Why General Electric Invests Billions In Solar

Posted on April 9th, 2012 by


Kevin Walsh, Managing Director and Leader of Power and Renewable Energy at GE Energy Financial Services, discusses why General Electric has chosen to invest billions of dollars in the solar industry.

Full transcript:

Ben Lack: Tell us about your perspective of the solar energy and why GE has chosen to invest billions of dollars in the industry.
Kevin Walsh: We believe in solar power and think it is a proven technology. We’re investing in solar for the long-term and think it has a place in the generation mix for a number of reasons: It’s smart to have a component of the generation mix without fuel or carbon price exposure; solar’s generation profile correlates well with utilities’ load profiles; it can be constructed fairly quickly and in a modular fashion which allows projects to generate revenues during construction; operating  a utility-scale solar project does not require much water; the costs of solar has come down dramatically and the technology continues to improve which is encouraging to the industry in terms of its utility and cost competitiveness. In addition, our investments in solar helps diversify our own renewables portfolio, which includes investments in wind, hydro and other forms of renewable energy.
Ben Lack: The industry is currently consolidating in the United States. From your perspective is that a good thing, a bad thing and where do you see solar going in the future.
Kevin Walsh: It is not surprising  to see some shake-out given the pace of change in the industry, changes in technology- and cost positions.  There has  been some consolidation but we think there will be strong survivors and that the industry  has a solid,  long-term future. GE Energy is re-entering the solar space with its plans to build a 400-megawatt thin film solar manufacturing facility in Colorado. So, we also benefit from GE Energy’s insight into the industry and their view is that this industry has a long-term future.
Ben Lack: Your team recently invested a hundred million dollars in a 127-megawatt solar farm in Arlington, Arizona which is about 40 miles west of Phoenix. Give us some insight as to why a project like that is appealing for your portfolio.
Kevin Walsh: This was an attractive deal for us for several reasons.  First, we know LS Power well and have a great deal of confidence in them as a partner.  We like to partner with firms we believe will do a good job in terms of developing, building and operating projects.  This project also uses proven equipment and has a solid, long term off-take agreement. The overall economics of the project are solid.
Ben Lack: How important is it to have an existing customer in place to actually purchase the power that your project is going to be generating. Is that the distinguishing element that you need in order to get comfortable about investing in the development of a project?
Kevin Walsh: Well, certainly it is a very important factor to have a customer to buy the power from this project or other such projects. We have invested in merchant projects in other sectors, but not solar.  At this point, we will likely stick with fully contracted solar projects. Financial markets are quite supportive of well-conceived projects that have long term off-take agreements, which provide certainty of revenues. That’s a pretty standard approach in this industry.
Ben Lack: Kevin, I would like to get a personal response from you why you are doing what you are doing and why this industry interests you.
Kevin Walsh: Well, first and foremost it is a good business. GE Energy Financial Services has been in this industry for a long time. It is a good place for GE to invest, leveraging our skills and expertise and our relationships across the industry. I had the pleasure of leading the power and renewable energy group during the past five years.  We increased our investment in renewable energy from less than a billion dollars in 2006 to a total of eight billion committed to the industry since then. Renewables have been one of the fastest growing areas for us, and it is exciting to be a part of a growth story. GE Energy Financial Services matches up well with what GE is good at – energy and investing in critical infrastructure. So, first and foremost, this is a good business, but it is also fun to be part of a growing and exciting industry that continues to innovate and deliver newer and better solutions to our energy needs.  We also have a small team that focuses on venture investing in new energy technologies.  We benefit from the insight that this activity brings to GE. Innovating in energy and investing for the future is what we are all about.
Ben Lack: Is there a learning that you can share with us that you kind of observe over the last 12 months that has changed your ideas on how you and your team should  be approaching this sector and what types of project you should be investing in or just really in general how you look at the industry at all.
Kevin Walsh: Well, I think you need to be adaptable. We can’t say we predicted that solar would have scaled so quickly.   Five years ago, we invested in a solar project in Portugal. It is 11 megawatts, which at the time was the largest solar PV project in the world. Then in 2011, we invested in the 550-megawatt Desert Sunlight project in California, which is now considered one of the largest solar PV projects in the world.  That type of rapid industry growth is pretty exciting. You need to stay on top on what is happening in the industry and seize the opportunities when they arise. In addition to staying on top of trends, we try to leverage our expertise and our know-how to help the industry grow. We stick to what we know which is investing in sound, well-structured energy projects with good partners.

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One Person has left comments on this post

» scott said: { Apr 12, 2012 - 08:04:29 }

the reason GE has invested so much in solar is that Algore and the Obama administration promised “green” subsidies to offset the costs and the “losses” from producing products that the free market generally thinks are garbage. the entire windmill technology crap is evidence of that as well.

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