Goldman Sachs Lists Top Five Drivers for Renewables

Goldman Sachs Lists Top Five Drivers for Renewables

The investment bank has laid out the five events it believes are necessary in order for the booming renewable-energy sector to continue its rapid growth.

Goldman Sachs has long supported a wide range of environmental investments, especially in alternative fuel sources. Steve Hargreaves reported the drivers in CNNMoney.

At the top of the list is enacting renewable portfolio standards. RPS's require utilities to buy usually between 10 and 25 percent of their power from renewable sources, and by adopting the standards, the country will have created a reliable market for renewable energy producers can sell.

RPS legislation figures into the energy bill making its way through Congress right now, but utility companies and some legislators are opposed to making renewable energy mandatory, instead preferring to allow each state to set its own RPS standards.

The second item of Goldman's list is to boost the enforcement of RPS standards. Hargreaves quotes Tim Kingston, a managing director at Goldman, as saying that unless there are "real teeth" in RPS proposals, there won't be any incentive for sending money into the renewables market.

Enacting a cap-and-trade system or a carbon tax is the next item on the list of key drivers. Despite several proposals introduced in the U.S. so far to create a tax on fossil fuels or cut emissions, there has yet to be any progress made on creating either of these options to reduce GHG emissions.

Along with creating a carbon tax, Goldman Sachs says the recent major increases in fossil fuel prices will both reduce demand and push consumers to look at renewables. In recent years the world's consumption has grown rapidly, nearly reaching a par with worldwide production, which results in high and unstable prices for fuel.

The final key driver that can help spur the growth of the renewable energy industry, according to Goldman analysts, is the 2008 presidential election. Throughout his administration, President Bush has opposed both carbon regulation and adopting a serious RPS. The sense among investors is that the next administration -- regardless of party affiliation -- will be more open to encouraging both of these developments.