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Top 10 reasons to invest in renewable energy projects

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Rebecca O’Connor, editor of renewable energy investment platform Trillion Fund, goes through 10 good reasons for investing directly in renewable energy projects.

If you can’t put solar panels on your own roof – usually the first port of call if you want to invest in renewable energy because you get the cheaper energy, too – but you are still interested in the growing opportunities to invest in renewables, then you might wish consider investing in a project.

They can make an interesting, profitable and feel-good addition to a mix of investments (tempting as it might be, it is not a good idea to put all your eggs in one basket, or all of your pension in one solar farm, in this case). And also bear in mind that investments in renewable energy projects tend to be long-term. Your capital may be at risk and investments may not be readily realisable. Returns tend to be variable.

1. The level of returns

Returns from renewable energy projects knock the socks off standard cash savings accounts, where we Brits insist on putting our money despite the negative real interest rates.

The average rate on the top five easy access savings accounts is 1.6%, according to Savings Champion. A typical internal rate of return (IRR) on a renewable energy project would be 6-8% at current rates. Although it is important to note that project investments are not easy access and are higher risk than a typical savings account at the bank, so you might get the return, but not some of the other benefits of a standard account.

It is possible for returns from direct investments in renewable energy projects to reach 8%, sometimes more if the project hasn’t been built yet, or if there are tax breaks included, such as the Enterprise Investment Scheme (EIS), for which some projects qualify, giving investors a 30% uplift. Although generally, remember the higher the return, the higher the risk.

Another part of the reason returns can be higher than on investments of a comparable risk profile is down to the feed-in tariff (FIT), the government-backed subsidy that pays developers of renewable energy a top-up amount for producing clean energy instead of the alternative dirty stuff. This amount is set at the date a project is installed and changes only to rise in line with inflation for 20 or so years – the typical term for which a FIT is guaranteed.

2. The stability of returns

The wind and sun are pretty much constant. OK, they may go up or down a bit daily and seasonally, but the projected returns are designed to account for these blips to the average wind speed or solar radiation. Overall, the blow of the wind is predictable and so is daylight from the sun.

The subsidies renewables attract are also constant – and rise in line with inflation (see below). In the past, there have been concerns over the reliability of the existence of the subsidy itself, i.e. could the government pull it altogether? Following a court case in 2012 that ruled the government could not retrospectively pull the FIT, these fears have been calmed.

The only real variables in the returns come from changes to electricity prices, which are governed by the market and are harder to predict than subsidies, although there are historical trends.

3. The low risk of the technology failing

Renewable technologies are relatively new, but they are pretty dependable (one reason why insurers are quite happy to issue warranties for performance of panels and turbines for 20 years or more, and also why pension funds, which need sturdy places to put pension savers’ cash, like investing in them).

Once a turbine or some panels are installed, then barring some exceptional circumstances, they can be relied upon to start working straight away and not stop for years – in most cases way outlasting their 20-year FIT term or insurance warranty.

4. Inflation-beating

Because of the FIT, but also because of energy prices, which contribute to returns in two ways. First, if energy prices are going up, the developer is receiving more revenue for the energy they produce and some of this goes back to the investors. Second, energy prices are included in the Retail Price Index (RPI) and in fact, have a large bearing on it as energy makes up so much of household spending.

So energy prices push up RPI and therefore also push up the index-linked FIT.  So investors in renewable energy projects might be paying more on their energy bills, but are getting some money back in the form of higher returns on your renewable investments.

5. The impact on local communities

Discounting the shrill minority of nimbys (‘not in my back yard’), the impact on local communities from local renewable projects is largely perceived as positive. Homeowners will benefit from cheaper energy and there is now a planned government incentive scheme to enshrine discounts on energy bills for communities that approve local renewables projects.

You can now invest in panels on the roofs of new-build and sometimes existing homes, contributing to the lower energy bills of others, or even on school roofs. And there are local jobs in it too.

6. The long-term impact on energy bills

One of the problems with energy from fossil fuels is price volatility, but on an upwards curve. This is because fossil fuels are a finite resource, and as any budding economist knows, a dwindling supply of any good or service pushes up its price.

Guess what? The wind and sun are infinite – as long as there are enough turbines and panels relative to people on the planet, supply-side pressures on the price of energy from renewable sources are kept in check.

It is getting to that point where there are enough panels and turbines (and hydro plants) that could potentially lead to higher bills, but this is a short-term phenomenon and far less damaging than the long-term fossil fuel curve of rising, rising, rising, until it runs out. And no amount of subsidy is going to pay for the Earth to produce more oil and gas for us to extract.

7. The impact on the UK’s energy security

We are dependent upon imports from other countries for everything we take for granted in our modern lives. And in these days of dependency on dwindling, increasingly expensive fossil fuels from or through countries, that’s a fairly powerless and perilous position to be in.

One of the greatest reasons to generate our own renewables projects and the structure to support them, favoured by academics in particular, is energy security. In other words, if you own it, and it is down the road, that’s a darn sight more secure (and cheaper) than a tanker passing through the Gulf.

8. The impact on the planet

This is a quick one: no noxious by-products equals less pollution and less threat of massively destructive natural disasters.

On the thorny issue of climate change, even if you don’t believe that the planet is getting warmer, few deny the harmful effects of carbon dioxide (CO2) on the balance of the planet’s ecosystem.

Imagine if your lungs were being pumped full of CO2 – you wouldn’t last long. If we can stop pumping out that CO2 at such an alarming rate, the planet will breathe a little easier.

9. Transparency

You know where your money is going. For years, investment banks and fund managers in that place called the Square Mile have been funnelling our cash, unbeknownst to us, into the hands of the great greedy, the bonus boys, the Machiavellis of the modern era, who have in turn ploughed it into companies that have no remit other than to make lots of profit, by any means necessary, mainly for no one but themselves.

In many ways, this mechanism of cash into bank, cash into God knows what and by whom but certainly not much back to where it came from, is how we have ended up in the sorry state the economy is currently in.

But you can’t siphon money off into a renewable energy project. It is not a ‘trust’ (so illicit); it is not a ‘derivative’ (of what?); it is there, you can drive up to it, touch it and maybe have a cup of tea with the developer.

10. The length of the investment term

Short-termism is everywhere in life, but nowhere is it more damaging than in finance. Think of the havoc wreaked by payday loans, for example. Long-term means building something worthwhile, not cutting and running. And renewable energy investments are long-term.

Abundance Generation debentures, for example, are for 20 years or so, in line with the duration of the FIT payments (capital is at risk). This won’t suit everyone, particularly if your investment goal is for something you want soon, such as a car or holiday. But it does provide a big boost to returns to keep your money in something that is (crucially) inflation-linked, for a longer period.

If you re-invest any payments you receive from the investment before the end of the term, so much the better. Great if you are 20 years from retirement, for example, or saving for your young children’s university education. A secondary market for some renewable energy investments is developing. However, the sector is still quite young, so it may be hard to find a buyer for any investment you wish to sell.

BONUS REASON: The good feeling

Rebecca O’Connor is editor of Trillion Fund, a renewable energy investment platform. See the Trillion Fund directory of renewable energy investments to get started.

Please note that investments in renewable energy projects tend to be long-term. Your capital may be at risk and investments may not be readily realisable. Returns tend to be variable.

Further reading:

Why investing directly in renewables projects is a worthwhile venture

Harnessing the power of a community

Renewable energy: debunking the subsidy and efficiency myths

Bruce Davis, Abundance: ‘we can do something different with money’

The Guide to Limitless Clean Energy 2013

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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