9 Aug 2023

Climate policy expert 'cautiously optimistic' over BlackRock deal

12:49 pm on 9 August 2023
The wind turbine in Brooklyn, which was recently replaced.

BlackRock has launched a $2 billion fund to help New Zealand reach 100 percent renewable electricity. Pictured, a wind turbine towers above Brooklyn, Wellington. Photo: 123rf

A climate policy expert says he is cautiously optimistic about the investment from BlackRock to help New Zealand reach 100 percent renewable energy.

The government yesterday announced it was partnering with investment company BlackRock to launch a $2 billion fund with the goal of making New Zealand the first country in the world to reach 100 percent renewable electricity.

The fund will give money to businesses to develop more wind, solar, green hydrogen, and other renewable climate solutions.

Professor David Frame from the University of Canterbury said there were always some risks around large infrastructure investments, but moving to 100 percent renewable electricity was a great idea.

"I sort of feel cautiously optimistic but the caution comes from the history of large infrastructure projects where the government has a significant role and just quite what the terms of the deal are, which is a little opaque at the moment."

BlackRock has had a lot of experience in large projects and the New Zealand electricity sector has had issues with renewable energy projects being consented but not acted upon, he said.

"It's nice to see some sort of capital come in and actually try and make a difference, but as I say I think we'll have to find out more as we go ... the announcement yesterday was mainly about the partnership and the money but the specifics will matter a lot."

Frame said the investment would be beneficial for New Zealand in the long run.

The government would have a role in consenting and approving projects and getting them through the regulatory environment, he said.

"If BlackRock are stumping up the cash to actually build the infrastructure we need that's a good thing, we've had a long period of underinvestment in infrastructure in New Zealand while our population's increased by 50 percent."

Things like BlackRock's investment were very important because even if New Zealand managed to get to zero use of fossil electricity, without work the country would not stay there due to its population growth, he said.

The BlackRock project was worth supporting even if more details were still needed, he said.

"In the long-run this will be the kind of infrastructure project that makes the most difference to climate change."

A leading energy research analyst said he did not think the government's team-up with BlackRock would be 'game changer'.

Forsyth Barr analyst Andrew Harvey-Green said more details were still needed on exactly how the deal would work, but he understood that BlackRock would look to attract investors into the $2b fund.

"Once it has that money it will look to deploy that capital into renewable projects in New Zealand, so there's a bit of a process to go through yet."

One of BlackRock's challenges once the money was in place would be to find bankable projects in New Zealand to invest in, he said.

BlackRock was a big name in the investment community, but there were already other offshore investors interested in New Zealand's solar and wind projects, he said.

BlackRock deal a step towards 100 percent renewable energy - Shaw

The Green Party says the government's collaboration with BlackRock is an important step along the country's journey towards 100 percent renewable electricity generation.

Its co-leader James Shaw said that the country had a massive challenge ahead in electrifying transport and heavy industry.

In terms of New Zealand, BlackRock has announced "a country specific fund designed to enable a whole country to decarbonise in a very short period of time", he said.

That did not address the whole challenge, but it was a step along the journey, Shaw said.

"As long as we're providing alternatives for people to put their money into I think what you'll see is less investment in the fossil fuel industry and more investment in renewables."

Shaw said while BlackRock had a few questions to answer regarding where it was investing, he believed the fund would lead to less investment in fossil fuel and more in renewables.

Greenpeace is nervous about the government's partnership with BlackRock saying the company's ultimate goal was to make profits for investors.

Its head of campaigns Amanda Larsson said it was good that the government was hearing New Zealanders' concerns about climate change and the need for political action.

The $2 billion announced in the BlackRock deal would help to replace fossil fuels that were driving climate change with renewable energy sources, she said.

"But I think it's also reasonable to look at this with caution because what we're ultimately talking about is an enormous overseas private asset manager that's ultimately here to make profits for investors, not necessarily to serve the local or public interest."

The energy transition would take a lot of money and although there was a place for private finance in that there should be a balance, she said.

Caution was needed given BlackRock was also one of the biggest investors in fossil fuels globally, she said.

The government should not just rely on private investment to transition away from fossil fuels, Larsson said.

"But what we haven't seen from this government and we have seen from our peers overseas is public investment in things like household solar and community energy."

She said that government contribution was important to get community buy-in and areas that have relied only on private finance have faced more community resistance to projects.

"It's really about making sure that the communities and local people benefit from the energy transition because otherwise there's resistance to it and that slows the rollout."

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