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Goldman's five renewable energy drivers

Investment bank outlines key events necessary for continued growth in the red-hot sector.

By Steve Hargreaves, staff writer

NEW YORK ( -- Goldman Sachs, the investment bank heavyweight long known for its enthusiasm for alternative fuel sources, outlined five events Thursday it says are key to the rising sector's growth.

1 - Enacting renewable portfolio standards - These standards, known as RPS, require utilities to buy a certain amount of power from renewable resources - usually between 10 and 25 percent. The idea is to provide a reliable market where producers of renewable electricity can sell their energy.

About half the states now have them, and the energy bill currently under debate in the Senate includes a proposal to set a national RPS at 15 percent.

But the proposal faces stiff opposition from the electric utility industry and senators from the Southeast. They say some areas of the country, like the relatively windless Southeast, have far fewer renewable resources available, and therefore setting RPS standards should be left up to the states.

2 - Boost enforcement of RPS standards - There are plenty of RPS standards out there and plenty more feel-good proposals, said Tim Kingston, a Goldman managing director, in a speech at the Renewable Energy Finance Forum on Wall Street. "But unless you put real teeth into it, the incentives that drive money into that space are not going to be there."

3 - Enact a carbon cap-and-trade system or a carbon tax - Carbon dioxide is one of the primary greenhouse gases contributing to global warming. Burning fossil fuels is one of the main ways carbon dioxide enters the atmosphere.

There have been several proposals either to cap carbon emissions or impose a tax on fossil fuels in order to cut their use. The United States has so far rejected those calls, instead opting for a voluntary approach that has not resulted in an overall reduction of carbon emissions.

But with the Democrats now in control of Congress, Kingston expects the prospect of a cap or a tax to be revisited.

"We're confident one or the other will be implemented soon," he says.

4 - A significant increase in fossil fuel prices - Oil prices have skyrocketed in the past few years, more than tripling since 2002.

Most analysts blame surging demand - mainly from the United States and developing nations - that has led to oil consumption amounts that are nearly equal to the amount the world produces.

The slim difference between production and consumption has deepened the effect of geopolitical tensions, refinery problems, natural disasters and other events, as the world is less able to deal with a disruption in supply. This has pushed prices even higher.

The high prices and high demand have also attracted the attention of investors, further inflating prices.

Some analysts say this scenario is not going to change and may only get worse as the world's oil consumption continues to grow, although this view is by no means unanimous.

5 - The 2008 presidential election - The Bush administration has so far opposed both mandatory carbon regulation and renewable portfolio standards. Most renewable energy investors hope the next administration will be more receptive to these ideas. Top of page