13.06.2013
Font size
0 Vote(s) Rating
Do the math!

Unleashing the force of citizen investors

Americans continue to underestimate the importance of community ownership in the renewables sector. A recent article at Think Progress is the latest example. But one significant number was left out of the calculation, as we discuss in the latest edition of Do the Math!

Last week, I referred to an excellent article by John Farrell of the Institute for Local-Reliance in discussing why Americans fail to understand how third-party ownership will prevent energy democracy by leaving ownership of energy supply in the hands of corporations. Specifically, Farrell spoke out convincingly against "master limited partnerships."

This week, the energy director at the Center for American Progress, Richard Caperton, responded. His main bone of contention is that "it's not clear that small investors have enough money to make the transition to a zero-carbon future happen on their own." His back-of-the-envelope calculation shows that the investments needed for the US to go 80 percent renewable are equivalent to 20 percent of the average household's net worth in the US.

 - Roughly half of all investments in renewables made in Germany came from individuals as of the end of 2011.
Roughly half of all investments in renewables made in Germany came from individuals as of the end of 2011.
energytransition.de

Interestingly, Caperton does not mention the date for that calculation: 2050. Had he done so, we would have easily been able to calculate that the 17,000 dollars he says every household would need to invest do not all come at once; indeed, we have 37 years until 2050, so the average household does not even need to invest 500 dollars a year.

And once again, familiarity with the German situation is helpful. In the 1990s, the village of Schönau (population: 2,400) had to come up with nearly 2.9 million euros in their effort to take over their local grid – more than 1,200 euros per person, not per household, and it was needed immediately. The community itself got 2 million euros from its own citizens, with an additional 900,000 coming from citizen investors from the rest of the country. In total, the amount was spread across 650 investors, who contributed nearly 4,500 euros on average.

"But Craig," I can hear you saying, "that's cherry-picking – you can't switch over the entire country that way." Don't tell that to the Germans, for whom the entire Schönau campaign has become a role model to follow. Berliners are now fighting to get back their grid, and Germans in general remain skeptical of corporate ownership of renewables. Indeed, German experts increasingly wonder whether there is much of a role for large corporations in the country's future renewable power supply at all. (Craig Morris)

Is this article helpful for you?

7 Comments on "Unleashing the force of citizen investors "

  1. heinbloed - 15.06.2013, 02:29 Uhr (Report comment)

    Citizens ownership seems to part of the solution with difficult projects. Now the Dutch utility ENERCO offers bonds for comunities and citicens along Rhein-Amsterdam channel where they plan to build a wind-park:
    http://www.volkskrant.nl/vk/nl/2680/Economie/article/detail/3458830/2013/06/14/Eneco-burgers-kunnen-verdienen-aan-windmolens.dhtml
    About 5 % ROI for locals and 4% ROI for non-locals are in the talk, the actual ROI will depend on the wind .... The number of bonds are limited.

  2. heinbloed - 14.06.2013, 01:52 Uhr (Report comment)

    @Richard Caperton:
    (I paste and copy from my previous posting)
    Well, yes Richard, but the money can be borrowed, the asset (the grid and the powerplants ) do not walk away. Communities have no duty towards investors (for example a 7% return/a), whilest "the rich" want to see that. At least ! And tax-free, please. Most community owned energy investments (in Germany) offer share holders an anual return of something between 2-4%. No traditional fonds manager would buy something like that, to little. And to avoid the cold take-over by individuals the number of shares per share holder is limited (sometimes limited per household, per electricity meter) and the share holders have to actually live in the community.
    So there is no risk of large investors taking controll. The very large ones aren't interested because the ROI is to low for them. The medium ones aren't interested because they can't fetch power. And the small ones are happy to own their front garden - so to speak.

  3. Richard Caperton - 14.06.2013, 03:29 Uhr (Report comment)

    Thanks for writing about this, Craig. Unfortunately, you've misunderstood the math. Sure, that investment could be made over a number of years, but the end result would still be an irresponsible non-diversification of your wealth. The point is that lots of money will come from big investors, and those investors like tools like MLPs. Lots of money could come from small investors, too, and we should make sure that tools that work for them also exist.

  4. heinbloed - 13.06.2013, 21:06 Uhr (Report comment)

    Well, yes James, but the money can be borrowed, the asset (the grid and the powerplants ) do not walk away. Communities have no duty towards investors (for example a 7% return/a), whilest "the rich" want to see that. At least ! And tax-free, please.
    Most community owned energy investments (in Germany) offer share holders an anual return of something between 2-4%. No traditional fonds manager would buy something like that, to little. And to avoid the cold take-over by individuals the number of shares per share holder is limited (sometimes limited per household, per electricity meter) and the share holders have to actually live in the community.
    In the end it is the electricity consumer who pays. More with the traditional investors (for their profits) and less with the community.
    The power generators in the UK pay no taxes, Thames Water (suplying London) makes 500 Million profits/a and pays no taxes. Just in the news. So there is no reason except Thatcherism why these basic things like water, energy, transport should not be owned by those who use them. Well, atomic power plants wouldn't exist then, "a problem for national security" the military men like Lochheed share holders would say.
    ------------
    The oil refinery in Cork (Ireland's only refinery) is for sale at the moment, it was bought for an aple and an egg from the Irish state about a decade ago. Deutsche Bank is aranging the sale, their shareholders want a 20% profit netto/a. This profit has to be made with the price of petrol and home heating oil, they produce nothing else there. And the state pays for fuel allowances. And Taxes? Pffft ....."think about the jobs". And when the bank goes to the wall : "Think about the consequences".
    Energy business is Mafia business. Not only since the times of Rockefeller.

  5. James Wimberley - 13.06.2013, 17:52 Uhr (Report comment)

    The financial situation of German and American households is quite differemt. The latter have experienced a huge housing boom and bust, leaving huge numbers financially strapped their historical savings rate is quite low, and their priority at the moment is understandably to rebuild their liquid assets. An American community comparable to Schönau simply could probably not raise $3,000 in ready cash per head. The inequality in the distribution of wealth is much greater. It's unfortunately true that American policymakers have to find ways of attracting investment in renewables by the rich more than by the middle (working) class.

  6. Craig Morris - 13.06.2013, 14:35 Uhr (Report comment)

    That's exactly what I thought as well -- whose money does he think banks have?

  7. heinbloed - 13.06.2013, 14:33 Uhr (Report comment)

    " This week, the energy director at the Center for American Progress, Richard Caperton, responded. His main bone of contention is that "it's not clear that small investors have enough money to make the transition to a zero-carbon future happen on their own." His back-of-the-envelope calculation shows that the investments needed for the US to go 80 percent renewable are equivalent to 20 percent of the average household's net worth in the US."
    Money is a myth.
    Where would the banksters then get this money from ? And where did came from so far?
    ------------------------
    A first (?) project in Down-under:
    http://reneweconomy.com.au/2013/vic-wind-farm-breakthrough-with-pioneering-share-structure-75914

Write a comment

Your personal data:

Security check: (» refresh)

Please fill in all required fields (marked with '*')! Your email will not be published.