That’s right, Goldman Sachs is betting on renewables for the long haul and they say it will be good business for them and their clients.
Big Banks Betting on Solar
In the last two years, solar has seen a surge in interest from investment banks.
In 2012, Morgan Stanley backed a $300 million fund to finance residential solar in California and Arizona with Clean Power Finance.
In 2012, Bank of America Merrill Lynch helped Solar City finance a five-year plan to build more than$1 billion in solar power projects for U.S. military housing communities across the country.
Last year, Sunrun financed $630 million worth of residential solar projects thanks to backing from JP Morgan and US Bank. Sunrun called the uninterrupted stream of capital from the banks vital to putting new residential solar systems in place.
Already this year, SunPower announced a new program with Bank of America Merrill Lynch that will provide financing for $220 million of residential solar lease projects. BofA says this investment is consistent with their “overall 10-year, $50 billion environmental business initiative to help address climate change, reduce demands on natural resources and advance lower-carbon economic solutions.” So Goldman Sachs isn’t the only bank putting their money into clean energy in a big way.
And, we have Goldman Sachs. Not only do they currently have a stake in the world’s largest solar thermal plant in California’s Mojave Desert but they have also invested in First Solar (the largest solar PV manufacturer in the US), SunEdison, and Solar City. Specifically, Goldman Sachs is financing$500 million in leases for Solar City’s customers and some are viewing this as a big bet on distributed solar power as the leader in the solar race.
Is All Solar Created Equal?
It’s tough to write about investment banks and solar financing without taking notice of their stock projections. That’s partly what makes this space so interesting after all.
I am in no way advocating positions in any of the following solar stocks, I simply think it’s worth noting the dual roles of investment banks.
On the one hand, we have the biggest investment institutions in the world helping to finance the growing solar industry and looking to make a return on investment while doing so. And on the other hand, we have the same institutions rating solar stocks and making projections about their future stock prices. Does anyone see a potential conflict of interest? Not that this is somehow unique to the solar market.
At the start of the year, Goldman Sachs upgraded SolarCity (SCTY) from “Neutral” to “Buy” — increasing the stock’s price target to $80 a share, from $65. They rate SunEdison (SUNE) a “Buy” with a raised price target of $18, from $15 a share.
Goldman clearly has a strong belief in the growing residential solar lease and distributed generation market (as compared to the utility-scale market which First Solar relies on for revenue). Goldman also has a large stake in the leading residential solar leasing company, but I suppose chicken or egg, I am happy as long as solar wins in the end.
Goldman Getting Green
In addition to their increasing presence in the solar sector, Goldman Sachs has recently approved a$1.5 billion investment for a 19 percent stake in Dong Energy, the largest Danish energy company and an offshore wind energy developer. And they have invested more than $380 million for a majority stake in Renew Wind Power, an Indian wind energy business — likely the largest investment by a private-equity firm in India’s renewable-energy sector.
Whether it is their belief in a looming environmental bubble that poses risks to conventional fossil fuel investments, or the knowledge that renewable energy is becoming cost competitive and profitable, the largest investment banks in the world are making increasingly clear their intention to invest big money in renewable energy.
We have yet to see exactly where the remaining billions of dollars will be invested, and if it will be anywhere near enough to meet the ever-increasing demand for clean energy.
Will Quinn is an environmental consultant with ICF International and his opinions are his own. He holds a B.S. in Environmental Policy Analysis and Planning from UC Davis, is the Blog Editor for the solar financing marketplace Mosaic, and is passionate about practical solutions to environmental problems. He believes people take action when personal benefits outweigh the barriers. And an impact investment that allows millions of people to go solar from their computers just makes sense. He is excited to be part of the solar crowd and hopes you are too.
Disclaimer: Any opinions expressed herein by persons not affiliated with Mosaic reflect the judgment of the author and not necessarily that of Mosaic. Nothing herein shall constitute or be construed as an offering of securities, or as investment advice or recommendations by Mosaic. Mosaic’s investments are limited to investors who meet applicable suitability standards based on income, net assets and state of residence. Please click here to learn more.
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