2010 Goldman Sachs Making Up To $1B Investment in Renewable Energy

Goldman Sachs Environmental Policy Framework

In mid- January (see Bloomberg) Goldman Sachs Group Inc. said that shortages will reappear in the crude oil market as supply fails to keep pace with a recovery in demand. Global oil consumption will return to levels seen before the financial crisis by the third quarter of this year, Goldman analyst Jeffrey Currie said in a presentation in London.  At the same time, projects to bring new oil to consumers are still lagging as a result of the credit crunch, he said. By 2011, the market is back to capacity constraints…The financial crisis created a collapse in company returns which has significantly interrupted the investment phase.”

Goldman Sachs is aggressively seeking market making opportunities in environmental markets. The policy framework that they have laid out explains both their investment strategy and an underlying commitment to protect the environment and indigenous populations. Their specific interests in wind, water, solar, alternative biofuels and sustainable forestry related products are detailed below along with references to existing partnerships and hints of future commitments.

Goldman Sachs “seeks to make a significant positive contribution to climate change, sustainable forestry and ecosystem services through market-based solutions.”

In their own words-  Goldman Sachs’ core competencies include

• Identifying market opportunities,
• Creating efficient market structures,
• Providing liquidity
• Investing capital.

Goldman Sachs will aggressively seek market making and investment opportunities in the environmental markets described below.

• Emissions trading (CO2, SO2),
• Weather derivatives,
• Renewable energy credits, and
• Other climate related commodities

These are Goldman Sachs’ stated objectives:

1. They intend to be  a leading U.S. wind energy developer and generator through their recently acquired subsidiary, Horizon Wind Energy (f.k.a. Zilkha Renewable Energy).
2. They will make available up to $1 billion to invest in renewable energy and energy efficiency projects.
3. They will evaluate opportunities and, where appropriate, encourage the development of and participate in markets for water, biodiversity, forest management, forest-based ecosystems, and other ecosystem features and services.
4. They will continue to devise investment structures for renewable energy and invest alongside our energy clients, such as our wind energy partnership with Shell Wind Energy and our solar energy fund with BP Solar.
5. They will explore investment opportunities in renewable and/or cleaner burning alternative fuels such as renewable diesel (such as our investment in Changing World Technologies), ethanol and biomass.
6. They will seek to make investments in, and create financing structures to assist in the development and commercialization of, other environmentally friendly technologies.

Equator Principles

The Equator Principles serve as a framework for determining, assessing, and managing environmental and social risk in project financing, based on the policies of the World Bank and its private sector arm, the International Finance Corporation. Goldman Sachs will seek to apply the general guidelines to debt and equity underwriting transactions, to the initiation of loans and to investment banking advisory assignments where the use of proceeds is specified to be used for potentially

Goldman Sachs says that they will not knowingly finance

• Any project or initiate loans where the specified use of proceeds would significantly convert or degrade a critical natural habitat.
• Extractive projects or commercial logging in World Heritage sites.ii
• Companies or projects that collude with or are knowingly engaged in illegal logging
• Projects that contravene any relevant international environmental agreement which has been enacted into the law of, or otherwise has the force of law in, the country in which the project is located.

Goldman Sachs prefers to

• Only finance preservation and light, nonextractive use of forest resources for projects in forests whose high conservation values are endangered.iii
• Develop due diligence procedures around key environmental issues for use in evaluating potential financings.
• Protect the highest conservation values in forests with respect to its execution of financings in the logging and forest products industries.
• Use a Forest Stewardship Council or a comparable certification when they finance forestry projects that impact high conservation value forests.
• Examine whether clients process, purchase, or trade wood products from high risk countries and will encourage such clients to have certifiable systems in place to ensure that the wood they process, purchase or trade comes from legal sources.
• Provide training, as appropriate, to our employees on environmental issues and practices.
• Develop training sessions and provide the tools necessary to make informed decisions.
• Finance projects in indigenous areas where free, prior informed consultation results in support of the project by the affected indigenous peoples.

China’s Power Sources & Clean Energy Technologies Are Expanding: Some Companies to Know About

China, the world’s largest polluting nation, is working with international organizations and private industry to develop cleaner energy models to combat climate change and meet demand for power in an economy that expanded 10.7 percent in the fourth quarter 2009.

By 2020, China aims to use 10 million tons of bioethanol and 2 million tons of biodiesel, replacing 10 million tons a year of petroleum-based fuel, Chen Deming, vice chairman of the National Development and Reform Commission, told a news conference.

The companies described here are not meant to be a complete list of Chinese companies engaged in clean energy nor is Bolton Hill Consulting, Ltd. making any specific recommendations with respect to these companies. The descriptions are provided here for information purposes only to help companies unfamiliar with China’s clean energy interests to better understand the rapidly changing landscape and some of the pivotal players in China.

The companies described below are powerful in China or have shown rapid growth. They may be working with American and European companies or they are likely to do so in the near future. These companies are acquiring foreign companies, setting up subsidiaries, developing new technologies and making innovative use of existing technologies.

A Large Scale Demonstration Project: China Renewable Energy Scale-up Program (CRESP)

The CRESP program was developed by the Government of China (GOC) in cooperation with the World Bank (WB) and the Global Environment Facility (GEF). Together, these entities have been implementing the Renewable Energy Scale-up program for China which aims to create a legal, regulatory, and institutional environment conducive to large-scale, renewable-based electricity generation in two Chinese provinces. The Institutional Development and Capacity Building component includes: Mandated Market Policy MMP research and implementation support; technology improvement for wind and biomass; and long-term capacity building.

• In Fujian, a 100 MW wind farm at Changjiang’ao, Pingtan Island. The Pingtan wind farm will consist of wind turbines, associated civil and electrical works, an extension to an existing control room, a switchyard, and a 15 km, 110 kV transmission line from the wind farm to the Beicuo substation, which will be upgraded to meet the evacuation needs of the wind farm. In Jiangsu, a 25 MW straw-fired biomass power plant at Mabei Village, Rudong County.

• The Rudong power plant will consist of one 110 ton per hour, high-temperature, high-pressure strawfired boiler, one 25 MW steam turbine, and associated mechanical, electrical, and civil works.

Get to Know These Companies:

1. China Huaneng Group Corp, China’s Largest Power Producer

• The company may be planning to take its wind power unit public in a Hong Kong share sale this year worth at least $1 billion, said people familiar with the plan.

• The company is rumored to have hired China International Capital Corp, Goldman Sachs Group Inc, Macquarie Group Ltd and Morgan Stanley to arrange the initial public offering.

2. China Power Engineering Consulting Group Corporation or “The Group”

• “The Group” is active in developing new clean technologies and leads the country not only in design of conventional thermal power plants, transmission and substations.

• The Group Corporation has also carried out widespread international exchange and cooperation with many foreign enterprises groups and engineering companies.

• The Group Corporation plays leading role in scientific research, standardization and technical information for power survey and design, undertakes new technological research and development, introduces, assimilates and innovates new technologies.

3. China Southern Power Grid Corporation Ltd.: Managing China’s Grid

China Southern Power Gird Corporation is administered by the central government,with independent budgetary status.The total assets of the new power gird operator surpass 203.8 billion yuan(US$24.10billion) and its registered capital is 60 billion yuan (US$7.23billion).Its main responsibilities are:to operate and manage power gird according to the law,ensure reliable power supply,plan the development of regional power gird,foster regional power market,manage power dispatching and trading center,and carry out power dispatching according to power gird operation laws and the market regulations.

4. China SDIC Power: Received Largest Capital Injection of Power Assets ever

China SDIC Power’ takeover of power assets from its controlling shareholder, State Development and Investment Company, for a consideration of RMB 7.69 Bn. After the transaction, SDIC power assets achieved a whole listing. This deal was the largest capital injection to a listed company by its controlling shareholder in 2009, and the largest capital injection of power assets ever. Along with the commission of a number of key power projects, such as cascade hydropower stations in the Yalong River Valley and Tianjin million-kilowatt extra supercritical thermal power station-a pilot project of circular economy, the total installed capacity of SDIC will reach 50000 MW by 2012, with total assets of SDIC’s power business exceeding RMB 140 billion.

Wind Power in China

• Chinese wind power capacity doubled for the fifth time by end of 2009, to 25.1 gW by the end of 2009, a third of the global additions in the previous 12 months, according to the Global Wind Energy Council.

• The government may lift its 2020 target for wind power capacity by 50 percent to 150 gigawatts, representing a 20 percent annual growth rate from 2009, Goldman Sachs said in a research note dated Feb. 3. “I’m optimistic about the long-term development of China’s wind power industry,” said Martin Wang, a power analyst with Guotai Junan Securities in Hong Kong. “The government seems to be increasing support to the sector.”

5. China Longyuan Power Group Corp, China’s Biggest Wind-Power Producer in December raised HK$20.1 billion in the world’s second-largest alternative energy initial public offering (IPO) since at least 1999, according to data compiled by Bloomberg.

6. Xinjiang Goldwind Science & Technology Co 002202.SZ,: Growing Chinese Wind Generator Manufacturer- The Group’s principal activities are manufacturing, marketing and selling large-sized wind generator sets. Other activities include introducing and applying wind generating technology; manufacturing and selling parts of wind generating sets; providing consulting services in building and operating wind generating plants; building and operating middle-sized wind generating plants. This company is already listed in Shenzhen, aims to raise $1.5 billion from a Hong Kong IPO in the first half of this year, sources told Reuters earlier.

Biofuel in China:

By 2020, China aims to use 10 million tons of bioethanol and 2 million tons of biodiesel, replacing 10 million tons a year of petroleum-based fuel, Chen Deming, vice chairman of the National Development and Reform Commission, told a news conference. “In the future, all the biofuel production will use non-grain crops,” Chen said.

7. China Clean Energy (OTCBB:CCGY) : develops and manufactures biodiesel and environmentally-friendly specialty chemical products made from renewable resources through its subsidiaries, Fujian Zhongde Technology and Fujian Zhongde Energy. It’s new plant (Oct. 2009)  has been designed to produce up to 100,000 tons of biodiesel annually or a combination of as much as 40,000 tons of biodiesel and 30,000 tons of specialty chemicals.

8. Novozymes in China: laboratory and research facilities have now doubled in size Novozymes has a total of around 200 employees in Beijing, including 100 or so working in research and development. Lykke Friis, the Danish Minister for Climate and Energy:“The idea behind the extension is to strengthen our research into biomass for advanced biofuels, made from waste materials such as straw. Here in China we’ve entered into partnerships with two important players in the field, namely COFCO and Sinopec.” Novozymes to Announce Details on Cellulosic Ethanol Technology February 16, 2010 at NEC Conference

9. China Biodiesel Holding Corporation: leading product is Biodiesel, while the sideline-products are oleic acid methyl ester,C16C18 fatty acid methyl ester, coconut oil methyl ester. The main market is located in mainland China, but abroad channels are maturing, including Europe, East Asia, and North America.  They report that their current total capacity is now 100,000 tons per annum (Feb 2010)

SDIC’s Hydropower Projects

Along with the commission of a number of key power projects, such as cascade hydropower stations in the Yalong River Valley and Tianjin million-kilowatt extra supercritical thermal power station-a pilot project of circular economy, the total installed capacity of SDIC will reach 50000 MW by 2012, with total assets of SDIC’s power business exceeding RMB 140 billion.

Investment Projects：

10. SDIC HUAJING POWER HOLDINGS CO.,LTD.

11. ERTAN HYDROPOWER DEVELOPMENT COMPANY,LTD.

12. SDIC YUNNAN DACHAOSHAN HYDROPOWER CO,LTD.

13. SDIC QINZHOU ELECTRIC POWER CO.,LTD.

14. JINGYUAN SECOND POWER CO.,LTD.

15. GANSU XIAOSANXIA HYDROPOWER DEVELOPMENT CO.LTD.

Video: Pentagon commits to use biofuels- Secretaries Vilsack and Mabus Onboard

The Secretaries of Agriculture and the Navy were at the Pentagon in January 2010, showing their commitment to going green. Secretaries Vilsack and Mabus signed a Memorandum of Understanding committing the two departments to work together to develop biofuels.

In November of 2009- Rear Admiral Phil Cullom spoke plainly at the MIT Innovations Journal event co-organized by Bolton Hill Consulting at the National Academies of Science. The message was clear. The U.S. Navy has a long-standing commitment to the use of biofuels because it makes economic sense. The Navy is the largest consumer of biofuel in the United States. Rear Admiral Cullom controls a 21 Billion dollar budget. He attests that the Navy has used cutting edge clean technology for a long time to save money, increase access to domestic fuel sources and promote American innovation. The talk he gave at this event was riveting because not only is he interested in the topic- he is extremely well-educated (nuclear engineer & Harvard business graduate among other things), well spoken and highly committed to the use of biofuels in multiple contexts. Listen to him in his own words below.

Video provided by Allan Tone at ProVDN

Bill Gates Wants a Green Agriculture Revolution: Here’s Tech That Can Drive It

By Josie Garthwaite
Original content at earth2tech.com

Posted October 16th, 2009 at 12:00 am in Big Green, Startups

Excerpts below

At the World Food Prize in Des Moines, Iowa today, Gates announced that the Bill & Melinda Gates Foundation has awarded $120 million in nine new grants to organizations and research partners (including $15 million for the Alliance for a Green Revolution in Africa), to work on the effort, focusing primarily on small-scale farming in sub-Saharan Africa. In his speech Gates called for an end to the ideological division over the future of agriculture: “Productivity or sustainability — they say you have to choose. It’s a false choice,” he said. Rather, we need farming techniques that are both environmentally responsible and highly productive, and technology will help bridge the gap, he said.

Today’s grants are being awarded for projects including distribution of legumes that fix nitrogen in the soil and pest-resistant sweet potatoes, training for African governments to “draw on as they regulate biotechnologies,” help for women farmers in India to manage land and water resources sustainably and programs to deliver information to farmers via radio and mobile phones. The awards come as part of the $1.4 billion that the Gates Foundation has committed so far for agricultural development efforts — promoting techniques such as no-till farming (explained in the video clip below), rainwater harvesting and drip irrigation.

The Gates Foundation has drawn criticism, as the Seattle Times points out today, for focusing too strongly “on technology solutions and higher yields, a path that risks repeating the mistakes of the original Green Revolution.” But a growing number of firms, including startups and small companies, are working on a new wave of agricultural tech that could play an important role in a real green shift.

via Bill Gates Wants a Green Agriculture Revolution: Here’s Tech That Can Drive It.

Climate change is raising the stakes for agricultural tech as the world population grows and the amount of arable land shrinks. According to the Environmental Protection Agency, farmers will have to deal with “increased potential” for extreme events like droughts, floods and heat waves,” and “enduring changes in climate, water supply and soil moisture could make it less feasible to continue crop production in certain regions.” More mouths to feed, plus less arable land and changing rainfall patterns, means growing demand for tech that lets farmers do more with less.

Venture capitalist David Anthony, founding partner of 21Ventures and a frequent co-investor with Quercus Trust, thinks that “aeroponic farming,” or farms in urban environments that use technology like LEDs to grow crops, will find a growing market. His firm invested in Aero Farm Systems, a New York-based startup that develops tech-heavy urban farming processes. In general, Anthony thinks that advanced farming techniques are an under-invested area where his firm sees promise.

A slew of companies are also working on smart water management technology, and some of them could extend to agricultural applications. PureSense, for example, uses soil moisture sensors and sends data via wireless networks to irrigation control systems.

Other companies are helping small-scale farmers bring their surplus foods to market using technology and the broadband age. Take FarmsReach, a California startup that won the audience choice award at our Green:Net conference in March. The 2-year-old company has developed a web marketplace to make it easier for buyers, such as restaurants, hospitals and schools, to order produce from nearby farmers, and for farmers to manage their sales and deliveries.

FarmsReach has been designed with the U.S. food system in mind, but other iterations — perhaps utilizing mobile devices for areas without ready computer or broadband access — could be useful elsewhere. Gates spoke to that need today, urging food companies to “buying power to provide markets for small farmers,” although, “the logistics might be more complex at first.”

Of course, the farmers and communities that the Gates Foundation is seeking to serve with these grants need low-cost solutions, and much of the technology emerging from startups right now still has a ways to go on the cost curve. As Pacific Institute co-founder Peter Gleick put it at this year’s Clean-Tech Investor Summit, “It’s entirely possible to create brilliant water technology that the places that need it the most can’t afford.” So we second the call from Gates for a “greener” revolution, with an extra nudge for startups to  put technology to work for small farmers and the planet.

Photo credit Bill & Melinda Gates Foundation