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Investing In Clean Energy – The Low Risk Way

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This article first appeared on 3D Investing’s blog and is republished with kind permission. John Fleetwood writes: “Clean energy has been one of the darlings of the sustainable investment world, at least in terms of investor demand.  Its something that every socially motivated investor wants to have in their portfolio, but until relatively recently, it has proven an almost unmitigated disaster area for investors.”

Even now, most clean energy funds are languishing below the level they were 5 years ago, most significantly down in value.  Those that have limited the losses have only done so by diversifying into natural gas and stocks not directly related to clean energy.  And individual shares in the sector have been even more volatile. Vestas Wind, one of the leading wind turbine manufacturers is typical:
 

It may be that clean energy investment will prove to be highly profitable over the decades ahead, but the last decade has not been encouraging and this sort of volatility does not sit well in most people’s portfolios.  So are there any alternatives and if so, are they worthy of consideration? I believe there are, and I’d like to highlight two ways of investing in renewable energy without being exposed to the volatility of clean energy equities.The first is via environmental infrastructure funds.

These are a relatively recent phenomenon in the UK, and consist of large portfolios of renewable energy assets, often already operational and with long-term, relatively secure contracts for the energy they produce.  This removes much of the risk of planning and development, albeit with lower potential returns.  Typically, these funds are structured as investment trusts with a target initial yield of around 6% that is expected to grow in line with inflation.

Borrowings are secured for periods similar to the expected lifetime of energy generation, and income is underpinned by long term agreements, often in association with Government incentives.  All of this makes infrastructure funds a less risky way of investing in clean energy, albeit without the potential upside offered by renewable energy equities.  That said, an inflation linked dividend of 6% isn’t to be sneezed at, especially when there is the potential for modest capital growth on top of that.

I suspect that many, if not most investors, would rather accept a lower overall return than take on a high level of volatility.Most of the funds trade at a modest discount to their net asset value, and are either wholly focused on one form of clean energy (wind or solar), or a combination.  The table below summarises those available in the UK.  All of these funds are now paying dividends of 5.5% or more, supported by predictable revenue streams from operational assets.

There are also a number of funds that invest in environmental assets, of which a large proportion is invested in renewable energy. The other way of investing in clean energy that I’d like to highlight is community share issues.  These are promoted as social investments as indeed they are, but they also offer long term income streams that might be considered to be less volatile than investing directly in listed companies.

There have been a proliferation of such investments over the past few years, boosted by Government tax incentives.  These took some of the risk our of investment by providing generous tax relief up front and with the maturation of the industry, the Government now considers that this is no longer appropriate.  Although disappointing, the withdrawal of tax relief is testament to the predictable nature of the income streams and the lowered risk of this type of investment.

The number of new solar investments has diminished sharply but there are still opportunities for both solar and wind investments in community based projects.  There are two very good community investment sites that facilitate investment in these type of projects.The first is Ethex, a partner of 3D Investing.  Ethex makes positive investing easy to understand and do, providing a direct and personal way for individuals to invest in businesses they believe in.  It does this by providing in depth social and financial profiles that enable comparison of the investments.  Investment can then be made online in a simple and straightforward way.  Current offers include:

 
 

A 3 year bond paying 6% interest to finance new solar energy projects in the Bristol area.

A 2 year bond paying 5.5% interest to purchase the assets of a solar Community Interest Company.

Shares in a Community Benefit Society with a forecast return of 6-8%, derived from investing in two community owned wind turbines.

The second portal for community energy investment is Abundance.  Abundance is wholly focused on community energy investment and offers peer-to-peer investments in long term debentures.  Most notably, Abundance has pioneered a pretty unique financing model, whereby the majority of investments offer the repayment of capital and interest every six months throughout the term of the investment.  So far, £1,241,437 has been paid back to investors by way of capital repayments and interest on £14,771,983 capital raised, offering proof of the business model.

Furthermore, it provides a secondary market in investments with £178,511 having been traded already.  This is very encouraging as these types of investment having historically proven to be very illiquid with poorly functioning secondary markets. Abundance has also enabled investment through a pension.  This is to be lauded as these investments generate long term income flows that match the required profile of an investor seeking income in retirement, or for whom the long term predictability of returns is highly desirable.  The usual financial caveats apply, but this is a very significant development.  Well done, Abundance.

Energy

Is Wood Burning Sustainable For Your Home?

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sustainable wood burning ideas

Wood is a classic heat source, whether we think about people gathered around a campfire or wood stoves in old cabins, but is it a sustainable source of heat in modern society? The answer is an ambivalent one. In certain settings, wood heat is an ideal solution, but for the majority of homes, it isn’t especially suitable. So what’s the tipping point?

Wood heat is ideal for small homes on large properties, for individuals who can gather their own wood, and who have modern wood burning ovens. A green approach to wood heat is one of biofuel on the smallest of scales.

Is Biofuel Green?

One of the reasons that wood heat is a source of so much divide in the eco-friendly community is that it’s a renewable resource and renewable has become synonymous with green. What wood heat isn’t, though, is clean or healthy. It lets off a significant amount of carbon and particulates, and trees certainly don’t grow as quickly as it’s consumed for heat.

Of course, wood is a much less harmful source of heat than coal, but for scientists interested in developing green energy sources, it makes more sense to focus on solar and wind power. Why, then, would they invest in improved wood burning technology?

Homegrown Technology

Solar and wind technology are good large-scale energy solutions, but when it comes to small-space heating, wood has its own advantages. First, wood heat is in keeping with the DIY spirit of homesteaders and tiny house enthusiasts. These individuals are more likely to be driven to gather their own wood and live in small spaces that can be effectively heated as such.

Wood heat is also very effective on an individual scale because it requires very little infrastructure. Modern wood stoves made of steel rather than cast iron are built to EPA specifications, and the only additional necessary tools include a quality axe, somewhere to store the wood, and an appropriate covering to keep it dry. And all the wood can come from your own land.

Wood heat is also ideal for people living off the grid or in cold areas prone to frequent power outages, as it’s constantly reliable. Even if the power goes out, you know that you’ll be able to turn up the heat. That’s important if you live somewhere like Maine where the winters can get exceedingly cold. People have even successfully heated a 40’x34’ home with a single stove.

Benefits Of Biomass

The ultimate question regarding wood heat is whether any energy source that’s dangerous on the large scale is acceptable on a smaller one. For now, the best answer is that with a growing population and limited progress towards “pure” green energy, wood should remain a viable option, specifically because it’s used on a limited scale. Biomass heat is even included in the UK’s Renewable Heat Initiative and minor modifications can make it even more sustainable.

Wood stoves, when embraced in conjunction with pellet stoves, geothermal heating, and masonry heaters, all more efficient forms of sustainable heat, should be part of a modern energy strategy. Ultimately, we’re headed in the direction of diversified energy – all of it cleaner – and wood has a place in the big picture, serving small homes and off-the-grid structures, while solar, wind, and other large-scale initiatives fuel our cities.

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Energy

7 Benefits You Should Consider Giving Your Energy Employees

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As an energy startup, you’re always looking to offer the most competitive packages to entice top-tier talent. This can be tough, especially when trying to put something together that’s both affordable but also has perks that employees are after.

After all, this is an incredibly competitive field and one that’s constantly doing what it can to stay ahead. However, that’s why I’m bringing you a few helpful benefits that could be what bolsters you ahead of your competition. Check them out below:

Financial Advising

One benefit commonly overlooked by companies is offering your employees financial advising services, which could help them tremendously in planning for their long-term goals with your firm. This includes anything from budgeting and savings plans to recommendations for credit repair services and investments. Try to take a look at if your energy company could bring on an extra person or two specifically for this role, as it will pay off tremendously regarding retention and employee happiness.

Life Insurance

While often included in a lot of health benefits packages, offering your employees life insurance could be an excellent addition to your current perks. Although seldom used, life insurance is a small sign that shows you care about the life of their family beyond just office hours. Additionally, at such a low cost, this is a pretty simple aspect to add to your packages. Try contacting some brokers or insurance agents to see if you can find a policy that’s right for your firm.

Dedicated Time To Enjoy Their Hobbies

Although something seen more often in startups in Silicon Valley, having dedicated office time for employees to enjoy their passions is something that has shown great results. Whether it be learning the piano or taking on building a video game, having your team spend some time on the things they truly enjoy can translate to increased productivity. Why? Because giving them the ability to better themselves, they’ll in turn bring that to their work as well.

The Ability To Work Remotely

It’s no secret that a lot of employers despise the idea of letting their employees work remotely. However, it’s actually proven to hold some amazing benefits. According to Global Workplace Analytics, 95% of employers that allow their employees to telework reported an increased rate of retention, saving on both turnover and sick days. Depending on the needs of each individual role, this can be a strategy to implement either whenever your team wants or on assigned days. Either way, this is one perk almost everyone will love.

Health Insurance

Even though it’s mandated for companies with over 50 employees, offering health insurance regardless is arguably a benefit well received across the board. In fact, as noted in research compiled by KFF, 28.6% of employers with less than 50 people still offered health care. Why is that the case? Because it shows you care about their well-being, and know that a healthy employee is one that doesn’t have to worry about astronomical medical bills.

Unlimited Time Off

This is a perk that almost no employer offers but should be regarded as something to consider. According to The Washington Post, only 1-2% of companies offer unlimited vacation, which it’s easy to see why. A true “unlimited vacation” program could be a firm’s worse nightmare, with employees skipping out every other week to enjoy themselves. However, with the right model in place that rewards hard work with days off, your employees will absolutely adore this policy.

A Full Pantry

Finally, having a pantry full of food can be one perk that’s not only relatively inexpensive but also adds to the value of the workplace. As noted by USA Today, when surveying employees who had snacks versus those who didn’t, 67% of those who did reported they were “very happy” with their work life. You’d be surprised at how much of a difference this could make, especially when considering the price point. Consider adding a kitchen to your office if you haven’t already, and always keep the snacks and drinks everyone wants fully stocked. Doing so will increase morale tremendously.

Final Thoughts

Compiling a great package for your energy company is going to take some time in looking at what you can afford versus what’s the most you can offer. While it might mean cutting back in other areas, having a workforce that feels like you genuinely want to take care of them can take you far. And with so many different benefits to include in your energy company’s package, which one is your favorite? Comment with your answers below!

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