CLEAN ENERGY

THE FUTURE IS HERE

Nearly a century ago, Thomas Edison imagined tapping the inexhaustible power of the sun. Today, harnessing that energy—along with the power of wind, water and the earth’s heat—has become a reality. Technological and financial innovations have brought renewables into the mainstream, and the resulting transformation will lead to energy savings, reduced carbon emissions, greater energy diversification and job creation.

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clean energy
SAFE, CLEAN, INEXHAUSTIBLE

5 TYPES
OF CLEAN ENERGy

“Clean energy” can refer to a range of technologies. Here are five that tap into power that’s virtually inexhaustible.

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  • clean power goes mainstream
    from eco-niche to mainstream

    the solar boom

    Solar power—in particular, rooftop solar—is expected to continue its already rapid growth in the next few years.

    view chart
  • available everywhere

    No fuel costs—all you need is a clear view of the sky.

    1 hour = 1 year

    Enough solar energy falls on the earth in one hour to satisfy global energy needs for a year.

    Source: National Geographic

  • energy savings

    Rooftop solar installations can reduce energy bills for U.S. consumers. New programs allow homeowners to lease them with little to no upfront cost—and the resulting savings can cover the lease payments with money to spare.

    Reductions in energy bills from rooftop solar1

    10% 20%

    1Range cited by U.S. solar companies

    Source: Goldman Sachs, North Carolina Clean Energy Technology Center

  • avoiding carbon emissions

    10 million acres of forest

    Over seven gigawatts of solar were installed in the U.S. in 2015. That’s enough to avoid over ten million metric tons of greenhouse gas emissions annually—equivalent to the carbon sequestered by:

    • Taking 2.3 million cars off the road.
    • 10 million acres of forest.

    Sources: Goldman Sachs, U.S. Energy Information Administration and Environmental Protection Agency

  • creating jobs

    260,000

    In 2016, the U.S. solar industry employed 260,000 people—up 25% from the year before. That was more than 15 times the job growth of the economy overall.

    Source: Department of Energy, Bureau of Labor Statistics

Global Solar Demand, Gigawatts

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* Estimate

Source: Goldman Sachs Global Investment Research

clean energy, smart technology

inside the home of the future

The switch to renewables is just one way that the world’s energy usage is changing. Smarter, internet-connected devices are giving consumers the ability to track their power consumption and control lights and appliances.

Here’s how today’s technologies will come together in the house of tomorrow:

inside the home of the future
Solar Panels
Geothermal Heating & Cooling
Smart Controllers & Appliances
Energy-efficient Lighting
Electric Vehicle
Energy Storage
I’d put my money on the sun and solar energy.

What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.

- THOMAS EDISON, 1931

Source: Uncommon Friends: Life with Thomas Edison, Henry Ford, Harvey Firestone, Alexis Carrel, and Charles Lindbergh, by James Newton

capital innovation and the clean energy industry

financing the future

It takes great ideas to move an industry forward. But it takes capital to bring a great idea from the whiteboard to reality. Here are some of the key steps along the way:

Startup

In this early phase, governments, venture capital and other investments fund early development, prototyping and initial production. These can be risky for the investors, but capital at this phase is crucial for getting successful ideas off the ground.

Initial Access to Capital Markets

If the early work is successful and the technology is proven and commercialized, the company usually launches an initial public offering (IPO) of stock or issue bonds. With access to capital markets, the company can scale up operations or expand its production facilities to reach more customers. Once the business has entered the markets, it becomes easier and more efficient to connect with investors and raise capital.

Capital Market Innovations

In recent years, new financing structures have provided the clean energy industry with greater capital access to grow and deploy renewable technologies at scale. Here are two examples—one raising money by issuing equity (i.e., stock), and another using debt (i.e., bonds).

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raising capital using equity

YIELDCOs

What is a Yield Co?
YieldCo Operating Company: Wind, Hydro, Solar, Biomass
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what is a yieldco

A YieldCo is a publicly listed vehicle that owns operating assets such as solar power plants, allowing investors to share in the cash flows and growth from additional operating asset acquisitions, while recycling capital to the parent company for new development.

The Challenge: Investors Put a Price on Risk

High-growth clean energy companies carry business risks. These include the need to fund project developments that require large amounts of upfront capital with returns spread over a long period of operation—building renewable power plants, for example. This risk drives investors to seek greater returns, which can lead to a higher cost of capital.


The Opportunity: Separate the Risk, Share the Growth

Once clean energy plants are built, they generally offer stable, reliable, long-term cash flows. A YieldCo gives investors a chance to participate in that cash flow stability through a dividend (or "yield") while avoiding the associated development risks.

In addition, YieldCos often have a pipeline of future assets to acquire from the Parent Company or third party developers, allowing investors to realize cash flow growth in addition to yield. For clean energy developers (e.g. a Parent Company), aggregating operating assets and selling them through the YieldCo provides a mechanism through which it can free up capital that can be used to fund additional clean energy growth and development.

Sources: Goldman Sachs Global Investment Research

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raising capital using debt

SECURITIZATION

The Challenge: Smaller Assets, Limited Liquidity

Clean energy companies often own many smaller-scale assets—rooftop solar leases, for example—which generate stable cash flow over time, but may not provide upfront liquidity.


The Opportunity: Aggregation, Diversification, Liquidity

Securitization allows companies to aggregate expected cash flows from those smaller-scale assets into larger, diversified bundles. “Slices” of these securitizations are then structured as bond tranches and sold to investors, who receive a portion of the cash flows over time. The companies get upfront capital that they can reinvest in growth, while still maintaining a residual ownership interest in their projects.

The takeaway

A Smarter Future

Technological innovations and new financing methods are making renewable energy more accessible than ever before. As a result, solar, wind, hydropower and other sustainable sources are expected to account for half of our global energy mix by 2030, according to estimates from Bloomberg New Energy Finance.

This transformation will allow the world to meet its growing power needs more sustainably—helping to create a cleaner, healthier and brighter future.

The Tipping Point, and Beyond

Total Installed Generating Capacity, 2012-30 (GW)

  • 2012 2012 5,579 gigawatts
    2012 5,579gigawatts
  • 2030 2013 10,569 gigawatts
    2030 10,569gigawatts
    • Solar
    • Wind
    • Other Renewables
    • Nuclear
    • Fossil Fuels
Takeaway Chart
Scroll to view chart
  • Solar
  • Wind
  • Other Renewables
  • Nuclear
  • Fossil Fuels

Source: Bloomberg New Energy Finance - New Energy Outlook 2015

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