Green Money: Energy Banks
by Michael Graham Richard, Gatineau, Canada on 12.21.05
Jeremy Faludi at WorldChanging writes about a concept that we can only describe as being sublimely elegant: Energy banks. He begins: "One of the obstacles facing energy-saving retrofits or construction of manufacturing systems and buildings is that up-front costs are often high, even when money is saved in the long run. But if you install a solar array that has a five-year payback time, it has a 20% annual return on investment; this far higher than the return of most stocks, and it is risk-free, since electricity prices are not going to go down--it can only get better than 20%. The same is even more true for gas-saving investments, where price volatility can be high. Clearly there are good investments to be made here." We know that such systems exist in the corporate world, and that some governments are doing something similar, but the concept is so good that it has to be pushed further where it already exist, and expanded to all sectors of human activity. If green investment money was more available, it would make it so much easier to improve things. Please, read the rest: ::Things That Should Exist: Energy Banks
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" if you install a solar array that has a five-year payback time, it has a 20% annual return on investment; this far higher than the return of most stocks, and it is risk-free, since electricity prices are not going to go down--it can only get better than 20%."
First, a solar array is not necessarily a better investment than a stock because a share will still be a share forever. A piece of equipment wears out and at some point becomes worthless. Second, the idea that installing a solar panel is risk free is flat out wrong. Not only can electricity prices go down, but if dumbo kid throws a rock at your building, it could cost you a fortune (to name one thing).
Now to end the sourpussness: larger companies can sell futures contracts to lock in pricing benefits of conservation: for instance if I install something that costs $1000 and saves 10,000 kWh, if I can sell in the futures market 10,000 kWh for more than $1000 I can make money (I'll still be net long power as presumably I will still require power in the future). Such a mechanism would be key to an "energy bank" in order to hedge their risks (the same way financial banks currently use interest rate derivatives--futures, options, etc.--to manage their financial portfolios).
Not to mention the fact that most energy upgrades result in avoided costs (think reduced increases in your bill) rather than outright cash savings. This is very difficult to quantify and doesn't result in a "payback" in terms of a stream of income or lump sum of principle returned.
don't solar panels lose efficiency over time?.. this does seem like something individual investors could do though.. install solar panels on someones roof for them, have them pay the current electricity price and promise it will never go up.
All of these downsides mentioned above can be factored in on a large enough number of project.
Over one single project, it's not worth it, but an energy bank would handle thousands of them at once.
While I'm all in favor of renewable energy sources and energy-efficient buildings, I'm not sure why we need a whole new model for this. What's wrong with an old-fashioned home improvement loan to put up solar panels, install more efficient windows, or better insulation?
What about investing in forestry? investing in alternative energy systems is good to save on your bills and helps to hold the natural reserves, but what about creating new forests?
The yields on tree investments are quite good, between 10 and 18% but it is a long term investment.
Check http://www.ecobosques.com/index.htm and see that there are other alternative green investments