Lesson 8 – Marielle Martin

I considered this blog assignment from the perspective of a generalized renewable energy company.

Considering what I know about renewable energy, what are some of the key things I need to be able to explain to a potential funder of my project?

Long run outcomes are crucial to ‘selling’ a business idea to a potential funder. Renewable energies are luckily the perfect representative for long run focused projects. Explaining the benefits of an investment relative to competitive enterprises is important. The cost of non-renewable energies will rise a supply falls, and there is little control to be had over supply available. As a renewable energy entrepreneur, that notion, compared to expected growth in renewable energy use and a decrease in cost of implementing renewable energies, is a selling point. Getting down to the ‘nitty-gritty’ is also important to investors though.

What finance-based processes would I use to explain our potential for success?    

Using Return on Investment is a simple, straightforward approach to showing the viability and reason for doing a project, however it does not account for many variables related to taxes and extraneous fees. The Return on Equity accounts for these variables though, and is useful to potential funder persuasion. In addition to simply understanding the return, having an estimate of the value that a project adds to a business is very important. The Net Present Value shows cash flow after a certain period of time from project undertaking. Many renewable projects receive government grants too, so incorporating expected discounts further lowers the time required to achieve positive cash flow.

2 thoughts on “Lesson 8 – Marielle Martin

  1. I completely agree as to the selling of your business. There are a few differences between selling to an investor and selling to a homeowner. I feel that capital budgeting was more valuable that NPV. NPV is a good start but seemed to have to many holes or maybe variables that are not initially considered. I read about capital budgeting and that made a lot of sense. It reminded me of all the tools and fixed assets, maintenance etc…..check out my post if you have time….

    http://sites.psu.edu/engr312/2014/10/20/david-westsmith-lesson-8-blog/

  2. Hello Marielle,
    Long run outcomes are important to lure investment and given all the metrics to propose and predict outcomes it should be relatively easy to show the viability of a project. However, given the current government involvement with tax incentives and poor legislation regarding the SREC market, particularly in PA, it makes investors nervous. I think the government needs to develop better policy for renewable energy and level the playing field with non-renewables. PA’s Alternative Energy Portfolio Standard required 18% of energy generated come from ‘alternatives’ with only a 0.5% carve out for solar by 2021. Well since PA allowed every state within the PJM grid to trade and sell SREC’s in the PA market the SREC price went from $300 in 2010 to $25 presently. Solar businesses and installers either went broke or moved on to the next state. How can solar projects be financed if government enacts poor policy? What do you think will fix the PA market?
    I know you already posted to my blog, Thank you, but here is my link again:http://engr312.dutton.psu.edu/2014/10/17/solar-system-investment-mark-moore/

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