Six European ‘climate champion’ utilities are set to emerge as the big winners – and possible merger targets – in a €7trn ($7.8trn) investment spree as the EU pursues its 2050 decarbonisation goals, said Goldman Sachs.
The investment giant named Orsted, Enel, RWE, Iberdrola, and EDP and its renewables associate EDPR as set to “significantly outgrow the rest of the sector”, as part of a wider trend it called the “rise of the renewable majors”.
Utilities could be in line for 45% of the €7trn of investment needed to drive the EU to its net-zero emissions goal, said Goldman Sachs in a research note.
That could also drive consolidation in the sector, and Goldman Sachs said Germany’s RWE and Portuguese utility EDP, plus Scottish group SSE “stand out as possible targets were we to see M&A owing to a favourable combination of high earnings exposure to low-risk, infrastructure activities (RES, grids) and their relatively small market cap”.
Meeting clean energy targets will see 40% of European power coming from wind and solar by 2030, or 75% if other sources such as nuclear and hydro are added – double the level today, it said.
“By 2050, this implies a generation mix characterised by up to 90% renewables, with the rest coming from batteries, hydrogen and CCS,” said the note.
Goldman Sachs also tipped offshore wind to see the “biggest upside” from Europe’s energy transition – it expects the source to be generating at “well below market prices by 2023-25”.
Globally, the investment group said it backed predictions of 1TW of offshore wind deployed by 2050 as "an achievable target".