SolarCity deal new step in sustainable energy investments

​PGGM Infrastructure investments now cover almost the entire spectrum of current sustainable energy production and consumption, writes Erik van de Brake.

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Our agreement with SolarCity, under which PGGM will invest in a large portfolio of solar energy systems, is a new link in a chain of investments in sustainable energy. PGGM Infrastructure took the first step in 2010 with a direct investment in Walney, an offshore wind farm in the Irish Sea. The SolarCity portfolio now brings us into virtual contact with the end users of alternative energy: 38 thousand American households.

With this investment PGGM expects to generate a stable return for the participants of our clients, among them Pensioenfonds Zorg en Welzijn/PFZW (pension fund for the Dutch healthcare sector), for at least twenty years. This return comes from the regular payments by American homeowners for the use of the solar panels installed for them by SolarCity.

This transaction means that PGGM infrastructure investments now cover almost the entire spectrum of current sustainable energy production and consumption. In recent years we have acquired interests in centralised generation of alternative energy, such as wind farms and solar parks. Our stake in heating company Ennatuurlijk finances measures to improve the sustainability of the energy supply to tens of thousands of Dutch households and companies, with low or zero carbon heat being supplied to users.

PGGM is also invested in companies that are involved in the large-scale application of smart meters, which will play an important role in households optimizing the benefit they obtain from the electrification of our societies in the coming decades.

Given (McKinsey report  2016) that by 2040 the Netherlands must have achieved substantial emission reductions while facing 37 per cent higher demand for electricity, it is essential that there also be back-up capacity for periods without sunshine or wind. PGGM has interests in gas transport and distribution, mindful of the role natural gas will continue to play for several more decades in the transition to a low carbon society, to which the Netherlands has also committed itself in the Paris Agreement.

The McKinsey report spells out the drastic steps that are needed to create an economy in 2050 that produces 80 to 95 per cent fewer greenhouse gas emissions than in 1990. To achieve this, the pace of the energy transition will have to be three times greater than in the previous thirty years.

That will produce a surge in technological dynamism, driving innovations in the field of energy storage, so that gas-fired generation plants also can eventually be phased out in the future, or innovations for carbon capture and storage. Of equal importance is the catalytic role assumed by government, prompted by the national Energy Agreement  that was concluded in 2013. This has already led to hundreds of agreements and initiatives in all the sectors affected by the energy transition.

PGGM Infrastructure’s direct investment strategy has been to invest in individual projects, each of which can be seen as a separate piece of the puzzle to improve the sustainability of the energy mix. Now that government policy is increasingly taking shape, see the example of the Energy Agreement in the Netherlands, our investments are becoming more aligned with integrated and coherent policy driving the energy transition.

As government policy develops, multiple opportunities will open up for direct infrastructure investors such as PGGM. Depending on the natural regional conditions and incentivizing measures by governments, geographically diverse energy mixes are certain to arise. In California, for example, an abundance of sunshine combined with government policy has led to large-scale application of solar for consumers.

In all long-term energy scenarios for the Netherlands, solar comes in just behind wind.  In addition, much can be achieved in the Netherlands through energy-saving measures, residual heat usage and electrification of households and transport. We are well positioned to invest in the entire chain worldwide, to secure an attractive financial return and contribute to a sustainable future.  

Head of Infrastructure

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