The Sustainable Economy
Big Bad Bank discovers "compelling" case for Renewable Energy
by Giles Parkinson
Ed: GS is the epitome of selfish capitalism. We take their 'good intentions' with plenty of salt. A $40B bet still tells us Renewables could take the fossil fuel out of capitalism. Because they're bankable.
Investment banking giant Goldman Sachs (GS) has declared the renewable energy sector to be one of the most compelling and attractive markets – and is backing up its talk with $US40 billion of made and planned investments. It is not the first big bank to talk up the renewable energy sector or “sustainable” investments, but it is one of the first to put real money behind it.
In 2012, the bank made a commitment to invest $US40 billion in renewable energy, and it has made a number of large equity investments, over and above the normal advisory and fund-raising work that is the usual bread and butter revenue for investment banks. Stuart Bernstein, who heads the bank’s clean-technology and renewables investment banking group, states in a recent interview:
“Goldman Sachs finds this market incredibly compelling. It is at a transformational moment in time.”
Bernstein said the bank is taking a decades-long view and is convinced that renewable energy will be an important component of global GDP growth. He dismissed suggestions that it was part of a PR campaign – such as BP’s infamous “Beyond Petroleum” pitch of a decade ago where it appeared to spend more in marketing than it did in new technologies.
“It will be important from a societal perspective, and it will be good business for us and our clients…We want to be extraordinarily focused, involved and have the best franchise in the area. That’s how we think about it.”
Among GS’s key investments are a recently-approved $1.5 billion investment for a near 20 per cent stake in Danish offshore wind energy developer Dong Energy.
It has a substantial investment in BrightSource Energy, which is about to bring its huge Ivanpah solar power project into full production – it will be the largest in the world.
GS provided $500 million of finance to SolarCity, to allow the biggest solar installer in the US to expand its solar leasing business.
It has also been an early investor in First Solar, the largest solar PV manufacturer in the US, SunEdison, and made big money from the sale of Horizon Wind Energy to Portugal’s EDP for $2.15 billion in 2007.
GS’s commitment of $40 billion is based around a number of assumptions – that costs will continue to decline as efficiency improves, that solar and wind will reach grid parity without subsidies in the not-too-distant future, and that energy storage issues will also be solved.
It also believes that the position of coal at the top of the global fuel mix is eroding – something that it highlighted in a recent report that said the window for thermal coal was closing rapidly:
“Thermal coal’s current position atop the fuel mix for global power generation will be gradually eroded by the following structural trends: 1) environmental regulations that discourage coal-fired generation, 2) strong competition from gas and renewable energy and 3) improvements in energy efficiency.”
Much of GS’s’ investments will be focused on the emerging economies of Brazil, China, India and Mexico —along with developed economies such as Japan and South Korea that have made a large commitment to renewables, and are reliant on expensive fossil fuel imports.
In Japan, GS has established a new independent power producer called Japan Renewable Energy— to develop, build and operate solar, wind and other renewables projects. It is backed by the bank’s $3.1 billion GS Infrastructure Partners II fund (GSIP). It has already committed to a 250MW solar project in Okayama.
GS paid more than $3400 million for a majority stake in an Indian wind energy business called Renew Wind Power, which plans to build 1GW of facilities within two years. Another investment is in the FloDesign Wind Turbine, developed by a U.S.start-up as a high-efficiency shrouded wind turbine.
Bernstein also heads GS’s venture-capital group, which has a key office in California’s Silicon Valley and is focusing on late-stage venture companies. It is using its convening power to host conferences and forums for sector stakeholders.
◊ Giles Parkinson is the founding editor of RenewEconomy.com.au, which provides news & analysis on cleantech, carbon, & climate issues. Publ. here 11.2.2014