EQT Group Acquires Scale Microgrids, Showing Faith In US DER Growth
EQT Group Acquires Scale Microgrids, Showing Faith In US DER Growth
Early in January, EQT Group announced that it would acquire Scale Microgrids, a US firm specializing in services for microgrids and distributed energy resources (DERs). The move reflects an investment thesis that the energy transition will not flag in the US market, despite political headwinds.
The acquisition comes at a pivotal moment for the electricity market, which is undergoing a process of decentralization in which DERs will play a more prominent role. DERs provide grid stability, energy security and decarbonization, as electricity demand spikes due to the electrification of the commercial, industrial and transport sectors. Distribution operator Scottish Power predicts a five-fold increase in DERs connected to its networks by 2035, and various business insights foresee a 232% growth in the microgrid market.
Thus, EQT’s strategic move anticipates significant market potential for DERs and microgrids – and the firm views Scale as its entry into the distributed energy future. With eight years of experience in delivering distributed energy solutions, Scale Microgrids is expanding its portfolio to encompass community solar and battery storage projects. Recently, it secured its largest tax equity investment deal to date, with Truist Bank.
Stockholm-based EQT manages assets valued at €246 billion, including private equity, infrastructure, real estate, growth equity and venture capital. With a track record of climate-related investments, the group recently launched a strategy to invest in and scale businesses that promote a low-carbon and circular economy and enhance clean energy and resource efficiency across various sectors. Scale Microgrids is the first North American investment under this strategy – and the second overall – after the acquisition of ju:niz Energy, a German developer of utility-scale battery storage, at the end of 2024.
Scale Microgrids designs, builds, finances, owns and operates microgrids and distributed energy assets across North America. It has 250MW of projects either operational or under construction and a pipeline of an additional 2.5GW of distributed and community energy projects. Its energy as a service (EaaS) financing of projects through microgrid service agreements, and little or no upfront investment, aligns well with the long tail of mid-market and small and medium-sized enterprise (SME) manufacturers across North America looking to ensure resilient and efficient energy supplies. Another EaaS provider, Redaptive, recently secured a $100 million equity investment from the Canada Pension Plan Investment Board.
The acquisition of Scale Microgrids gives EQT Group a toehold in the US energy market and Scale a backer with experience in growing technology businesses. EQT’s move is also bold, considering the uncertainty around climate policy after the latest US election. However, despite the short-term challenges that this may pose, the long-term trend towards DERs remains strong: DERs will play a critical role in the energy transition and in maintaining grid stability and security within an increasingly complex electricity market. The partnership also exemplifies how collaborations amongst investors, utilities and technology developers will shape this evolving industry.
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