July 4, 2009

Renewable Energy Investment

Your jaw will just drop because of your present electric utility bill for that month. It gone higher by around 15 to 20 percent compared to your previous electric bill. You are not using excess appliances except to your new microwave open which you are using for just 25 to 30 minutes in a week. How come you have arrived on such high electric bill?

High cost of power generation is one of the major reasons for that. Remember that most of power plants operating in the United States are still using imported crude oil as its main fuel. It is a fact that prices of such oil is volatile because of several factors such as weather condition, quantity of production, and some times political and economical conflicts.

Once prices go higher, importers have no other choice but to impose higher price to the power generation companies. The latter will pass the burden to the electric utility which is responsible on distributing generated electricity on residential and commercial consumers. That is how the cycle goes, and it will keep running as long as we are dependent on imported energy supplies.

The U.S. Department of Energy is tasked by the federal government to look upon the matter. That is why DOE is now working on the renewable energy sources that are domestically available. Research and studies are conducted to know the viability of renewable energy projects. After finding out the viability of these projects, the federal government together with different financial institutions is starting to provide funds that will be used in renewable energy investments. Of what it is and how it works will be discussed through the rest of this article.

Renewable energy investment (REI) is a program planned by the federal government together with different financial institutions in the country which concerns on raising investment capital, arranging finances and investments in renewable energy projects, and different technologies to improve energy efficiency. Investments covered viable renewable energy sources which includes solar power, wind power, hydropower, different bio-fuels (bio-methane and bio-diesel), geothermal power, ocean energy (tidal and thermal conversion), and waste heat recovery.

One integral part of REI is the venture capital. It is generally composed of funds raised in the capital markets by different specialized companies, funds, and investors. It is used to finance renewable energy that has potential in expanding their operation.

When a renewable energy company avails of venture capital, the investor who provided the funding will take part in the company's management, and normally will receive profits, shares, and royalties. However, these investors are not interested in dividend income. They are much interested on the growth of their stocks inside the company and at the same time seeing the company grow in a rapid rate.

REI Requisites for Renewable Energy Companies

There are certain REI requisites that a renewable energy should follow to avail the program. These are the following:

1. The Internal Rate of Return (IRR) - it is an indicator that the investment injected in a particular company will grow and the company's operation will expand in estimated time frame. Investors will not fund a company or project if it is not competitive enough.
2. Market Potential - it is the viability of the project. The company must have renewable energy projects that can create an entirely new market in order to achieve a high growth rate than projects in existing markets where there are large number of competitors.
3. Management - the company must have personnel organization with requisite skills, talents, capabilities, and industry experience to implement and supervise projects and other peripherals.

Renewable energy investment is just a step forward to reduce our dependence on imported energy supplies and at the same time expanding renewable energy. After all, we will be benefiting from it.