Decentralization of power generation has the potential to improve upon energy use efficiency, helping to lower greenhouse gas emissions and provide additional energy security (E.ON UK, plc. 2014). Rather than having only limited, yet massive, power generation sites and transmitting energy over a great distance, energy may be generated and distributed by smaller facilities reducing loss and waste (Casten, Jan. & Feb. 2005). Local communities will benefit from geographically driven solutions taking advantage of an area’s unique ecosystem and resources. Decentralization in and of itself does not prohibit any particular form of energy development; it merely focuses the efforts of the best solution in each unique locale. This is a big shift, however, spurred by improvements in technology that could change the structure of the energy utility company as it exists today. Current energy utility companies may find themselves shifting to a project management type role in helping to coordinate and maintain transmission generation from smaller, more local generators (Koerth-Baker, April 6, 2012).
Companies that are focused on research and development, environmental consultants, financial advisors, maintenance, and, of course, political and policy consulting firms will all be in great demand. This is also a time when technology improvements may increase significantly with a more competitive business environment. It is likely we will see breakthroughs in storage and computer technology opening the door to new companies that will service the infrastructure. One of the more interesting opportunities may well lie in bringing together local, regional, and national efforts ensuring efficiency while maintaining a broad focus aimed at economic, social and environmental sustainability. Policy issues and solutions will evolve over time as deemed necessary. A company well versed in regulatory affairs and the intricacies of public policy will be necessary to keep this new energy delivery structure moving forward.
Casten, T. R., & Downes, B. (2005, Jan. & Feb.). Critical thinking about energy: The case for decentralized generation of electricity. Skeptical Inquirer, 29(1). Retrieved from http://www.csicop.org/si/show/critical_thinking_about_energy_the_case_for_decentralized_generation_of_ele/
Koerth-Baker, M. (2012, April 6). What we talk about when we talk about the decentralization of energy. The Atlantic. Retrieved from http://www.theatlantic.com/technology/archive/2012/04/what-we-talk-about-when-we-talk-about-the-decentralization-of-energy/255873/2/
What is decentralized energy? (2014). e-on. E.ON UK plc. Retrived from https://www.eonenergy.com/for-your-business/large-energy-users/manage-energy/energy-efficiency/decentralised-energy-experts/What-is-decentralised-energy
Obviously, much of what most investors are going to be interested when investigating a renewable energy company will be the same as if they are looking at any type of business – financial statements. An investor is going to be most interested in their potential ROI (return on investment). If this is a new company, the business plan should include financial projections that clearly define what the balance sheet and income statement expectation may be along with outlines of the goals and exit strategy (if one exists).
In the renewable energy industry, it is likely the sales projections will depend largely on available incentive programs. It is imperative that a new company understand what those incentives, the details on the life-cycle and the estimated value and how those incentives will affect sales. If sales can be expected to be cut in half if the incentives are withdrawn, then that information must also be relayed to the potential investors. Also, it is critical to provide the potential investor with a thorough risk assessment and analysis. Although the fossil fuel industry understands and has been working with such assessments for a long period of time, it is something that the renewable energy industry needs to address. Properly conveying the risk and mitigation solutions could take an investor off the fence and make him or her want to invest in your project (Altran GmbH & Co, 2011).
With risk management addressed, it is imperative to show potential investors how the business makes money and, most importantly, has a significant rate of return. The best accounting method to do this, after the actual and future estimated balance sheets and income statements are prepared, is to run a return on equity (“ROE”) which takes the net income realized divided by the shareholder’s equity. This effectively shows how much profit has been and will be generated per dollar of investment. With some historical information, this number can also so the company’s efficiency levels. A rise in ROE each year would indicate a strong and efficient company. There is, however, the potential to artificially affect the ROE by having a large amount of debt or buying back shares (Financial Statement Analysis, 2014).
Altran GmbH & Co. (2011). Risk Quantification and Risk Managment in Renewable Energy Projects. Hamburg, Germany: Author. Retrieved October 15, 2014, from http://iea-retd.org/wp-content/uploads/2011/11/RISK-IEA-RETD-2011-6.pdf
Financial Statement Analysis (2014). Investing Answers. InvestingAnswers, Inc. Retrieved October 15, 2014 from http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/return-equity-roe-916
The government could help to promote energy efficiency with a number of different policies that support innovation from local communities and utilities. The government could offer, for example, incentives and low-cost loans that can be distributed through local utility companies for retrofitting current structures and applying higher efficiency standards in new construction. Decisions as to the best methods of efficiency are most effective at the local level with attention to geography, availability, and distribution of resources. Capital constraints previously preventing individuals and industry from taking advantage of advanced methods of energy efficiency may be alleviated with access to low-cost loans guaranteed by the government. Although one argument may be that the recovery time is too lengthy to realize any individual benefit of such upgrades, this may be handled by incentivizing the utility to provide the immediate cost benefit recouping its cost over time. Additionally, the government should expand its efforts to ensure easy access to all available energy usage and technology data is accessible.
In order to move this idea forward, I would create a business that will wade through the myriad of tax, regulations, and technology choices and provide a turn-key solution. The business would determine the best efficiency solutions for local industry and individuals while working with local utilities and the community ensuring a holistic approach. This type of business would receive funding through a variety of government (or other more creative) sources and would use all available programs to offset individual investment for provided solutions, where feasible. If the brunt of the capital cost is handled outside of direct investment by individuals, there is a greater chance of acceptance and this is when real progress may be made.
One of the reasons renewable energy projects do not appear to be getting the same degree of support (financially) as more well-established forms of energy is that we do not have the infrastructure or the storage ability required to allow renewable energy to take over the bulk of total energy demand. The transmission grid needs a large expansion and upgrade before we are able to move energy from where it is being generated to where it is needed (Harris, 2013). More importantly, there is no storage ability with current technology. Without storage ability, renewable energy cannot be developed beyond the point where such energy’s total share of the market hits its capacity level (Jenkins, 2014). It is a great deal easier to cycle a nuclear plant during non-peak times than it is to stop a hydro-electric dam during fish migration. Private equity does back a great many projects in the renewable energy market but a significant return on investment is not yet available because of the enormous amount of money required for research, development and infrastructure. At this time, non-renewable energy is still less expensive and more lucrative. Until that shifts, the nuclear and non-renewable energy market will continue to receive more support.
There are a number of niche opportunities in the renewable energy market that come to mind, especially in light of the estimated $100 trillion dollars that will be spent to build the system. First, because the market is in its relative infancy, we are still developing local, regional, national, and global regulations that will govern this industry. A company that is well versed on all of the regulations and issues will be of tremendous benefit to government agencies and private industry alike. Another possibility for a niche opportunity is that of recycling. This may take the form of battery recycling or PV panel recycling. As we become more reliant on renewable energy, it is important to understand that some of the components that will be used and, ultimately, wear out are going to require special handling and proper disposal. Of course, it goes without saying that storage development is also another critical niche opportunity as is energy management, including software applications and distribution.
Harris, R. (2013, December 02). Slashing fossil fuel consumption comes with a price. NPR. Retrieved from http://www.npr.org/2013/12/02/248230187/slashing-fossil-fuel-consumption-comes-with-a-price
Jenkins, J. (2014, April 15). Can nuclear power and renewable energy learn to get along? The Energy Collective. Retrieved from Jenkins, J. (2014, April 15). Can nuclear power and renewable energy learn to get along? Retrieved from The Energy Collective website: http://theenergycollective.com/jessejenkins/368706/can-nuclear-power-and-renewable-energy-learn-get-along
My name is Jennifer Bechtel and I am working towards my BA-ESP (Energy and Sustainability Policy). I still have a way to go given the few classes that I can take at any one time because of a full-time job and full-time mom duties for a very busy pre-teen who is also a competitive gymnast. I live just South of Denver, CO although I grew up on the East Coast and spent my formative years in Philadelphia. I call Philadelphia my “home town” but was born in Virginia and spent time on all three coasts. I admit that it is a bit strange being land-locked although it is beautiful out here and possibly the best place to get through a winter season since snow does not hang around long.
I have worked in the upstream oil & gas business for more than 10 years now in a variety of positions. Currently, my position is that of a lead drilling tech for a large, independent oil and gas exploration and production company based in Houston with offices here in Denver. I began my career in oil and gas when a former colleague identified me as someone who possessed a great skill set to work in the regulatory field and gave me a position as a senior regulatory analyst. In that position, I handled all regulatory affairs for the Rocky Mountain division of another oil and gas company and found I had a talent for working together with federal and state agencies toward a mutually beneficial goal. I do not know yet where this degree will take me but I am leaving myself open for possibilities.
My interest in this course is primarily to satisfy my core requirements. However, I have always wanted to find my own niche and am intrigued by wealth of entrepreneurship opportunities in the energy field.