Onsite solar energy production and the development of battery storage and electric vehicle charging systems at warehouses and other logistics locations could generate attractive returns, especially as the US government channels more federal funding towards renewables, NorthBridge Partners’ Greg Lauze told PE Hub.
Lauze is NorthBridge Partners’ co-founder and managing partner. His Wakefield, Massachusetts-based private equity firm primarily invests through value-add funds seeking to buy, reposition and develop last-mile warehouses.
The firm on Wednesday announced the launch of NetZero Logistics Inc through a joint venture with Green Bridge Energy, a Raleigh, North Carolina-based provider of clean energy infrastructure in the commercial and industrial sectors.
“In general, we target a 16 [percent] to 18 percent gross IRR that is in line with our fund’s targeted returns,” Lauze said of the venture.
NetZero Logistics was formed to integrate solar, EV charging, battery storage and other related technologies that boost clean energy use by logistics real estate assets.
“These are very financially attractive deals,” Lauze said about renewables in the logistics sector. “They happen to add to net-zero goals and objectives, but they stand up on their own in terms of really attractive returns in this environment.”
The logistics sector has been slower to adopt renewable energy than other areas. But recent events could spur the sector on.
Two pieces of legislation, the Bipartisan Infrastructure Law, signed last year, and the Inflation Reduction Act, signed in August, provide funding and tax incentives for renewable energy infrastructure. For instance, the Bipartisan Infrastructure Law also provides $7.5 billion to build a national EV charging network.
“We will be able to tap into a lot of those tax credits and subsidies,” said Lauze.
Some of NorthBridge’s tenants are now asking for renewable energy infrastructure – something that was not happening just five years ago, said Lauze. Onsite solar energy generation will help logistics companies save money.
“We could sell the power directly to those users on site as opposed to just taking it back to the grid at large,” he said, referring to a trend where third parties rent warehouse rooftops to generate solar energy but then sell that electricity to the grid.
Keep on trucking
Truck operators within the logistics sector are adding more electrified vehicles to their fleet. One example is the United States Postal Services (USPS), which announced last month that at least 40 percent of the delivery vehicles that it buys will be electric.
“We are positioning in a way where adoption might be a little bit slower, but we are making a 10- to 15-year sort of secular bet that as EVs increase, site-specific infrastructures may become more critical,” said Lauze.
Placing EV charging systems in warehouses and other logistics facilities will be convenient for fleet operators, said Lauze.
“We want to take our deal with Green Bridge to the next step where we can offer our tenants EV charging infrastructure on site,” he said. “We can be capital providers and they can pay rent, essentially, to lease and use that infrastructure.”
The capacity to harness three forms of renewable energy – solar, EV charging and battery storage systems – at one site is unique, said Lauze. “Our view is that each one of these projects is pretty granular in nature, at the asset level, and that’s where we have competitive advantage,” he said.