Thursday, September 29, 2011

Smart Ways to Save Money with Alternative Energy

Millions of people are already taking more than just a passive interest in adopting alternative
energy sources and green applications to help them energize everything from their alarm clock
to their automobile. As time marches on and as researchers continue to improve the output
capacities of an ever widening selection of alternative energy sources, innovators and early
adapters continue to pave the way for alternative energy applications for the rest of mankind.

Now demanding more and more attention as oil prices skyrocket, the negative impacts that
burning coal has on our environment becoming ever more apparent, and the dangers of nuclear
energy again brought to light with the recent devastating tsunami in Japan, people are re-
focusing on safe and renewable sources for their energy. Many hope to be able to separate
themselves from reliance on nuclear or fossil fuels by turning to the following alternative energy
  • Solar
  • Geothermal
  • Wind
  • Water
  • Biomass technologies
Always at the heart of the matter, personal economics will continue to play a huge roll in just
how fast the world can transition from fossil fuels to renewable energy sources. Slowly the tide
is turning as advances in the technologies listed above become more and more economically
viable. In some ways this is as much as a reflection of basic supply and demand as it is political
and social pressure being brought to bear in an attempt to push a psychic change in the way we
view energy consumption. In another vein, education is playing a key role as well as more people
are becoming aware of alternative energy sources through government programs, commercial
advertising, and the efforts of green advocates from across the planet.

Three things that are definitely working in favor of continuing a successful transition to
green technologies and the development of more and more practical applications and uses of
alternative energies are:
  1. Ever rising costs for traditional fossil fuels
  2. Continuously reduced comparative costs for alternative sources
  3. Reduced payback models and more favorable cost/benefit analysis results
The fact that fossil fuels have a finite supply is not news anymore. In fact, with dwindling
supplies and more expensive extraction efforts being needed to obtain these resources, these
two cost drivers are constantly putting upward pressure on their commodity prices in the market
place. Increased prices for oil and coal equates to increased prices for the electricity that is
produced when using these energy sources in the power plants.

At its simplest level, this could mean that the cost of powering your electric tooth brush has
gone from 20 cents a month to 40 cents a month. One can always go back to brushing their teeth
manually, they can accept the additional costs associated with the increase in their utility bill, or
they can seek out a cost effective alternative. The beauty of competition is that it creates options
where options were not available before, and alternative energy sources are currently being
developed to fill this void.

Many people start out thinking small. By installing a single solar panel, they may be able to
supply power to charge that electric toothbrush, operate their coffee pot and their alarm clock,
and with a battery backup system, be able to turn on the light on the nightstand when they wake
up in the morning. One solar panel with an energy collection device like a rechargeable battery
may be able to support one's whole "wake-up" package for the morning saving somewhere in the
neighborhood of $5.00 a month.

Comparative costs are falling for installing alternative energy devices
At the opposite end of the spectrum are the facts that as technologies advance in alternative
energy sources, economies of scale and the economies of scope begin to come into play. As
demand for alternative energy sources increases, the cost per kilowatt begins to drop as well. As
manufacturers see more and more demand for alternative energy sources, they are responding
by developing improved products like more efficient solar panels, wind turbines, geothermal
devices, etc.

Basic laws of supply and demand are moving in the direction of making alternative energy
an increasingly viable option. As mentioned earlier, many innovators and early adapters have
already taken the plunge to invest in alternative energy sources to reduce or eliminate their
dependence on traditional utility generated electricity. With more options becoming available
every day, many new home construction projects are including the installation of alternative
energy devices as part of the original package and bundling the cost into the overall financing
package. Additionally, with certain tax benefits available for making this type of investment,
the reduced tax liabilities in combination with utility saving can often dramatically improve the
payback period for this investment.

Payback analysis
Going back to our "wake-up" package with an estimated saving on the utility bill of $5.00 a
month, one should ask the question, "If I can build and install a solar panel with a rechargeable
battery system by myself for about $300, how long will it take to payback this $300 investment?"
Simple math would indicate that the payback period would be ($300/$5.00 a month) = 60
months, or a period of 5 years. A 5 year payback in light of a 30 year mortgage seems pretty
reasonable doesn't it? (Note - this payback does not factoring in any benefit that may be derived
through any favorable tax treatments from making the investment).

In addition, one should never forget what happens after the payback period has been achieved
- this $5.00 a month in savings starts going right into your own pocket! Once the sunk cost
has been recovered, it is all direct savings for you. One is then free to reinvest in their next
alternative energy project, or to simply enjoy the savings. One last consideration to make is the
nature of rising energy costs as well. More likely than not, 5 years from now, your $5.00 a month
savings could easily be $6.00 or $7.00 with the pace that energy costs are rising today. Higher
energy costs will help to reduce the payback period significantly.

H.M is highly involved in alternative energy discussions and he also run a site, Alternative Energy Geek, where he enjoys teaching people how to make our world greener.

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  1. Love this advice. Thanks for sharing - always good to save money and energy as much as possible!