U.S. Banks to Finance Billions in Renewable Energy Projects

---

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Large U.S. banks have pledged to loan or invest tens of billions of dollars in renewable energy projects in the coming years, potentially helping fill a vacuum created by Congress' inability to extend the federal Production Tax Credit (PTC) to support renewable energy.

The increased commitment of banks to invest in or lend to green energy projects could provide a financial lifeline for renewable energy developers and manufacturers that have seen their businesses wither this year because Congress has not extended the federal PTC. The PTC provides a credit of 2.2 cents per kilowatt-hour (kWh) of renewable electricity generated for a period of 10 years. It is scheduled to expire at the end of 2012. Many renewable energy projects have been deferred or cancelled due to uncertainty about the credit's extension. The windpower industry has benefitted most directly from this tax credit. In prior years, it was able to monetize through tax-equity deals with financial institutions. But the tax equity market has dried up, and Congress has yet to vote on extending the PTC, despite broad, bipartisan support for extension.

Bank of America Corporation (NYSE:BAC) (Charlotte, North Carolina), Goldman Sachs Group Incorporated (NYSE:GS) (New York, New York) and Wells Fargo & Company (NYSE:WFC) (San Francisco, California) recently pledged a total of $120 billion in loans and investments in a variety of "clean technology" industries, including renewable energy generation and infrastructure, energy efficiency, environmental remediation, biofuels, energy storage, low-carbon transportation, water purification and waste treatment.

Bank of America pledged to lend or invest $50 billion in these projects over the next 10 years. Goldman Sachs established a goal of investing or loaning $40 billion to companies in those industries over the next decade. Wells Fargo committed to make $30 billion in loans and investments in clean tech industries by 2020. The banks didn't specify how much of their commitments would go to renewable energy development as opposed to energy efficiency, environmental remediation, clean fuels, or other "clean tech" industries.

"Environmental business delivers value to our clients, return for our shareholders and helps strengthen the economy," Bank of America Chief Executive Brian Moynihan said in a statement. "We met our prior (environmental investment) goal in about half the time we set for ourselves, so more than doubling our target is ambitious but achievable." The new goal, effective Jan. 1, 2013, follows the anticipated completion of the bank's current 10-year, $20 billion environmental business initiative. That earlier initiative is more than four years ahead of schedule.

Renewable energy, including wind, solar, hydro, biomass and waste-to-energy, were some of the clean tech industries included in Bank of America's $50 billion pledge. The bank also said it would step up its lending and investing in "smart grid" programs, large-scale energy storage, water purification, and energy-efficiency upgrades to buildings.

"Many of our clients are transitioning to more environmentally conscious business practices, products and services," said Cathy Bessant, Bank of America's Global Technology and Operations executive and chair of its Environmental Council. "We can continue to grow our business, promote a greener global economy, and address climate change by helping our clients meet their own sustainability objectives."

Goldman Sachs created its Clean Technology and Renewables group in 2010 to meet a sharp increase in demand for capital among energy and environmental projects. Global investments in renewable energy infrastructure are projected to double in the next 10 years and reach $395 billion annually by 2020, it said in its Environmental, Social and Governance Report for 2011, released last month.

To help meet this need, Goldman set a target of $40 billion in financings and capital investments over the next decade to companies that promote clean technology alternatives. Much of that appeared to be earmarked for renewable energy, though the report containing the target did not provide specifics.

Goldman said it financed $4.8 billion in clean technology companies around the world last year, and co-invested more than $500 million more in those firms. "We believe that clean technology, an emerging industry focused on creating sustainable sources of energy with zero- to very low-carbon emissions, holds great promise in helping the world transition to a low-carbon future," the bank said in its report. "We believe we can play a critical role in the vital transition to a low-carbon future by helping raise capital in the public and private markets and investing alongside our clients in clean technology sectors, such as solar, wind, geothermal, energy efficiency, green transportation and advanced biofuels."

In announcing its commitment to support clean tech companies with $30 billion in loans and investments by 2020, Wells Fargo's chairman, president and chief executive John Stumpf said: "Our commitment to the environment reflects our belief that Wells Fargo's responsibility as a corporation goes beyond its mission of helping customers succeed financially. We also have a major role to play in promoting the long-term economic prosperity and quality of life of the communities we serve."

Wells Fargo said the $30 billion would be for investments that promote a "greener economy," including wind and solar energy, clean technologies, energy efficient buildings, and environmental innovation.

"Our research shows more than 80 percent of our consumers think environmental issues are important," Mary Wenzel, Wells Fargo's director of Environmental Affairs, said in a statement. "We share their values and concerns and are acting on them through a broad-based, financially powerful approach to the environmental opportunities and needs we see on the horizon. We hope to demonstrate that progress for Wells Fargo and for the communities we serve. It does not have to come at the expense of the planet we share."

The banks' decisions, announced in recent weeks, come as the financial services industry struggles to recover from a raft of operational, legal, regulatory and public-relations problems. Bank of America's shareholders meeting was picketed by people opposing its lending to the coal industry. JPMorgan Chase & Company (NYSE:JPM), which has not announced an expanded commitment to clean tech companies, is recovering from a multibillion-dollar bond-trading debacle. A number of banks have had embarrassing revelations about their mortgage-lending practices before and during the financial meltdown that began in 2008.

"Bank of America cannot have its cake and eat it too. We cannot applaud its climate and renewable energy commitments while the bank is also playing a leading role in financing the coal industry," Amanda Starbuck, director of the Rainforest Action Network's energy and finance program, said in a statement reported by The Charlotte Observer. "Bank of America's commitment to renewable energy is a step in the right direction; however, the bank is simultaneously taking two steps back by continuing to underwrite the coal industry."

In an interview with The New York Times, Starbuck said: "I am not knocking any bank that chooses to fund renewable energy. But they're setting the wrong target. Until Bank of America addresses coal and other carbon-intensive fuels they're financing, this is like green-washing."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.