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Stocks, Bonds, Real Estate — And Now, Energy Investment

Richard Gordon - Manager Renewable Energy Systems at JPS

Richard Gordon – Manager Renewable Energy Systems at JPS

Not too long ago, during a discussion with a customer contemplating options for a renewable energy investment, my team explained the benefits that can be derived from renewable energy and, more importantly, how to get the best return on investment.

Only this wasn’t your everyday PAYE customer, this was the leader of a financial entity to which I would readily turn to seek financial advice because I trust their financial acumen. But the notion that there existed “energy” investment advice similar to that in the financial world was new to them. The executive even revealed that he now understood why a recent costly expansion to his existing renewable energy system had produced little return or benefit.

Electric utility companies like JPS invest billions of dollars in power plants. And hardly a dollar is spent without first understanding the value of the energy investment. For renewables, this means understanding how much of the energy source (sun, wind, water flow, wave height, etc) has been around in the past and how much is likely to be available in the future, if current trends continue. This is part of the puzzle that goes into determining the most economical, reliable, safe, environmentally friendly and durable way of converting the renewable energy source.

Not many will dispute the fact that JPS and its engineers know how to make a power plant operate well beyond its useful design life.

 Now let’s examine some of the other key fundamentals for an energy investment.

Most customers want the best value for their money and the best return on investment. Yes, some of my customers have very deep pockets and are not overly concerned with return on investment. If you are not at that financial stage where you can afford to invest a tidy sum and wait 10-15 years to recover the investment, don’t worry, most of us aren’t. (Note to my investment banker: we have some work to do.)

The economics of a battery-based system

For the rest of us, the key to maximum return on investment is understanding margins, that is, how much do I save when I am using the power I produce, versus how much I can earn from selling my excess electricity. The latter has a smaller margin, so limit your excess energy to below 20 per cent of your total energy consumption.

Every day my team of engineers and I are asked the question, “My light bill is too high… what size batteries do I need?” Now, if batteries were a cheaper way to power your home or business in 2016, the majority of utilities and my more affluent friends would all have adopted large battery systems by now.

The energy economic analysis shows that converting your home or business to operate on a battery-based system will actually increase your cost of energy; simply put, it will cost more than purchasing from the utility over the long term.

The leveled cost of energy over 25 years for a battery-based system is approximately US$0.50/kWh, about twice the US$0.24/kWh that customers are paying the utility now. It is no surprise that less than 10 per cent of all photovoltaic/solar energy systems installed worldwide are battery-based systems. If and when the day comes that a battery-based system is the more economical and has become proven technology, the utility companies of the world will deploy this technology in the most appropriate way. Until then, it is not an economically viable way for the average customer already connected to the grid, to lower their energy costs.

The fact is: small battery/energy storage systems are best used to provide a quiet and rapid response to a short power outage.

The bottom line is, if you want to lower your energy cost by producing your own energy/electricity, then this energy must be produced at a cost lower than the price at which you purchase electricity from the utility, with sufficient margin to allow you to cover the cost of your energy investment. The key elements to realizing this expectation are: low equipment cost, good quality installation and the use of existing facilities and services. These existing facilities include, but are not limited to: your roof, your electrical panel and wiring and its interconnection with a much larger system, that is, the JPS grid.

No hurricane-proof renewable system

There is no “hurricane proof” renewable energy system, not even the 50-70-metre tall wind turbines. So when making a long-term investment, it is important to have plans to deal with the protection of your investment. For the energy investor, this includes having design criteria, such as “three-second wind gust at 150 mph”, incorporated into the design of your renewable energy system. While this is commonplace for a utility’s investment in a large power plant, it is much less common in the design and installation of many photovoltaic systems in Jamaica, based on our observations.

Notably, this is an important criteria that will increase the initial cost of the investment, in a highly competitive and price- sensitive local solar (photovoltaic) industry.

As the international solar industry continues to evolve and with it the costs and engineering codes and practices, our local industry will need to also evolve. Let’s be smart energy investors. Seek out the best value for your money. Ask questions and be vigilant. When in doubt, ask an energy expert.



Category/ies:Jamaica News, News, Renewable Energy, Solar Energy, Success Story.
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