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Considering investing $250,000 or less in a solar project?

Photo by George Pagan III on Unsplash

After being away for a week or so from EnergyCentral.org community, I noticed a question "Best way to invest in solar"  - raised by Mr. Duncan Chinnock, to which I was referred by a dear friend, Mr. Matt Chester, Energy Central Community Manager of Generation and Energy Management Networks:

"I am looking into a solar investment for someone and am trying to figure out what way investment of that amount might be best utilized. If you had $250,000 to invest in a solar project, what kind of project would you look for and what kind of ROI would you expect?"

I have to say, this is an ultra-important question since more and more "small" and medium investors or just regular folks realize the true potential of investing in clean energy projects – whether those related to PV technologies or projects or any other similar ones. Furthermore, I'd say that those small investments are the absolute key for Energy Transition success, especially considering the enormous amount of $48 trillion (according to IEA) required for successful Energy Transition. I believe we do not need World Bank or UN report to realize that no one, including the UN or any other government (including the US or China governments), or any financial organization/s would be able to finance local Energy Transition process unless the Private sector, aka regular dudes such as Mr. Duncan Chinnock client who has available $250,000 or 5-10% of this amount, joins the common effort.

Prior to sharing my thoughts over this question I went over few answers provided by fellow members and noticed that suggestions vary from investing in solar companies bonds to investing in different technologies, from investing in large developers to investing in community projects.

First of all, I think it is great that the solar market became so diverse so we have truly plentiful opportunities to invest. 

Yet, among the suggestions offered by forum members, I didn't find the suggestion to invest this amount ($250,000) or actually much less in OURSELVES and our local communities in a form of Personal Energy Consumption Optimization (Deep Energy Retrofit) and/or Clean (Solar/Wind, etc.) Power Generation and/or Storage for personal use.

Let's say someone has an available amount for an investment. Obviously, this available amount is after-tax money.

If he invests in anything – whether bonds, shares or else – he'll have to pay income or any other tax over anticipated revenues – if those arrive of cause.

If he invests the amount in his own home energy consumption optimization + adds Renewable Energy system + Storage system etc. – he'll simultaneously raise home value, will reduce future energy-related expenditure and probably won't have to pay any further taxes.

As for the ROI, numerous reports conclude the expected ROI on the investment is 3-7 years, which leads us to 15-30% annual profit on such investment. Add to this formula tax exemption – since you are not allegedly profiting, and you probably couldn't get any other better deal.

It is clear to me that the improvement of the house is not expected to require an investment of $250,000, while the question relates to how it is possible to invest this specific amount.

As the respondents noted, the options are numerous. However, I would suggest considering the possibility of Impact investing in the local community, aka investing in the sense of promoting energy efficiency and clean energy generation in the neighborhood homes, by so creating a kind of the neighborhood semi-decentralized energy hubs.

Obviously, an investment of this kind is far more complex than investing in shares of any company, and while there is no certainty regarding the return on investment, especially when it comes to collecting the investment money back from our neighbors.

However, it is obviously possible to create countless mechanisms for kind of a joint venture, such as establishing a neighborhood cooperative, establishing a non-profit venture, formation some kind of LLC/LTD. or any other suitable form that fits your country legal principles.

On the one hand, concentrated investment in a joint venture - such as investing in DEEP ENERGY RETROFIT of 10 residential homes can significantly reduce costs, which will reduce the return on investment for all.

On the other hand, there is no doubt that promoting community interests, especially promoting the community in terms of energy efficiency and community sustainability, has many advantages. The members who have the ability to invest first capital could help neighbors who cannot bear the initial costs, while the repayment of the initial investment debts could be extended for a long period of time. So instead of paying for energy supply to the utilities, they will return the initial investment to those who were the first to invest.

It is important for each of us to live in a better neighborhood, in close interaction with neighbors with whom we have a common interest, mutual responsibility.

While each of us has a personal interest, in cases of energy sustainability, collectivism has a clear advantage.

Becoming sustainable delivers numerous benefits both to individuals and to society. However, it is clear that in view of the difference and uniqueness of each individual compared to the interests of the society, each will act out of his motives and personal (subjective) considerations.

Below is a list of topics that may constitute for every individual the basis for taking action:  

  1. Cutting down energy consumption related losses.
  2. Paying fewer taxes.
  3. Reducing Carbon Imprint resulting from domestic energy consumption.
  4. Raising the level of personal comfort and convenience.
  5. Raising Home value in the short and long term.
  6. Purely environmental considerations and willing to contribute in a common effort for a higher cause.
  7. The need to be proficient in all expenses related to the use of electricity.
  8. Getting ready for the future energy economy.

The Paradox:

On the one hand, the technological era we live at has placed an emphasis on the individual, giving the individual power that he has never had. The latter trends certainly emphasized the importance of the individual not only in the sense of the power that was put to his use but also in the individual’s attitude toward the other. The definition found in Wikipedia provides quite a clear definition for Individualism:

“Individualism is the moral stance, political philosophy, ideology, or social outlook that emphasizes the moral and material worth of the individual”.

However, and as for the matters at hand, namely climate change, environment, energy, and sustainability, etc., it is quite clear that in these cases the interests of an individual are identical to those of another individual. After all, the aforementioned issues affect us all.

The common interests of a large group of individuals lead us to conclude that under these circumstances, collectivism is of great importance.

“Collectivism is a cultural value that is characterized by an emphasis on cohesiveness among individuals and prioritization of the group over self. Individuals or groups that subscribe to a collectivistic worldview tend to find common values and goals as particularly salient and demonstrate greater orientation toward in-group than toward out-group.”

There seems to be a fundamental contradiction between the two aforementioned definitions.

An apparent conflict of interest between an average end-user (or neighbor)  and the society (or governments or wealthy individuals)  is solvable subject to the understanding of both parties that each of them must act in a complementary manner.

Moreover, both sides can benefit most from cooperation in this area. At the same time, the parties must change their approach to certain aspects:

End-users (or less wealthy neighbors) must realize that:

  1. Their own personal interests align with the common interests of the society (or neighborhood) as the whole.
  2. They could benefit from their own actions directly and immediately subject to taking action. Continuous procrastination will lead to nothing but continuous losses (in overpaying taxes, energy bills, Carbon Imprint, etc.)
  3. Becoming sustainable energy wise will definitely support the global effort of preventing or at least slowing down The Climate Change.
  4. Taking proactive action is the best we can do for the next generations, our kids

Impactful and wealthy people must realize that:

  1. Promoting (investing in) renewable energy solutions on large scale without optimizing energy efficiency at their (or the local end-users) premises and/or allowing end-users to do so delivers partial solution only.
  2. Renewable energy-driven society is totally different from the current fossil fuel based economy, and therefore it will not be wise to replace Centralized power Plants by Centralized Solar fields or Wind farms. Decentralized Renewable Energy powered and completely energy-efficient communities or even premises are the keys for a better future.
  3. Pouring billions into mega-projects could be avoided. Instead of wasting tax money and/or investments authorities (or influential community leaders) should promote energy consumption optimization (Deep Energy Retrofit) + vast adoption of renewable energy sources at end-users’ premises for self-consumption.
  4. It is much more important for wealthy individuals to team up with local end-users in a joint effort towards a common goal as opposed to being perceived as rich people disconnected from the needs and interests of their community members.
  5. Properly organized mechanisms of investments in local communities would bear not only solid monetary profits but also respect from their community members,

The bottom line

It’s about the time to put purely private interests aside. When it comes to small to medium size investments to sustainability and/or Renewable Power, the division into collectivism versus individualism is the one that detracts from the common goal and not necessarily brings the best result – aka high profits. In addition, not everything, and certainly not the level of satisfaction with the results of the investment, is measured in a numerical sense only. Investing in ourselves and in our local communities should both deliver monetary and personal status gains (Increased status in the eyes of community members).

Therefore, as far as the issue of investing in sustainable projects is concerned, the consolidation of these two concepts: 1. Individualism (purely personal interests) and 2. Collectivism (both personal and community interests) into something like – “Energy Sustainability oriented Collective Individualism” must be considered.

In short, we need Win-Win solution both for the individual and society, and investing together or investing on behalf of the local community (subject to ensuring a mechanism for collecting the investment back) would guarantee both monetary and personal satisfaction gains.

Tal Paperany's picture

Thank Tal for the Post!

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Discussions

Matt Chester's picture
Matt Chester on Apr 23, 2019 10:31 pm GMT

Thanks for this Tal-- a really great overview and some valuable insights into what sort of actions are the most impactful to solving the generational challenges we're facing. I'll post this link in response to the original question, as well!

Duncan Chinnock's picture
Duncan Chinnock on Apr 24, 2019 8:58 pm GMT

Thanks Tal.  This inquiry was for my brother and it looks like he is going to focus on a personal space to start with.... a commercial building he owns. He is upgrading the roof, making energy effecienty improvement and installing solar. It makes perfect sense for him to do all of this at this building which he is setting up as a Technology Incubator.  It's in Southbridge, MA and he is looking for tenants. Anyway, very thorough and insightful response to my query.

Tal Paperany's picture
Tal Paperany on Apr 29, 2019 12:59 pm GMT

Hi Duncan

Thanks for your kind words

I am glad if my answer was somehow helpful

I'd suggest for you and your brother to check out some elements of the following White Paper I published- https://www.energycentral.com/system/files/ece/nodes/340222/white_paper-_practical_steps_for_the_mitigation_of_climate_change_-january_2019_1.0.pdf, so he could check out stages of Bulbee process. Maybe he'll be able to implement some of them, and that for sure will allow him much better results (including ROI)  in short and long term.

Nowadays I am about to enter into cooperation with Israeli Innovation Authority in regards to this process etc. + pilot (hopefully it will be funded and promoted)  and tomorrow we start preparation for it officially.

The main reason for it is allowing smooth and cost-efficient Energy Transition to such guys as your brother and actually everyone else.

I wish I was able to help you further, and maybe I would. So if you have any further questions or else – please feel free to contact – tal@bulbee.net. Maybe I'll be able to assist to your brother as well – free of charge of causeJ

Best

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