Is Earth Day a Big Deal?

Sustainable & Responsible Investing Continues to Grow at Remarkable Pace

 

US SIF, the Forum for Sustainable and Responsible Investment published their biennial 2018 Responsible and Impact Investing Trends today. As we have been expecting, the amount of investments categorized as being sustainable and responsible has grown considerably since the last report back in 2016. Earth Equity Advisors has been a member of US SIF for over fourteen years.

Sustainable and responsible investing in the US has grown to $12 trillion from $8.7 trillion in 2016. That’s a 38% increase and now accounts for just over ¼ of all investments under professional management in the US.

Earth Equity advisors has seen asset growth of 60% plus over the last two years. “It’s exciting to see our industry to continue to grow at this rapid pace and even more exciting to see Earth Equity bettering the industry’s growth,” said Earth Equity Advisors’ CEO & Director of Investments, Peter Krull.

The report also catalogs the more than 700 shareholder resolutions filed relating to environmental, social and governance issues during the 2018 proxy season. “Shareholder advocacy continues to be a good strategy to push companies to be better and truly helps Earth Equity to fulfill our mission to empower our clients to be changemakers,” Earth Equity Advisors’ Partner & COO, Neill Yelverton said. The top issues raised were proxy access, corporate political activity, climate change and labor and equal employment opportunity.

 

For more information on the US SIF report, visit the organization’s website for an executive summary of the report.

 

Impact Takes Way More Than ESG. It Also Takes Common Sense.

Guest article by Earth Equity’s friend and colleague, Garvin Jabusch of Green Alpha Advisors

Originally published as “ESG Screens Don’t Go Far Enough” by WealthManagement


If you’re interested in sustainability focused or other forms of impact thematic investing, that’s great, and personally I believe we should all consider some allocation to solutions for our primary risks. However, it’s not as straightforward as it may seem. Don’t be too impressed with a fund just because it purports to use ‘ESG’ – Environmental, Social, and Governance – criteria. While ESG criteria can be a value-add tool, its value quickly dissipates when simply overlaid on backward-looking investment analysis. Investing in a pool of legacy businesses—like fossil fuel extractors or toxic agrochemical corporations–that possess some positive ESG factors  is neither necessarily ethically responsible, nor a satisfactory strategy for long-term performance. Achieving a truly sustainable portfolio with strong long-term returns must be more than simply screening an established index and adding a green, pink, or any other wrapper.

ESG, as generally practiced, still falls for the old trope that your portfolio has to shadow a benchmark to be considered low risk (as though risk and volatility are the same thing!). But such facile utilization of ESG rankings relies on backward-looking analysis of legacy businesses and technologies, some of which will not have much valence in the near future. If we take a closer look at which types of businesses are creating value, these winners-of-yesterday aren’t as likely to generate competitive long-term performance going forward, whatever their ESG scores may be.

My Green Alpha co-founder, Jeremy Deems, and I managed a couple of negatively screened, more-or-less typical green ESG funds from 2002 to 2007, prior to our founding of Green Alpha.

We found that starting with a defined universe like the S&P 500—without much opportunity to seek interesting, sustainability-driving companies outside that index—was limiting, both in terms of potential performance and achieving sustainability goals. Being given a list of stocks and told to make it greener, as opposed to looking for the growing basket of green stocks across the market, does not result in a sustainability-facing portfolio. Applying ESG criteria to an existing old-economy index is simply insufficient relative to the growth opportunities available outside of those indices, and to the scale of the risks of delaying sustainability.

So it’s not that ESG metrics aren’t valuable, but they can only have valence within the context of investing in companies that are advancing sustainability to start with. In the solar industry or sustainable agriculture, for example, ESG metrics like efficiency of water-use can assist in identifying leaders. On the other hand, relative ESG rankings within industries like fossil fuels burning utilities or topsoil depleting agricultural chemicals don’t mean much, yet these firms routinely end up in ‘ESG’ labeled portfolios.

Consider the following ad, snipped from my Bloomberg Terminal:

Screen Shot 2018-06-01 at 12.46.53 PM.png

I applaud Bloomberg for developing the advertised app, as it surely is interesting to know which fossil fuels companies are attempting to moderate their destructive behaviors, however marginally. But no level of awareness of the relative carbon intensity of your oil and gas holdings can de-risk your portfolio from the downsides of climate change, water degradation, and premature death from pollution as well as simply not holding oil and gas securities. But this is the mindset engendered by our collective inherited paradigm: as long as I’m able to represent that I hold a relatively “good” tar sands extraction company, I can claim my portfolio is ESG.

At the end of the day, a firm’s absolute performance in leading the way toward a sustainable economy is what matters, rather than its narrowly-defined, industry-relative ‘progress’ toward a vague goal.

But it’s easy to simply say I don’t like the system. I have to actually propose something else, an alternative.

To think about a portfolio, we have to think through the economy that portfolio will reflect. The global economy will only self-perpetuate and grow under certain conditions, given a first principles view of the current political-economic situation. Therefore, a sustainable, efficient, and value-creating economy must stand on four pillars:

  1. exclusive use of true zero-carbon, cheap renewable energies,
  2. waste-to-value economics to reduce and ultimately nearly eliminate our reliance on destructive resourcing of materials from primary geological and natural sources,
  3. ever-accelerating productivity gains, ultimately to the point where there are so many economic outputs from so few inputs that we can thrive and even grow indefinitely while shrinking the economy’s ecological footprint, and
  4. equitable ownership of these new means of production.

The emerging and accelerating growth of an economy built on these tenets will greatly diminish the chances of global civilization succumbing to one or more existential-level systemic risks, while simultaneously creating wealth and even abundance. We call this Next Economics, and we’ve predictably dubbed its practical application Next Economy Portfolio Theory.

Next Economy Portfolio Theory begins by positing that any company that 1) is not contributing to the advancement of one of these four pillars, or 2) does not have a viable and preferably exciting business model, is more likely than not a bad equity investment, especially for the long term. Why? Because any investment that doesn’t serve the de-risking of the global economy while simultaneously generating productivity and therefore wealth and abundance will by definition eventually self-destruct. For example, attempting to double world GDP over the next couple decades on the basis of high-carbon energy inputs will cause that economy to struggle and likely fail. For us then, avoiding investing in the causes of major problems, in preference to investing in companies driving the Next Economy, is just common sense.

Does ESG matter? Yes, but you can achieve a much more potent impact investing style by utilizing ESG only within the context of the already-sustainable economy— by simply focusing on what’s next. If the fact that the four pillars of the Next Economy serve the cause of sustainability means you equate Next Economy investing to ESG, that’s fine, but don’t imagine that ESG methods and rankings alone will get us there. It takes way more.


EARTH EQUITY ADVISORS IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

The Economic Case for Fossil Fuel Free Investing

We really loved Betsy Moszeter’s article, “The Economic Case for Fossil Fuel Free Investing,” published in the November/December ’17 issue of Investments & Wealth Monitor. Moszeter is Partner & COO at Green Alpha Advisors, a responsible investment management firm in Boulder, Co. She is also good friend and colleague of us here at Earth Equity Advisors. Read the excerpt below and click through for the full content. 


The Economic Case for Fossil Fuel Free Investing

Investment industry practitioners and academics increasingly are talking about the financial and economic reasons why an investment advisor should offer clients investment strategies that are void of fossil fuel extractors, utilities, pipelines, and service providers. As advisors evaluate the economic and financial risk presented by fossil fuels, it’s also necessary to consider the resulting investment opportunities presented by companies innovating around the growing renewables industry. Even former U.S. Securities and Exchange Commission (SEC) Commissioner Bevis Longstreth is working hard to educate investors and investment professionals about why it’s entirely within one’s fiduciary duty to rethink the current and near­future investing paradigm of the sector.

In his article, “The Financial Case for Divestment of Fossil Fuel Companies by Endowment Fiduciaries,”1 Longstreth writes, “At some point down the road towards the red light of 2 Degrees Centigrade … it is entirely plausible, even predictable, that continuing to hold equities in fossil fuel companies will be ruled negligence.” Who knows more about potential negligence and what falls within one’s duciary duty than a former SEC commissioner? Let’s explore a few of the factors leading him and many others to recommend that invest­ ment portfolios be divested from fossil fuel companies.

Continue Reading…


EARTH EQUITY ADVISORS IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

The Long and Short of Socially Responsible Investing

With the rise of companies engaging in socially and environmentally responsible business practices—fair trade partnerships, living wages for all workers, utilizing sustainable manufacturing and harvesting practices to name a few—debates have risen about what impact our investing strategies have. Is it just as good to invest in a company that donates a little bit of profit to charities every year as it is to choose a company intent on growing their triple bottom line? (Triple bottom line companies focus on financial, environmental, and social outcomes.) Are there short or long-term benefits to one over the other?

Let’s look at two supermarket chains as an example. Ingles Markets provides $1000 scholarships to high school graduates who are employees or children of employees at any of their stores. This can be called an investment in the next generation, ensuring a means to a college education for young people who may not otherwise have the assets for tuition and housing. It fosters goodwill in every city where an Ingles Market is located, which prompts investment in the chain with investors knowing their money supports a company that’s interested in the future. But is awarding scholarships, or donating a portion of profits to local or national charities, the best the chain can do?

In the short-term, such investment in a company like Ingles Markets has a positive impact, but some argue it isn’t enough. In contrast, the Whole Foods Market chain strives to forge partnerships with suppliers in poor third world countries to facilitate fair trade and sustainable farming practices while bringing nutritious foods to underserved portions of the US. This is more than a profit making decision. It’s a boost to the company’s core values by widening their influence for the benefit of populations who need the most help. While it sometimes does make the products in Whole Foods Markets more expensive for the consumer, the chain’s success over the last decade proves sustainable practices that grow a company’s triple bottom line are attractive to consumers and investors alike.

“This is more than a profit making decision. It’s a boost to the company’s core values by widening their influence for the benefit of populations who need the most help. ”

The winds of change have driven many companies to behave in a more responsible manner, not just for their financial growth, but also for the benefit of the environment and society as a whole. Investment in socially and environmentally responsible companies is on the rise, currently a $20 trillion dollar industry. Studies have shown companies that cared about social and environmental responsibility had better operational efficiency, lower cost of capital, and better stock price performance.

Can a company that doles out scholarships or charitable donations compete with companies that reach farther and wider in their fair trade, sustainable, and environmentally conscious efforts?

Investing in companies that understand the value of giving to the communities in which they do business is not a bad choice if you’re looking for short-term impact. But for how long will that strategy remain competitive? As the emphasis on the worldwide impact of business rises, triple-bottom-line companies can convince investors they’re in it for the long haul, and not just for the next generation, but the ones that follow.


Interested in responsible investing for the long term? We can help. Contact us for a complimentary consultation.

Do You Need a Robo-Advisor or a Human Financial Advisor?

Society moves at a breakneck pace these days. Smartphones have given people access to virtually any information they want regardless of their location or time of day. With financial planning needs changing in seconds and people wanting information instantly, robo-advisors are being implemented more and more.

Which type of advisor is right for you?

A financial advisor’s role is to help you live the life you choose, whether that involves a big family with lots of college tuition down the line, early retirement, property investment, world travel, or more. Robo-advisors put your portfolio at your fingertips, giving you a snapshot of your investments in an instant.

A robo-advisor puts control of your future in your hands more than ever before. With the ability to make changes to your plan, you can make your money work for you using a robo-advisor. However, just because you can make swift changes to your strategy doesn’t mean you should, and which is where a human advisor comes in.

It Depends On Your Stage in Life

Much of the human advisor versus robo-advisor decision depends on your stage in life. If you’re just starting out as an earner and have only a small amount of investment capital, a robo-advisor, with its lower fees and more hands-on approach, could very well be the best option for you.

Young or first time investors are typically used to the technological savvy required to manage their own investment strategy, so a robo-advisor may feel more comfortable. Using a robo-advisor provided by an investment firm allows for a DIY approach with the safety net of a human advisor should questions arise. An initial meeting with a human advisor can help them understand the full impact of their investments through both the immediate and long-term future. The lower fees and transparent pricing of a robo-advisor may also be attractive for a group without a lot of assets (or rapidly building assets). As time goes on, the robo-advisor becomes an essential tool, giving them more flexibility to drive their portfolio themselves and make adjustments on the spot.

Another group to benefit from a robo-advisor are the savers, looking to build their portfolio for the golden years. This group is generally climbing the corporate ladder and balancing college tuition for their children. Because needs can rapidly change at this level of investment, there are sometimes questions better answered by a human advisor. A robo-advisor may give more control over the investment options, but a human advisor can answer questions pertaining to more dynamic investment considerations. Talking about money isn’t just about money, and a human advisor can tailor a plan that answers unquantifiable questions like how do I plan for an adventure trip of a lifetime or purchase the mountain cabin where I want to live out my retirement years?

“While a robo-advisor alone puts more control in the clients’ hands, there are still situations where a human advisor is a better voice in your corner, with their expertise and ability to think dynamically to plan your strategy. ”

While a robo-advisor can give easy access to the state of their investments, those who are high earners but not rich yet should have a human advisor who can answer questions revolving around taxes and alternate income streams. A robo-advisor is helpful for quick changes and immediate control over the portfolio, but for someone with quite a lot of investment capital, a strategic plan with a human advisor’s expertise can be more beneficial, keeping the robo-advisor as a single tool in an arsenal of tools to best manage the portfolio.

Those at the pre-retiree/post-retiree point in life are less likely to benefit from a robo-advisor over a human one. Plans that have been years (or even decades) in the making benefit from the human touch to ensure everything’s on track. Life can surprise us, and if that happens after retirement, a human expert can produce a creative solution to minimize any setbacks where a robo-advisor can only inform of the setback’s consequences. Keeping the road smooth through retirement years takes investment savvy and creativity that perhaps cannot be duplicated by a computer.

For those who’ve come into an inheritance, are named in a trust, or have gained a windfall through other circumstances will benefit most from a human advisor who is experienced with planning and executing an investment strategy around these specific life events. Such advice can cover questions around taxes, disbursements quantity and frequency, and can mean the savings of thousands of dollars in penalties if not properly handled.

A human advisor can offer advice on this and much more, as well as recommend investments that fit the clients’ social consciousness. While a robo-advisor alone puts more control in the clients’ hands, there are still situations where a human advisor is a better voice in your corner, with their expertise and ability to think dynamically to plan your strategy. A robo-advisor opens many doors to the understanding and control over one’s investments. Be sure to research carefully which option most fits your needs. Perhaps the answer for you lies with a combination of human expertise and the flexibility and control with a robo-advisor that gives the most value and peace of mind for a future lived the way you choose.


Set up a consultation with us to discuss your sustainable investment options.

Renewable Energy 101: Say Hello To Geothermal

Geothermal energy is simply the use of the heat from the earth we live on.

Generally, it’s captured by pulling hot water and steam from beneath the surface and once the heat energy is utilized, returning it in the form of warm water to be heated again.

Many regions of the world are already capturing geothermal heat for a sustainable source of energy to replace our reliance on fossil fuels. Geothermal plants account for more than 25% of the electricity produced in both Iceland and El Salvador (source).

Like other sustainable energy sources, the main cost for geothermal power is in the initial investment phase of building the plants.

However, running and maintenance costs are minimal because there’s no fuel used, and therefore no purchasing, transport, or cleanup costs involved in the operation of the plants. The cost can be recouped in a few years via a 30%-60% heating bill savings and a 25%-50% savings on cooling costs. (source) Because the hot water and steam utilized is renewable, scientists have surmised that with proper reservoir management of the steam and water levels, the energy potential in geothermal reservoirs will last literally billions of years. (source)

Because geothermal energy is predictable, it is an excellent resource for a base load of power which can be relied upon with remarkable accuracy.

This is not the case with solar and wind, which are weather dependent.

Geothermal capabilities can be harnessed on a grand scale, such as in Reykjavik, Iceland (pop. 118,000), where virtually every building is heated with hot spring water from the earth.

Both large and small systems can be installed depending on the needs of the property owner, and such a reliable source can reduce traditional energy costs significantly. (source)

Geothermal plants are not only beneficial as utility suppliers, but as direct power refineries for industries such as milk pasteurization and agricultural processing, and gold and silver mining facilities, and temperature regulation at fish farms. There’s also the potential for crop irrigation improvements around the western half of the United States, relieving a burden on rural water co-ops, private water conveyors, and the Western Area Power Administration. (source)

Benefits to local and rural economies are also realized through federal and state royalties paid by geothermal plants.

The Department of Interior’s Office of Natural Resources reported in 2013, geothermal power suppliers were responsible for around $15 million in royalties and rents from federal lands used for geothermal production. (source)

While geothermal power may not be as widely available due to location specific requirements such as proximity to volcanic and geyser activity or tectonic plate movement, the areas that are conducive to geothermal power can significantly benefit from the infrastructure advantages of well-paying jobs, influx of property taxes, and reduction of traditional power usage and savings on traditional utility bills through a resource more reliable and potentially more sustainable than fossil fuels—the earth itself.


PETER KRULL IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

Renewable Energy 101: The Power of Wind

As an option for sustainable alternative power resources, wind energy is in the forefront as a viable choice. It is a renewable resource, so the supply will never deplete, and unlike conventional power plants, wind turbines or wind farms produce no pollutants or greenhouse gases.

Wind energy is captured by windmills or wind turbines, which look like large fans with blades that can be as large as a football field. The wind turns the blades, which generates kinetic energy used to turn turbines attached to generators. The generators convert the motion of the turbines into electricity and feed into the power grid.

Small businesses or private residences can also harness wind energy with much smaller turbines connected to the power grid.

If the business or resident uses less energy than the wind turbine produces, it can actually result in credit from the power company.

Because wind energy is a drought resistant crop, farmers and ranchers have been taking advantage of its production as a way to supplement income alongside their planted crops and keep the land their families have worked for generations.

According to the Department of Labor, “wind turbine technician” is the fastest growing job in America.

As of January 2016, wind energy supports 88,000 high-paying American jobs, 21,000 of which are manufacturing.

The initial investment in a wind turbine, while having drastically decreased in the last 10 years, is still significant, with site preparation and installation of the machinery responsible for 80% of the cost. However, on a life-cycle cost basis, wind turbines are much more competitive than other technologies because there is no fuel to purchase and ongoing operating expenses are minimal.

Perhaps the biggest benefit of all is the projected health benefits of wind energy.

According to the Harvard School of Public Health, as of 2015, wind energy produced $7.3 billion a year in public health benefits by cutting pollutants that contributed to asthma attacks and other lung diseases.

Drawbacks, however, include the weather-dependent nature of wind. The wind doesn’t always blow when electricity is needed, and the way the energy is harnessed, there’s currently no way to store power in times of surplus to be used in times of shortfall.

It is also not feasible for the power to be supplied over long distances. Those benefiting from wind farms are limited to the location where the wind blows strongest.

This, however, isn’t necessarily prohibitive, given highly populated coastal communities can benefit from offshore wind farms, like one being built off the coast of Long Island, just recently approved by the Long Island Power Authority in January 2017.

The goal is to add low-carbon energy sources to the power mix by producing 2.4 gigawatts of offshore wind, enough to power 1.25 million homes and add high paying jobs while combating climate change. (Source)

With current estimates putting wind energy potential at ten times greater than the current US electrical consumption, wind energy, in combination with other forms of renewable energy, could be the wave of the future.


PETER KRULL IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

Renewable Energy 101: Hydro Power

Hydroelectric power, or hydropower, is the kinetic energy created by moving water captured by turbines and converted to electricity by generators.

Hydropower is actually one of the oldest forms of power production on earth, dating as far back as ancient Greek farmers using it for mechanical tasks such as grinding grain.

Paddlewheels were used in everything from mills and factories to boats built to cruise down the Mississippi River.

Hydropower is the product of damming up a river or lake and controlling the flow of that water through the dam. Used in conjunction with rainwater storage and proper management of the flow, hydropower harnesses a renewable resource that can’t be depleted.

Unlike wind and solar power, hydropower can be stored for times when the burden on the power grid is greatest.

Water can be pumped from a lower reservoir to a higher reservoir during times of low power usage—like overnight, when power consumption is at its lowest—and released again to the lower reservoir during times of high consumption, where the volume of water released can generate more kinetic energy to transfer to the power grid via the generators.

While the infrastructure to build hydropower is extensive, maintenance and technological improvements over time are easily done, making it a heavy investment up front but cost effective in the longer term. With an average lifetime of 50 to 100 years, hydroelectric plants can benefit generations, and have the ability to go from zero power to maximum output very quickly, making them ideal backup systems for sudden changes in demand, such as power supply interruptions due to weather.

All 50 states have some form of hydroelectric capacity already in place, with places like Washington State getting 70% of their entire power supply from hydropower.

Eleven other states get more than 10% of their capacity from hydropower. (source) Dams can also produce recreational opportunities, with the lakes formed by the reservoirs providing ideal destinations for fishing, boating, swimming, camping, and other outdoor activities. Reservoir water can also be used for irrigation, and the dams themselves are often considered tourist attractions, like the Hoover Dam.

While the environmental impact of the placement of dams is a very important consideration, teams of environmental engineers can be brought in to assess how to minimize this impact. The implementation of fish ladders and fish elevators help reduce or eliminate changes to the migratory and feeding habits of those dependent on the water being used in the dam system.  Dams can (and do) control flood prone areas to keep people safe.

Less than 3% of the United States’ dams are set up for hydropower (source).

This leaves room for expansion of already existing infrastructure through renovation rather than new construction that will further impact the environment, and in the long run, hydropower runs far cleaner, is more controllable, and has the potential to provide much more than the 16% of total electricity function it produces today (source).


PETER KRULL IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

Renewable Energy 101: Get to Know Solar

The first thing to come to mind when the words “clean energy” are used is solar power.  Solar power simply means taking the energy emitted by the sun and converting it to electricity through the use of solar panels. Harnessing the power of the sun was one of the first ways people considered as a power alternative to the traditional power sources derived from coal and natural gas for the purposes of lowering greenhouse gases and our dependence on the finite stores of fossil fuels.

The sun’s rays produce two possible power alternatives to fossil fuels: heat and light.

Heat is best used in thermal systems reliant on temperature to run. The heat produces both hot water and hot air for commercial and residential heating, and can also be used to generate power through steam or sterling engines.

Light is used in photovoltaic (photo = light, voltaic = produces voltage) systems, which convert the light to energy. This conversion is the main area industry leaders are turning to for advancement of the solar power industry today.

As with wind energy, the investment in solar power is heavy upfront.

However, advancements in the technology used to produce more efficient solar panels, coupled with the current tax incentives, energy bill cost savings, and increased market value of the property once panels are installed, the cost is an investment worth considering.

According to The Appraisal Journal, the selling price of homes has increased by more than $20 for every dollar decreased on the energy bills of the properties. Additionally, studies in California through Clean Power Research show over the lifetime of a solar energy system (30 years), homeowners will save an average of $40,000, and the cost of installation of a solar energy system has come down 75% since 2009. The national average purchase and installation price of a solar energy system is between $12,000 and $20,000, with a 25-year warranty. (Source) Maintenance, once the system is installed, basically comes down to cleaning the panels once a year.

Considering the sun emits enough energy in one hour to power the global population for a year, solar energy is perhaps the most obvious way forward in the initiative to replace fossil fuels and our dependence on them. A new report by the US Department of Energy (source) states that solar power employed 43% of the Electric Power Generation sector’s workforce in 2016, while all three fossil fuels (coal, gas, and oil) combined for only 22%. Slightly less than 374,000 people were employed in solar energy, while fossil fuel generation had a workforce of slightly more than 187,000 jobs. The boom in the solar workforce can be associated with construction work focused on expanding solar power. Coal employment has fallen 53% over the last decade, while during the same period, electricity generation from natural gas has increased 33% and solar generation has expanded 5000%.

Solar energy is rapidly becoming the future when it comes to powering our increasingly electronic lives.