GE Gets Serious About Solar Business with Strategic Investments

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General Electric

In a report published recently by industrial giant General Electric, the company is extremely bullish on solar energy. The company feels that renewable energy will be the next big opportunity and solar will have the biggest part of it.

GE Energy Financial Services, the financial arm of GE’s energy unit, has made a variety of investments in this sector and doubled its funding commitment to solar projects in the past year. The financial unit has present commitments of over $8B, out of which $1.4B is entirely dedicated to solar projects. The firm’s massive solar gigawatt portfolio now spans 48 power plants in six countries in North America, Europe and Australia.

See our full analysis of the General Electric stock here

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The main reason for firm’s bullishness in this sector is due to the technological advancements that have significantly reduced the cost of electricity and made solar energy a viable option. Electricity production costs have dropped by as much as 70%, nearing about 10 to 15 cents per kilowatt in the past few years. This has led to an increase in the size of power plants exploiting the economies of scale. To give an example, the size of the largest solar project has skyrocketed from 11 megawatts in 2007 to 550 megawatts in 2011.

GE Energy Financial Services most recent investments include a $100 million investment in a 127-megawatt solar farm located near tiny Arlington and a commitment to help finance the 550-megawatt solar farm located across the state line near Desert Center, California. The firm has also worked with venture capital firms like Kleiner Perkins, Google Ventures and North Bridge Venture Partners to invest in start-ups like Alta Devices (solar panels), Cool Planet Biofuels (biofuels), and A123 (batteries).

Energy infrastructure is one of the most valuable divisions of GE, accounting for nearly 30% of the stock value. Within this segment, energy accounts for 24% while oil and gas accounts for the remaining 6%. Therefore, the outcome of the bet of General Electric on solar energy can have significant impact on company’s bottom line.

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