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There’s Gold(man Sachs) in Them Thar Renewables

By Ralph Kisberg

While the environmental community reacted with disgust to the Administration’s withdrawal from the Paris Climate Agreement earlier this month, the financial industry was busy working on the investment implications of the decision. With former Goldman Sachs executives in top positions at the Treasury Department, the National Economic Council and throughout the administration, it was interesting to see how the investment monster reacted to Trump’s decision.  

Goldman researcher Jaakko Kooroshy proclaimed,

 The US exit from the Paris Agreement is unlikely to change the dynamics of the global low carbon transition …technology —not policy—will drive the shift to a Low Carbon Economy as LEDs, electric vehicles, wind and solar see rapid market share gains on the back of further cost reductions and performance improvement… politics around climate change and the Low Carbon Economy are likely to remain volatile… but we believe that markets and technologies will continue to be the key drivers behind the accelerating low carbon transition.

Goldman has been financing solar and wind farms worldwide for a while. By 2012 they had invested $40 billion in clean energy technologies. In late 2015, they announced a goal of investing a total of $150 billion in solar and wind farms and energy efficiency upgrades for buildings and power grid infrastructure by 2025.  

At the time of the 2015 announcement Goldman told the world ,  

“We are at an inflection point when it comes to the deployment of clean technology and renewables… The global energy market is undergoing significant change – from the development of technologies that are dramatically increasing the energy supply to the emergence of alternative energy sources – creating the potential to reshape economies and industries. “

Perhaps it is fair for an investor to infer from Goldman Sachs’s research that the four technologies of the apocalypse of the fossil fuel industry are: electric vehicles, solar PV, onshore wind and LEDs. “The transition to a Low Carbon Economy is now as much a transformative technology shift as it is a response to environmental challenges… analysts see momentum continuing beyond the U.S. exit from the Paris Agreement.”  

The Administration’s withdrawal “is unlikely to shift dynamics of the low carbon transition. With innovation and markets, rather than solely politics, increasingly driving the use of low carbon technologies, we believe the impact of the US decision on the Low Carbon Economy should not be overstated.”  

While the Administration is busy destroying oversight and regulation of the financial industry – as well as all other industries – Goldman Sachs, perhaps ominously, acknowledges climate issues, concluding that “by themselves, such (emissions) savings would not yet be sufficient to put the world on a ‘2°C’ pathway, in our view.”  

In spite of continued dismissal of the health costs of fossil fuels and the fact that Pennsylvania seems oblivious to the trend, it is becoming increasingly clear that the electrical power industry is indeed headed away from fossil fuels. The energy-efficient, mainly renewable-powered electrical age is the world’s future due to purely financial reasons  

Regardless of who is calling the shots in Washington, it’s only a matter of time before the U.S. fully seizes the opportunity and jumps in with both feet. When that time comes, America may come to see that the rush to natural-gas-powered electricity was nothing more than a very costly time wasting detour with serious negative consequences. In the meantime, there are investment opportunities to be found as the transition gathers momentum.  

And by the way, Goldman: Keep an eye on offshore wind and tidal electric power.    

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