Renewable Energy Business viability

Renewable Energy Business viability

19 Jul 07 | Business administration, Environment

As a part of writing a business plan, you have to project what your business is going to be in 1 year, 2 years, 5 years, etc. This is a very hard thing to quantify if you have never been a particular business before.

Because this business involves installing renewable energy equipment, e.g. solar panels, wind turbines, etc. on new and existing structures, the sales and availability is the driving force. If there is a sudden shortage in solar panels, then there will be none to install, which would tend to have a bad effect on those how install them for a living.

Some research is required to find answers to these and other issues. Many of these statistics can be found on line, but there are a lot of web sites out there that have to be waded through to find some things. All this takes time of course. Then there are things that are driven by emotion. The prime question is why will some one spend an extra $20K to install photovoltiac panels on there house? What is the motivation for installing expensive wind generating equipment?

The answer can be complicated. Individual motivations may include but are not limited to:

Environmental Concern. Installing renewable energy systems will reduce the amount of fossil fuels required to generate electricity for that particular house. Energy to run homes in the US accounts for about 22 percent of the total energy used. This includes all end users in the commercial, industrial, and transportation sectors.
Return on investment. Renewable energy technologies use natural energy sources to generate electricity. The costs associated with this are the initial purchase and installation of the generating equipment, plus any yearly upkeep. To calculate a pay back, one would use the price of the conventional energy purchased over time vs. the cost of the renewable energy system. This will give a payback period after which the owner of the renewable energy system is considered to be making money by not purchasing conventional energy for the remaining equipment life. This is known as a “return on investment.”
The coolness factor. Many people look at renewable energy as something new and interesting.
Energy independence. Some people desire not to pay money to large businesses for a number of reasons. They see renewable energy systems as a means to gain partial control of a world that is mostly run by others.
Because there is no other power source. In the case of remote cabins and other locations, renewable may be the only viable way to install an electric system.

Quantifying those motivations for a business plan are difficult. You cannot base a business on “coolness factor” unless you are talking about something like an iPod. Yet, it does exist as several people have told me when I was installing my solar panels that it would be really cool to have them installed on their house too.

There are other indicators of solar industry growth that are more tangible. These include increased production of photovoltaic and solar thermal panels. Some of these production increases are substantial and make a strong case for large growth in the solar industry. Others include statements by solar distributors that re-enforce the shortage of installers.

Above all, the business plan has to demonstrate that you can do the job. Not only do you need to be knowledgeable on the installation and other mechanics but also some business acumen is required. How are you going to generate sales (of your services or equipment). How are you going to manage installation work. How are you going to handle administrative functions, payroll, taxes, etc. These are all questions that should be answered in a good business plan.

Bookmark to: