Investing in Renewables

Solar Savings?

Every day we are bombarded with adverts for Solar Energy offereing grandiose earnings from FITS (Feed in Tarrifs) guaranteed for the next twenty five years. It does strike me as the typical double glazing boys have jumped on the latest bandwagon. Be very aware though that the upfront cost is large, the returns at the best dubious, and the guarantee of FITS is based not on twenty five years but a four year cycle. Spain has already removed FITS from Solar energy as they say the new low priced imports of solar panels from China removes the necessity of subsidy. Now look at the figures and consider what, if any, saving you will make without the handouts and after parting with perhaps the thick end of twenty grand. Yes, you can still sell any surplus to the grid for the time being but, without subsidy, the running costs become marginal at best after considering the capital cost. Statistically speaking the south west is a positive place for Solar, but Scotland, with four times less sunlight, is dubious in the extreme. However there are more efficient photo voltaic panels coming on line and also the experience shows that the lifespan is likely to exceed the twenty five years forecast and with little or no maintenance. So should you or shouldn’t you. Seperating the financial from the moral allows you to make your own informed decision. With electricity prices set to rise, benefits are certain to improve. Solar heating panels for hot water have certainly proved themselves but at around £2k per house are less of a risk more a guaranteed return. Solar photo voltaic is a great idea and it would be brilliant for the government to bring in some form of grant, possibly in the form of a tax incentive, but the present situation is untenable. If you are buying new build or if you can easily afford it, I would certainly support Solar. If you have to borrow to buy, don’t!

Micro Hydro

If you have sufficient head on sufficient flow this may be a reliable and affordable way to go. Unfortunately, even if the Scottish Government seem pro micro hydro, you will find serious problems with SEPA. Also, allow that you can only rely on hydro for perhaps 30% of the year. However it is probably the 30% that you have the greatest demand for electricity. The main problem being that only a very limited number of mostly rural households have sufficient available streams or burns passing through their property.  Diverting the flow may also adversly effect those downstream. Simple run of the river systems are feasible and work. However it is questionable how well the savings balance with the costs. Off grid is fine but on grid the savings may be questionnable.

Ground Source Heat/Wood Burners 

In new build properties this is a no brainer. In older properties, it is a mixture of opportunity, availability of fuel and your attitude to energy conservation. One big caveat. Rely on recommendation by people who have already had the equipement fitted. One near neighbour has a marvellous system fitted that costs £2k per quarter to run. Something is seriously wrong there but they have been unable to get any help from the manufacturer or the installer. Caveat emptor! An experienced local installer would have prove much more satifactory.

Small Scale Wind

If you are tempted by small scale wind, it is a fact that in the end you will be reliant on making money from the same Feed in Tarrifs as Solar and the same Caveat exists. They are revalued every four years. The second caveat is never discussed for fairly obvious reasons. The liquidity of companies providing small scale wind is not proven. There have been many cases of farmers putting up turbines only to find the suppliers out of business when faults occur. You, the purchaser, take the risk. One farmer that I am aware of had a total generator failure after six months and now is faced with replacing it at the cost of over £250,000. His bank is less than enthusiastic in increasing his loan. These things have the potential to bankrupt you. Fine if you are renting the land to a major player such as SSE but many other operators work through shell companies. Towards the end of their lives, these wind farms may be sold on or the operating companies liquidated leaving the land owner with the nightmare scenario of a phalanx of metal dinosaurs on their land that they will have to pay to have decommisssioned. Do you want that worry when you are twenty five years older, or to leave that worry to your families? And one further question that depends on siteing. Do you still want to be on good terms with your neighbours after they find that they can’t sleep on summer nights without the windows closed? The best position for the wind might not be the least intrusive.

Bonds

Investing in wind seems a good option. Be aware! Be very aware! Most UK operating companies are subsidiaries of large multi national operators. Some will simply divert the profits to the holding companies leaving little for the local limited company. Some are very genuine and some are part of large european blue chip operators such as EDF or SSE. It is simply a matter of getting very good advice from a broker who is expert in the energy field. As a short term investment, it probably is quite a good bet but I think best left to those with long pockets. In the Telegraph today there was an investment offer of 8% for renewable energy bonds. Considering that is twice the norm, I think the adage ‘beware Greeks bearing gifts’ may be aposite. I think that I would prefer something that I could get out of quickly as, if the bubble bursts, I would hate to be left with a load of junk bonds. However, I am not an investment expert and I would caution anyone to seek expert and knowledgeable opinion on this one. Certainly an awful lot of money is going into renewables and some people are going to end up very rich indeed.

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