Who are BlackRock and why are they investing 2 billion in New Zealand’s electricity infrastructure?
The energy transition is all about eliminating CO2 and other greenhouse gas emissions from fossil fuels, like petrol, coal and gas by switching to lower carbon sources like electricity or possibly hydrogen
Fossil fuels release large amounts of carbon dioxide and, as we’ve seen over the past few years, they’re dependent on international supply chains at the whim of geopolitical risk which makes them increasingly expensive and harder to obtain.
We need to build new electricity infrastructure to support increasing demand, this chart from Transpower illustrates the level of demand growth expected by 2050. In parallel new sources of demand like EVs can be used flexibly and more smartly (i.e avoiding charging them at peak when) to get more out of the infrastructure we have.
That said, we have a lot of new energy infrastructure to build… EV chargers…local network system upgrades…new generation farms…a national grid with capacity to carry more electricity to and from more places. This all requires money to catalyse the building. Boston Consulting Group wrote a report detailing that $42 billion of investment would be required over the next decade.
BlackRock announced the launch of a fund raise for a $2 billion fund dedicated to ramping up investments in wind and solar generation, as well as battery storage and green hydrogen in New Zealand.
Who are BlackRock?
BlackRock is a massive investment house. They essentially take people’s money and invest it in businesses for a return. BlackRock invests in all types of companies, including fossil fuel companies.
BlackRock has already invested in New Zealand companies by purchasing shares in them or providing them loans, this includes energy sector companies: SolarZero and Contact Energy.
What does raising a fund mean?
Fundraising is simply putting the call out for other individuals and investors to put their money into a bucket that Blackrock will then use to invest in renewable energy investments in New Zealand.
What is the Government’s involvement?
Apparently the NZ government provided feedback about its policy settings and the type of investments that would be necessary to reach a 100% renewable electricity grid.
However, it will not directly contribute any money into the fund, which BlackRock is raising itself.
How will this impact the market?
More money dedicated to decarbonisation is a good thing, but there is a bit of a process for BlackRock to go through in order to raise the funds and then find good opportunities to invest in. By good it will mean projects with a reasonable financial return.
BlackRock, the Government and New Zealand (as a place for renewable investment) had a balmy day in the media sun….. let’s hope it translates to more solar panels, EV chargers and wind turbines more quickly.