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How renewable energy can help us beat inflation

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It was war against Scotland and France in the 1540s that pushed Henry VIII to embark on his great experiment with inflation. By reducing the amount of silver in English coins and pocketing the difference, the crown was able to pay for more ships and soldiers. But the negative effects on the economy were profound. The real value of coins went down, prices went up in compensation, and ordinary people suffered.

Fast-forward nearly 500 years to 2013 and, in the UK at least, we are thankfully still in a period of relatively low and stable inflation by historical standards. No longer at the whim of an absolute monarch, we now look to the Bank of England’s monetary policy committee to keep inflation under control.

But as our economy fluctuates between anaemic growth and recession, policymakers are once again debating how best to approach this age-old economic condition.

Inflation back on the agenda

Since 1992, the target inflation rate in the UK, as measured by the Consumer Price Index (CPI), has been 2%. The logic behind such a target goes something like this:

Some inflation is a healthy thing for a growing economy. The prospect of money losing value over time incentivises people to use it now rather than save it. Because money is essentially a means of exchanging goods and services, the more it circulates, the more economic activity occurs and the more wealth and jobs are created.

Inflation that is too low, say close to 0%, would provide little additional incentive for people to use their money. The result would be not enough economic activity.

Inflation that is too high and volatile would fail to provide a stable environment for economic decision making, thus also inhibiting growth. For example, businesses and government would be reluctant to make long-term investments if there were too much uncertainty over the real values of future income streams and financing repayments.

So an inflation target of 2% seemed about right.

However in the last few years some senior economists have argued we should in fact be aiming for higher inflation than this. IMF chief economist Oliver Blanchard suggests a rate of 4% in order to give central banks more room to react to future economic shocks.

The additional economic activity resulting from higher inflation would push up demand for money and increase long-term interest rates (the ‘price’ of money). In turn this would allow for larger reductions in these rates when we need to encourage spending and boost demand in the future

In the UK, things appear to be creeping in this direction. George Osborne has widened the Bank of England’s remit so that new governor Mark Carney has more “flexibility” over the inflation target, up to 3% at least, to give the economy more room to grow.

Others warn that this is a slippery slope, and that what starts out as a creeping tolerance for slightly higher inflation risks drifting towards the kind of damaging double digit inflation last witnessed in the 1970s.

How does this affect us as individuals?

The difference between 2% and 4% inflation may seem trivial, but think of this – store away £1,000 today in a box under your bed and in 10 years’ time at 2% annual inflation, it will be worth the equivalent of £815, but at 4% it will be worth only £667.

Such headline figures tell only a small part of the picture though. Inflation as measured by the CPI reflects price increases across a basket of consumer goods and services. In the last five years, according to ONS data, CPI has averaged 3.3% per annum overall, but some categories, such as electricity and gas, have risen by an average of 8.1% per annum, whilst others, such as clothing, have actually decreased by an average of 2.4% per annum.

The reality is that each of us is individually exposed to price rises to different degrees, depending on our lives, responsibilities and needs. Overall, evidence suggests that the poor suffer higher inflation than the wealthy because they spend more on food and utilities. However there are no hard and fast rules. If you’re interested, you can calculate your own personal inflation rate here.

Of course inflation would probably matter to us much less if we could be confident that our own savings and investments would increase in value to cover the price increases we are exposed to. But this has become difficult in recent years. Interest rates are at historically low levels; bank deposits are losing value in real terms; bond yields are lower than inflation; and stock market investments are notoriously volatile.

What can you do to protect yourself against inflation?

One strategy to protect yourself against inflation in the future is to put your money in places where its future value is linked to inflation. It is in this context that renewable energy investments offer an attractive proposition.

In the UK, renewable energy projects receive some or all of their income through government-backed schemes. For smaller projects, such as a single large wind turbine, this is the feed-in tariff, which provides a fixed and guaranteed income stream for each quantity of electricity produced. Crucially, this income stream is linked to inflation.

In other words, if inflation goes up, then so do revenues. And all other things being equal, so do investor returns, too.

Nobody knows with any certainty what will happen to inflation over the coming years. The Office of Budget Responsibility predicts 2.8% CPI in 2013 reducing to 2% from 2015. But the possibility remains of higher levels, whether through deliberate changes to monetary policy or external events outside our control like sharp rises in food or fuel prices.

But unlike the subjects of England’s most famous Tudor king, we at least can take some steps to protect ourselves from our money losing its value as prices rise.

Sam Friggens is a writer for Abundance Generation. This article originally appeared on Abundance’s blog.

Further reading:

Why investing directly in renewables projects is a worthwhile venture

Harnessing the power of a community

Community renewables: creating sustainable wealth with values

Abundance calls on investors to pledge to third renewables project

The Guide to Limitless Clean Energy 2012

Sam Friggens is a writer for renewable energy funding platform Abundance Generation. You can follow him on Twitter: @Sam_Friggens.

Economy

How Going Green Can Save A Company Money

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going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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Energy

5 Easy Things You Can Do to Make Your Home More Sustainable

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sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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