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The Business of Green Energy

By: Hugh Bromma, CEO of The Entrust Group

IRA & 401(k) Insights

The concept of “going green” has been around for several decades, but in the last decade, the term has been taken more seriously as natural, non-renewable resources continue to be depleted even though viable alternatives exist. The problem lies in our business practices. We are taught to fully utilize one economic resource until it runs out. At that time, another methodology or resource is used to reach our business goals. From a short-term business perspective, this makes economic sense. However, from a long-term business perspective, or even social and environmental perspectives, there are major problems with this way of thinking. Especially when the resources being depleted are non-renewable.


Choosing green is an environmental way of life in which one is committed to utilizing resources in a way that gives back to the planet. Air, water, and food are required to sustain life and business. Keeping the environment clean is crucial for maintaining health and existence. Furthermore, quality of life issues are directly affected by how we solve our current physical and economic climate.



Green Efficiencies


American businesses are taking more steps to become environmentally efficient. Some companies are transitioning to energy-efficient equipment and supplies, and some are recycling to help minimize carbon emissions and waste production. The innovative thinkers are integrating business plans that use waste, in addition to reducing waste. A great example of this is Onsite Power Systems. In partnership with UC Davis, Onsite has engineered a system that can transfer one truckload of garbage filled with food scraps and yard waste into energy that can power up to 80 homes.



Every day, new and established entrepreneurs are adapting to green business practices. Many are demonstrating these ideas in their business plans and putting their ideas into practice. Because of this trend, an increasing number of investors are looking at green start-ups as a potentially lucrative investment. 


Google Energy


Google is one of the largest users of energy in the United States. Realizing that energy sources will reach equilibrium between fossil fuels and renewable energy sources, Google has taken a 37.5 percent stake in Atlantic Wind Connection (AWC), claims ABCNews.com in an October 2010 article. Over the years, wind turbine installation has significantly increased. According to the American Wind Energy Association , wind turbines have grown in popularity since 2000. They reached a pinnacle in 2008, only declining from 2009 to the present day because of a weak economy. While the nation may be experiencing a lull in wind energy, Google’s investment in AWC appears to be just the beginning. In early 2010, they bought 20 years of wind energy.



Solar and Micro-Utility


When it comes to solar power on rooftops, a micro-utility project is one of the most efficient, low-risk business options on the market today. Micro-utility companies are usually developers and financiers of solar energy projects. They work on large commercial and utility scale solar projects. A typical micro-utility project works like this: one or more investors pay for a large-scale solar panel installation on the rooftop of a business. That business (and possibly other businesses depending on the amount of megawatts generated) buys the solar electricity from the investor over a period of time (typically 20 years). 
 
In an ideal situation, the cost of electricity to the business is significantly reduced, while the investor is reaping the benefits of the tax credits and the income stream from selling the renewable power. The features of such a simple solution, have enticing investment benefits, such as:


• Reliable cash flows
• Competitive return rates for low to moderate investment risk
• Investors have exit options through sale of project assets, recapitalization, or securitization of the micro-utility income streams

Flying Bio-Fuels


Jet fuel is the lifeblood of the airline industry. According to a February 2010 article by Energy Business Daily , it makes up more than 40 percent of airline’s operational cost—a heavy price you can count on being shifted to the consumer. Not only is jet fuel increasing in cost, it’s responsible for almost 11 percent of the greenhouse gases created by transportation in the United States. These two financial burdens are encouraging airline companies to think outside of the box when it comes to alternative fuels.

The airline industry is looking at all sorts of interesting types of fuel like weeds , chicken fat, and even algae to fuel our large appetites for air-travel. Bio-fuels could potentially reduce emissions related to air travel by 60 to 80 percent, according to Boeing experts. Whatever the solution may be, investment opportunities abound in the production of bio-fuels.

Alternative fuel sources and their agricultural components will become more and more viable for aircraft with time, investment, and infrastructure. Although the bio-fuel hardware market will eventually be saturated, early adopters may find investment opportunities in the energy-producing arena. These fuels will replace conventional non-renewables in the future, effectively reducing our carbon footprint.

As businesses and consumers continue to demand more renewable energy sources, there will be a great number of opportunities. The renewable energy sector requires billions of dollars in investment capital to continue to grow and create sustainable solutions for the planet. For investors, backing green energy is an opportunity to potentially make returns while supporting an industry that is quickly becoming the economic, social, and environmental future of the global economy.

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