Wall Street’s major banks continue investing in the clean energy sector, with The Goldman Sachs Group, Inc. (GS) the latest to jump on the bandwagon. Goldman entered into a deal to finance approximately 110 megawatts (MW) rooftop solar power generators of Calif.-based SolarCity Corporation (SCTY). The combined lease financing agreement for homeowners’ rooftops is worth $500 million, and is the biggest deal to be announced in the U.S.
The agreement began in 2012 and extended as per its initial terms, to April-end. The deal has already helped achieve 26 MW of solar generation. Further, it is expected to generate an additional 158 MW as of May 10, 2013.
The agreement is consistent with Goldman’s target of investing $40 billion in renewable energy over the next 10 years. The initiative was taken to mark the company’s awareness of environment sustainability and to support the development and promotion of renewable energy as well as clean technology.
An acute awareness of the benefits of green energy exists in the U.S., reflected in the rising demand for rooftop panels from homeowners and businesses in recent times. Consequently, financial markets have recognized renewable energy as an immensely valuable asset.
Goldman’s deal with SolarCity has formed an attractive financing alternative to further reduce costs on solar projects. The majority of SolarCity's customers choose to rent a rooftop photovoltaic array rather than shell out large sums of money to purchase solar panels. The deal thus makes it easier for homeowners and business organizations to install solar systems in their buildings and thereafter pay a monthly fee, rather than doling out a hefty down payment.
Among other global banks, U.S. Bancorp (USB) and Credit Suisse Group AG (CS) have also been involved in deals with SolarCity. Financing solar installations is attractive for investors like banks as they enjoy tax rebates, including a solar tax credit. The federal tax credit is equivalent to 30% of a project's cost. Moreover, at times, banks receive a fraction of the homeowners' lease payments, according to the terms of the deal.
Through this innovative transaction, Goldman will likely change the dynamics of distributed solar generation, produce a significant source of clean energy and generate ample jobs across the U.S.
Goldman currently carries a Zacks Rank #2 (Buy).
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