promise right now that investors are seeing within renewables as a broad asset class?

POOJA GOYAL: Yeah, I mean, look. From our perspective, we are squarely in the middle of the energy transition. The energy transition, broadly speaking, is when people talk about renewables going from 7% to 10% of the power generation makes to about 50% of the power generation mixed globally. Even as of 2020 in the United States, renewables, which is primarily wind and solar, actually represented about 20% of the power generation mix. And it is anticipated that over the next 20 to 30 years, you are going to see that number actually double.

So from our perspective at Carlyle at this point in time, investing in the renewables and sustainable energy sector represents a multitrillion dollar opportunity over the next several decades. And we think that the right way to attack that opportunity set is to have a platform that's focused exclusively on deploying capital in the renewables and sustainable energy space.

BRIAN SOZZI: Pooja, given that we don't have the infrastructure bill passed yet in any form, how would you go about building a successful portfolio today for eventually when we do have that bill?

POOJA GOYAL: I think that's a very good question, and it's a question that's become more and more topical just after what we saw happen in November in terms of Democrats taking control of the White House as well as Congress. Look. From my perspective, we've been investing in renewables for the last 15 to 20 years. And so we've kind of seen the roller coaster of investing in renewables where they've been topical because of the amount of government support they may or may not have.

From our perspective the cost to produce electricity using renewables has come down so much over the last 10 to 15 years that renewables today are cost-competitive with conventional forms of energy, even on a subsidy-free basis. And if you look at what's happened in the renewable space right here in the United States over the last three to four years, there has been a significant acceleration of new capital going into renewable energy assets. That is happening irrespective of what the political climate may be.

So from my perspective, when you think about building a portfolio in renewables, you need to build a portfolio that is resilient irrespective of what the political outcome is going to be. And what's happened is that, in renewables, the cost to produce that electron, which ultimately is a commodity, has come down so much that irrespective of what political regime you might be operating under, what regulatory reform you might see, it actually makes sense to invest in renewables from a resiliency perspective as well as an economic perspective.

JULIE HYMAN: Pooja, perhaps nowhere is that better illustrated than a place that I don't think of as being particularly liberal in its politics, and that is the state of Texas where we are seeing right now a deep freeze affecting energy across the spectrum, from wind to natural gas to oil, pipelines as well. What are the lessons that we can learn from what is happening in Texas right now? Although it seems as though the lessons are more grid lessons than perhaps renewable-specific, but I'm curious how you're thinking about that situation.

POOJA GOYAL: Yeah, I mean, look. We're monitoring the situation very closely. If you see what's happening in Texas right now-- and it is a very clear example of how volatile climate patterns can actually impact the resiliency of our power and energy infrastructure. There are actually two factors at play right now in Texas.

On the demand side, you have significant surge in demand. If you think about peak demand in Texas, it typically happens in the middle of the summer. It does not happen at this time of the year. And if you did not have these rolling blackouts in place, you would actually see Texas demand blow through any historical levels.

On the supply side, you've actually seen a significant amount of supply actually go offline. And the reason that's the case is, because of the freezing temperatures, a lot of the thermal generation capacity-- and when I say "thermal," I mean natural gas as well as coal-- has really gone off market and cannot be operated right now. So you have a bit of a double whammy right now where you have a surge in demand and your supply has taken a significant hit. And that is really what is causing the issue right now in Texas.

From our perspective, this just highlights the issue that we need to think about grid resiliency/portfolio construction as we think about various forms of power generation that form your ultimate portfolio going forward. So it's interesting to us. Obviously, we are seeing asset-specific investment opportunities right now, but a lot of these power generation operators are hurting because of contracts that they may have locked themselves into, which could create some interesting investment opportunities. But on a long-term basis, we do expect further regulation so that the markets can prepare for these kind of spikes in demand or impacts on the supply side on a go-forward basis.

JULIE HYMAN: And, Pooja, forgive my ignorance on this point. But when you think about renewables, does smart grid technology also sort of count in that category? Do you have any investments that you have or are thinking about on that front? And how much does that kind of technology have the potential to help with these sorts of situations?

POOJA GOYAL: So smart grid definitely plays a role as you are going to see more renewable generation on the grid. Renewable sources, like wind and solar, tend to be intermittent sources of electricity. So unlike a coal plant or a gas plant, you cannot dispatch the wind or the sun on an as-needed basis. And there is an argument to be made that these intermittent sources of electricity actually make your grid less stable. So I do think that there is a role for smart grids in the absence of significant infrastructure upgrades as it relates to transmission infrastructure.

So we actually think about smart grids on a large utility scale basis as well as on a microgrid basis. We're beginning to see a lot of commercial and industrial customers. These are companies that operate large industrial facilities that are building their own resiliency from a power generation perspective. And so then they will typically have a microgrid around their own operations. And then, obviously, from a transmission management perspective, you both start seeing further investment in digital software as well as hardware where people are focused on transmission resiliency.

Now, the thing I want to say is, as people think about the energy transition, the more renewables you have on the grid, you need to have battery systems. How those battery systems are integrated with your renewable energy projects and how those battery systems are integrated further with your grid, a lot of that will get dictated by some of this technology investment so that it can be done on an automated basis.

MYLES UDLAND: Yeah, Pooja, I have about 30 seconds left. I'm curious. You've been in the renewable space a long time. I'm curious how different the conversations you are having now are versus back in '05 and '06 when this was a little-- that was big oil, right? That was ExxonMobil's biggest company in the world. How different is it today versus even just a decade ago?

POOJA GOYAL: Yeah, I mean, look. Candidly, in the early 2000s, renewables was a very niche sector of the market. It was a bit of a sideshow in the commodity market. I used to joke about it that we investing in renewables used to get excited about 20 to 50 megawatt projects, whereas if you're building a typical coal plant or natural gas facility, it would be about 500 megawatts to a gigawatt.

But the conversation around renewables in the early 2000s was a lot about clean tech, investing in technologies that can harness the wind or solar resources as cheaply as possible. Today the conversation is much more mainstream. I, for example, am deploying capital out of an infrastructure fund. This is not a growth fund. It's not a technology fund. It is out of an infrastructure platform. So the conversation has become much more mainstream.

The other thing I would say is, going into the pandemic last year, I was a little concerned that renewables might take a back seat given what happened during the great financial crisis. If anything, renewables are more front and center as a result of the pandemic today where you are basically saying-- seeing countries actually think about renewables as a job creation strategy coming out of the pandemic. And you are beginning to see a significant amount of leadership, even from the private sector, as they're thinking about resiliency and business planning for a carbon-neutral economy, let's say, 5, 10 years down the road.

MYLES UDLAND: All right, a really interesting conversation. Pooja Goyal is a partner and the head of Renewable and Sustainable Energy at the Carlyle Group. Pooja, it was great to get your thoughts this morning. Thanks so much for joining the show.

POOJA GOYAL: Thank you.