Power Prices, Commercial, Finance, Sourcing Renewables, Wind - June 12, 2017 - By Amy Poszywak
Leveraging commodities arm, Goldman Sachs inks 1st wind PPA
Levering the expertise of its internal commodities trading arm, Goldman Sachs Group Inc. has signed its first power purchase agreement for wind energy that is matched, roughly, to the size of its North American electricity load.
The virtual power purchase agreement tied to the output from a planned, 68 MW wind farm in Pennsylvania will help the banking giant toward its goal of using 100% renewable energy for its global electricity needs.
The deal also marks a shift in Goldman Sachs' renewable energy procurement strategy toward investments that contribute to the amount of renewable energy being developed. Previously, the company had primarily used renewable energy certificates to offset its U.S. electric load, Cindy Quan, vice president in the environment, social and governance team in Goldman Sachs' corporate services and real estate group, said in an interview.
"We were really interested in engaging with a developer to create new renewable energy generation for the grid," Quan said June 12.
Through the deal with a subsidiary of NextEra Energy Resources, Goldman Sachs will enable the investment and development of the wind project, which is expected to come online in late 2019. Arguably the most unique element of the announcement, however, is the role that Goldman Sachs' commodities trading group, dubbed J. Aron, had in its execution.
Working alongside the firm's corporate services and real estate department, J. Aron served as an intermediary for the project, providing commodity risk management and commercial expertise for the transaction. Harry Singh, a vice president in Goldman's power trading group said June 12 that his team was able to offer expertise on choosing the best location for a project and in contract negotiation.
That expertise was key in the decision to execute a deal for a project located within the PJM Interconnection region, where Goldman Sachs has the majority of its North American load, Quan said.
"By leveraging the firm's intellectual capital and J. Aron's expertise in power markets, we were able to structure the agreement in a way that allowed us to meet our operational and sustainability goals through a creative market-based solution," Goldman Sachs Chairman and CEO Lloyd Blankfein said in a news release announcing the PPA. "We are committed to being a leader in the development of renewable energy."
The agreement is anticipated to facilitate up to 150 construction jobs and result in the reduction of more than 200,000 tons of greenhouse gas emissions per annum once operational, according to Goldman Sachs' June 12 news release.