Renewable energy investment

There has never been a better time to make a renewable energy investment. The world is now so short of this precious resource that most power companies have implemented a rationing program in the form of rolling blackouts. Renewable energy is in even shorter supply but the demand is rising at a rate never seen by any other resource since the war.

Even with the massive shortages in brown energy governments are pushing companies to switch to greener sources of energy. The race is officially on to find the giants in the field of renewable energy resources.

Brown energy companies will be sluggish at joining the race as they are firmly committed to oil, coal and gas to drive their power plants custom build for that purpose alone with huge investments having been made in building them.

The contenders to invest in
There is no doubt that making a prudent investment in a commodity with such high demand and so few suppliers that any investment would probably yield a sizeable return. However which players are in the best position to tip the scale in your favour?

We are now all aware of the big 3

Solar :: Wind :: Hydro

Bio-energy is still in the science exploration stage and has made some giant leaps but still hasn't earned a position on the big visibility list.

So let’s look at what the world is resting their hopes on and more importantly investing our money in.

Solar
Solar energy investment has slowed over the last few years as a direct result of its inability to yield the kind of returns projected and solar investors are quickly losing the gusto that they had when they first bought into the idea.

For solar to become a real investment opportunity it must achieve widespread market penetration in order to increase manufacturing volumes which would bring the cost down to a reasonable marketable price.

The problem with investing in solar energy is in the amortization short fallings that have been experienced by anyone who has made an investment in this area. However, simple math could have shown any investor how difficult it can be to make a short term and even long term return on solar. In the early days of telecommunications several ideas were put forward that failed for a very similar reason as solar. The weather! The met office provides statistics about how many days in any given years you can expect. In the UK for example England has had 62 days of sunshine on average since 1970 until today. Anyone who bases their returns on a day over this can expect a shortfall in their investment.

The average solar panels manufacturers’ cost price is currently about $2 per watt delivered. The average cost of a 5kW home system is between £10,000 and £12,000. Or $16,000 to $20,000. Based on the UK met offices forecasts for the past 40 years; it would take the purchaser 32 years to earn back their initial investment. And even with tax allowances and ROC’s (Renewable Obligation Certificate) it could still take approximately 15 years to just pay off the system before you start to see any cash returns; assume your system is still working.

Now if I missed anything I’m sure the solar selling companies will be quick to tell me in the comments panel below. But a quick look at the real facts will level it all out in the end I’m sure. But let’s be fair about this! Let’s take a look at the amortization in a warmer climate such a California. The US weather office show the average number of day’s sunshine prediction to be: 73% average days of sunshine so to be fair let’s do the calculations based on that.

Total cost of 5kW system (let’s be conservative) $18,000. Average hours of sunshine based on 12 hours a days = 5kWh’s x 12 = 60kWh’s per day x 274 days a year (73%). That equals 16.440 kWh’s per year x 12c per kWh (12c = current market value) = $1,972 return per year on your initial investment. In this best case scenario it will take the purchaser 9.1 years to simply get their money back.

As shown in order to create the wide spread purchasing needed to substantially bring down the up front costs solar may not be the light at the end of the tunnel we hoped it would be.

But what about solar power stations
Solar power stations depend on the same stats as above and by self confession the solar power industry ambitiously predict that; “If demands increase and prices can subsequently come down” grid parity* may be reached by 2015 but only in the sunniest places in the world of course. Looks like the Middle East will retain the lion’s share of the energy industry after all.

Grid Parity
Grid parity is the point when a renewable energy source reaches a compatible price to traditional brown energy prices. Even in the best case scenarios solar has only reached grid parity in one of the sunniest places in the world; Hawaii.

Solar is still more expensive to produce than most brown energy sources making it less competitive than other renewable energy sources.

BIG renewable energy investors
Like most market stocks solar has had its ups and downs. Even I dared to venture a few pounds in the industry just after the crash, when I jumped in on the recovery. Well stepped in would be more accurate. I like most investors didn't really have the cash to jump in as we were all still licking our wounds after the crash.

The chart at the bottom of this article (First Solar) shows the last 5 years trends in stock prices of one of the world largest solar panel suppliers. Like most companies they showed a rapid recover after the crash and have now leveled of showing the usual expected trends of an average investment with nothing spectacular to report.

Wind power investment
Now we've all seen those huge towers spattered around the country slowly turning as they pump cash into the pockets of their investors. Or do they?

Wind energy relies on; well the wind; now although that may seem obvious it’s not the most important factor in the production of wind energy; there are a lot of other factors that need to be taken into consideration when it come to making usable energy from wind powered generators.

LEC stands for Levelized Energy Cost; which is the initial cost of setting up a system and the amortization period of recovering those costs. The current cost of LEC’s to the general public for a brown energy power station is 12p per kWh which is shared by everyone who is plugged into the grid.

Wind power LEC amortization

Capacity factor
The maker’s plate capacity of a typical wind turbine has actually been worked out to be between 20% to 40% of the actual theoretical maximum. In a 2008 study released by the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy, the capacity factor achieved by the wind turbine fleet is shown to be increasing as the technology improves. The capacity factor achieved by new wind turbines in 2004 and 2005 reached 36%.

In short this means that you must be careful when looking at projected output performance models; which usual don’t clearly reflect this figure. Wind turbines also have major problems when it come to complying with ‘power factor’, ‘frequency’ and the ‘dynamics of variables’ due to turbine faults and wind inconsistencies. As a result simply connecting a large scale wind turbine to the grid may not be as easy as it may first appear. The problem is that instantaneous electrical generation and consumption must remain in balance to maintain grid stability; this variability can present substantial challenges to incorporating large amounts of wind power into a grid system. Spilling reserves (power supplies that may operate at less than full loads) are frequently implemented to act as backup systems in the event that wind consistency suddenly drops. Spilling reserves are usually costly diesel driven generators that are anything but environmentally friendly.

Smaller domestic wind turbines
Unlike solar, domestic wind turbines can; if correctly installed and positioned; yield much better returns when combined with ROC’s, tax benefits, feed-in-tariffs and an efficient battery system. The problem is that most people don’t have sufficient battery storage to yield all the generated power while it’s running as larger battery system can cost more than the system itself. Another major problem is council approvals as most neighbours don’t like to look at your new turbine and tower. Finding places to park wind turbines is become a huge problem for suppliers and may be the main factor holding back wind turbine investors from making the kind of returns they may otherwise experience.

However, a new Carbon Trust study into the potential of small-scale wind energy has found that small wind turbines could provide up to 1.5 TW·h (terawatt hours) per year of electricity (0.4% of total UK electricity consumption), saving 0.6 million tonnes of carbon dioxide emission savings. 

Hydro energy investment
Hydro is in my opinion a real contender for making money in the renewable energy field. In countries such as Canada hydro represents over 60% (to be conservative) of many city needs. Major investments have been made to extract the energy stored in the mighty rivers throughout the world; But yet again we have a big HOWEVER!

there is a major price to pay on the environment. Dam systems not only cut off migrating fish stocks but also take their toll on agricultural needs and natural river integrity.

To be continued…

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