Friday, June 17, 2011
The new post-carbon age business model
The idea of providing a service of renewable energy - rather than a simple supply - and reaping a return on investment from selling any surplus generated to the grid, or by claiming the difference between the regular and premium rate, is emerging as the favoured business model for financing the low carbon revolution.
The latest example is the announcement from Google on Tuesday that it will finance a $280 million retrofit of residential solar power systems in the United States through a deal with startup SolarCity. This is the search engine's largest single renewable energy investment to date.
Upfront cash payments will enable householders who can't afford a large upfront investment to have solar modules installed on their roofs by SolarCity in a leasing arrangement. This allows them to pay a monthly fee for the modules that would be offset by savings and electricity bills.
The systems will be owned by Google who would earn a higher return on their investment than if the cash was in a bank.
This business model is now becoming established in the UK. The latest example was announced on Wednesday by the Foresight Group and Our Generation Limited, who have agreed an initial £10 million programme of residential solar PV installations in the UK over the next 3 months.
Energy services company Our Generation will make the installations and utility E.ON will be responsible for recruiting and managing the customer experience through its SolarExchange initiative.
15,000 of its customers will receive solar power installations costing as little as £99 and save up to £180 on their annual energy bill.
Foresight already manages solar power assets worth over £150 million.
The model is being used by many companies in the UK to finance the installation of solar PV modules on rooftops. The premium 41p/unit paid by the utility for solar electricity provides the return on investment.
Britain's forthcoming Green Deal and Renewable Heat Incentive will see many more examples of this model rolled out, with both large (Tesco, B&Q) and small companies seeing opportunities.