Harnessing Evolution: sustainable investing and renewable energy

At GE Renewable Energy, we work every day to accelerate the energy transition to affordable, reliable, and sustainable power. What we and many others are doing to decarbonize the world’s power supply is revolutionary. It’s good for the planet and it’s good for business. However, furthering the transition to sustainable power requires capital investment.

Partners Group is a private markets investment manager that recently launched PG LIFE, an investment strategy focused on the United Nation’s Sustainable Development Goals, to achieve attractive risk-adjusted financial returns alongside measurable, positive social and environmental impact. This focus on sustainable investment led to me participating on a panel at their annual conference to share my views on the topic. Partners Group is also the largest shareholder of Merkur, the 600 MW offshore wind project in the German North Sea for which we are now supplying wind turbines.

Panel [from left to right]: Esther Peiner, Senior Vice President of Partners Group Infrastructure, Jér?me Pécresse, CEO of GE Renewable Energy, Guido Fürer, group Chief Investment Officer of Swiss Re, and Gordon Brown, former U.K. Prime Minister.

Thomas Edison launched the power landscape as we know it with the first thermal power plant in 1882 and today GE technology powers 1/3 of the planet. Now, we’re leading the charge to change the game we invented. Sustainable investing for us means making the right investments, at the right time, in renewable energy technology and innovation.

We’ve made huge strides in lowering the cost of electricity from renewable sources, making renewable energy more competitive with conventional power sources. Recently we announced our intention to invest $400M in the development of the Haliade-X – what will be the world’s largest, most powerful offshore wind turbine. Earlier this year, we launched the 2 MW-127 that features the best-in-class capacity factor for onshore wind turbines in the 2MW range and the new 4.8-158 onshore turbine. In Hydro, we’re leading the pump storage race to help the grid absorb variability of wind and solar sources.

The massive new 450 MW hydropower plant in Linthal, Switzerland that’s also using GE hydro pump storage technology to generate an additional 1,000 MW.

In 2017, GE closed tax and cash equity investments in 16 U.S. renewable energy projects, of which about 1.4 GW was operational in 2017. Outside of the U.S. we will continue investing in renewable energy across Asia, Latin America, and of course Europe. In the past fifteen years, GE has made investment commitments surpassing $15 billion in the renewable energy space. These are just a few examples of how we’re investing in the future of energy.

While I’m proud of our progress to-date, we need to keep looking to the future. Renewable energy is also expected, via hybridization, software and storage, to become fully dispatchable power within the next 10 to 20 years. According to financial analysts, renewables will become the cheapest form of power generation by 2020.

 For sustainable investment to have a meaningful impact it needs to adapt to the ongoing evolution within the industry. Here are three examples we discussed on the panel:

How renewable energy is sold…

Up until a few years ago, those who signed Purchased Power Agreements that made the renewable energy projects financially viable were entirely made up of utility companies. Today, that’s changed dramatically. Increasingly we’re working with non-utility customers, including Fortune 500 companies, with ambitious sustainability targets. These non-utility customers are contracting to buy most or all the output from renewable energy projects. 

Amazon CEO Jeff Bezos christening a GE wind turbine at the new Amazon Wind Farm.

The relationship and role with developers is changing too. We’re seeing non-traditional models, like selling to big brands instead of utilities. Financing is playing a much more critical role for all developers large and small, both traditional and new-comers. More and more, we’re also seeing the use of auction models where price plays the key role in selection.

Where demand is coming from…

Where we do business is also changing. As an industry over half of renewable energy investments are happening in developing countries. These are also economies with high GDP growth rates and with that higher electricity demand growth. They are also often underserved by conventional sources of power and therefore are better able to leapfrog to renewable sources of power.

We see ths trend continuing in the future, considering that over 190 countries signed the Paris COP 21 agreement and have committed to reducing emissions despite their industrial growth and consumption.

One thing is common no matter the customer or location, they want renewable energy at a price competitive with fossil fuel. We’re committed to delivering and investing to achieve that and are already there in many parts of the world.

Shared Contributions and Commitment...

It’s important for the public and private sector to each make a shared contribution to a sustainable energy future. The public-private partnerships need to continue evolving and collaborating on challenges that require contributions by each.

For us in the private sector, we are uniquely qualified to innovate, manage risks, and allocate resources to accelerate the adoption of renewable energy globally. Growth of renewable energy in the world no longer depends on public subsidies and less and less on public funding. Private investors are driving this because there are good and sustainable investments.

Those in the public sector are in the best position to set and maintain regional and national policies that promote sustainable investing, incentivize emerging technologies that are too risky for the private sector, and provide a stable and reliable regulatory environment giving confidence for the private sector to invest. 

With all the change happening and yet to come, one thing is certain: Investing in sustainable power is a win-win.