This post comes from Matt Marino, founder of Clean Pursuits a GLD Boston insider. Find him @cleanpursuits

BOSTON – I once heard that the blades of modern wind turbines are modeled after the fins of humpback whales.  I’m not sure its true, but there is a striking resemblance, and such a practice has a name in design and engineering: biomimicry.

There is a less specific, more systemic feature of natural systems that I am interested in: the role of diversity.  It seems that diversity has a protective effect on some of the most critical natural systems, which directly or indirectly impact social well-being and human health; for example, its role in natural carbon sequestration, water purification, curing disease, and – oh yeah – evolution.

So diversity is a good thing for nature, design, finance and energy – so what? Well, as a self-proclaimed innovation economist, I’m always looking for the traits and characteristics of nurturing innovative projects, teams, solutions, ventures and geographic “clusters” (See Chris’ new survey to elect your city), and research I conducted while in b-school led me to believe that diversity is a key component for driving innovation.  The hypothesis that I  didn’t, but would like to, research further: the passive investments in nurturing diversity to drive innovation are just as important as hard spending on R&D.

Of course, diversity isn’t just cultural – it can derive from the cross-pollination of and collaboration between public-private partnerships, intra-industry ventures, and institutional “mash-ups.”  The latter is the focus of projects like Upstate Venture Connect, a project seeking to accelerate the linkage between academia, private and institutional capital, and workforce and industrial capacity in upstate New York.

It’s my belief that the diversity in the U.S. is a prime factor for our nation’s innovation leadership.  Arizona S.B. 1070 notwithstanding, a long tradition of favorable immigration policies have led to what Tom Friedman calls “the world’s biggest and most diverse pool of high-I.Q. risk-takers.”  In my view, the U.S. is still uniquely positioned for “innovation incubation,” an important consideration for those who believe we can innovate our way out of global meltdown (pun not intended, but appropriate I suppose).

Humpback photo credit: Nancy Black.

This post comes from on our our new Boston industry insiders, Aaron Lindenbaum. Aaron’s first post is really awesome and can’t wait to see more from him. Stay tuned!

Project finance is the key to clean energy growth and many in the industry are worried about the ramifications on financing if the Recovery Act section 1603 cash grants AKA the “cash-in-lieu of tax credit” grants expire at the end of 2010, as they are set to do.  The success of 1603 has been undeniable as it allowed a streamlined way for these capital-intensive projects to get financed during the global recession, accounting for up to 30% of the capital expenditure of a project.

Different iterations have been introduced on Capital Hill to extend the grants.  Most recently, seven US Senators teamed up to propose an extension through 2012.  And most controversially, US Senator Chuck Schumer (D-NY) proposed to alter 1603 as the centerpiece of his proposed “Buy American” bill.

The financiers themselves are voicing how critical an extension of 1603 really is, simply because investors need to know that they’ll get a return on their investment in reasonably short order. Whether it’s continued as an extension of stimulus or part of a new energy and climate bill, cash grants must be addressed in the short term.  And the dealmakers, the ones who inevitably sign off to make these projects happen, are practically begging for the government to restore financial certainty for their investments.  The fear is that while Congress focuses on climate legislation in the long term, project finance will suffer, stifling the unprecedented industry growth we saw in 2009.

In fact, we’ve already seen a severe drop in the wind sector in 2010.  Experts are reeling that only 539 MW went online in Q1, down from the 2,800 MW put on in Q1 2009.  That said, there are certainly other factors in play besides uncertainty about cash grants, but the fact remains that credit markets are still frozen and the federal business energy investment tax credit (ITC) just won’t cut it for the bulk of new projects that are starved for capital.

The leading project financiers and clean energy executives in the US are convening this week in Manhattan at the 2010 Renewable Energy Finance Forum (or REFF-Wall Street) to discuss the financial state of the industry.  My colleagues and I at Rasky Baerlein are running the media component of the event and will be onsite at the Waldorf Astoria.  I’ve got my ear to the ground and will have some people sit in on the “View From the Major Investment Banks” session for me.  I’m interested in that one most because it includes heavy hitters in renewable energy finance from all the major investment banks, and I’m guessing that 1603 will be a much discussed topic.  Stay tuned…

This post comes from Jesse Gossett, partner at Emergent Energy Group. Connect with him @emergentenergy

A funny thing was recently discovered in the middle east. The folks planning Masdar, the zero-carbon, zer0-waste and (supposedly) 100% renewable energy (proposed) city just outside Abu Dhabi did a little calculation on the solar resource they could expect in the area. All along they had figured to develop large solar arrays just outside the city to power everything. Wind was taken off the table earlier in the planning of the city as there really isn’t much of a wind resource in the area.

But solar. Now we KNOW there’s a great solar resource in the UAE, right? The country where nobody goes outside because it’s too hot, where people leave their AC and cold water running while they’re gone on vacation so the house is livable when they return, and the country that doesn’t really even HAVE sidewalks because, well, it’s too damn hot to walk anywhere.

Their calculations regarding the solar resource in the area apparently didn’t even happen because it was so obvious. They must have just estimated… Because, now, a few years into the plan? It appears  the initial ‘calculation’ was off by, oh, about double. That’s right. Apparently there are sandstorms (shocker) and a consistent haze from the UAE’s proximity to the Persian Gulf. These two factors dramatically cut the available solar resource in the UAE to about half of what could be expected in other similar latitudes.

Why does this matter. Well, for one it puts a damper on the solar dreams of Masdar. But, if we take a step back, it dramatically illustrates a common problem in the renewable energy industry. So many projects throw money around, make plans, and shoot for the stars without ever really doing their due diligence.

Here’s a comparison. Cape Wind was doing something no one had ever done in the USA. They had to forge ahead blind in some regards because the permitting structure and financing partners didn’t exist when they started the project back in 2001. Now they’ve spent 40+ million dollars and it’s still not done. While I don’t necessarily agree with the public outreach and incorporation methods of the Cape Wind project, its an example of a project that was in a position to fly blind and not feel dumb if something came out of left field (like Indian burial grounds 5 miles out to sea) because it was, for many intensive purposes, a first.

Now let’s take Masdar. There’s an iphone app for sun-eye for crying out loud!  Not to say that’s the technology to use in this case, but solar resource is NOT a hard thing to quantify. Had no one built a solar project (even on a house) in the UAE that could have spoken up and said, “Gee, this is producing a lot less energy than I thought it would…?”

Simple. That’s what a lot of this industry is. And yet we see time and time again people missing the trees for the forest.

Here’s a little snippet to kick off the the launch of The Green Light Distrikt – Boulder, an interview I did with Lauren Coyne from Namaste Solar about six months ago.

We’ve been kickin’ around Boston for the past couple months and now I’m curious how things are going in other US cities. We’ll do much the same thing that we did in Boston, recruit young cleantech pros that are working in the industry that are interested in joining our community. I’ve been speaking with James Moreau who is going to start writing soon. Stay tuned for his first post, the goal is to get a follow up with Namaste and potentially get some video footage. Also, if you’re in the Boulder area and interested in joining us, contact me.

Here’s the story.

Alteris Inc, a New England based company, was named to Inc 500, 500 fastest growing companies with about 1000% growth. While I was skimming the list I noticed that Namaste Solar had grown over 2000% in the same period, so I was curious about their growth.

I contacted Namaste and Lauren nicely and quickly responded to me.

Lauren is a co-owner, and in charge of education and community outreach. We had a great conversation, and it lasted about 40 minutes. I had to split the interview into two parts due to the constraints of uploading.

Here’s the interview

Nameste Solar Interview Part 1

Namaste Solar Interview Part 2

For your reference here’s an overview of the questions I asked during each part.

Part 1:

• How did you get into the industry? What’s your story?
• How did your experience getting the Colorado state incentives passed give you skills and information that were helpful in landing the job with Namaste?
• You’ve grown so fast, what was the source of your growth? What challenges has that created for your company and how have you dealt with them?
• You mentioned that the new incentives were a large part, but it seems like you have grown much faster then the industry and your competitors, what’s the reason for this?
• What are unique aspects of your business model?
• Describe the co-ownership model? It seems unique and gives you a clear social dimension do your business, why and how was that business model chosen and how do you keep that structure with growth?
• How does co-ownership affect the day to day decision making process?
• Looking to the future, do you plan on expanding into other markets other than Colorado with your current business model?

Part 2:

• What hiccups do you see in industry growth in Colorado?
• Has financing of residential systems drastically changed the Colorado market? How?
• What are you most excited to see happening in the industry in the next 5 years?
• What advice would you give to people, current graduates, career changers who are outside of the industry looking to get in?
• You mentioned training and workshops, are there any particular things you’d like to see when going through resumes?
• Within a solar company, do you see more opportunity on the sales, design or installation side?

Here are some of my reflections and conclusions after speaking with Lauren.

1. She’s really nice. It was about six months ago that we spoke, but I still remember this.
2. She has a really insightful explanation into the role of state incentives in Colorado and how the feed-in-tariffs with Excel energy work
3. They donate 1% of revenue to develop solar on non-profits every year regardless of their profits.
4. It’s clear that career changers need to stand out from the crowd and do something to show their passion for the industry. If they’re looking to get into the industry just to make money, it won’t make your attractive to companies, you need to be dedicated to the mission.
5. The largest that stood out is it seems that Nameste Solar put their money where their mouth is. Here are some examples:

• They operate a low emissions fleet
• They operate in LEED certified building, zero waste buildings
• Co-ownership model has clear social impact. At that time we spoke 47 of their 62 employees were co-owners.
• Donate 1% of revenue, NOT profit

All in all, I want to thank Lauren for speaking with me. I was great to learn about the Colorado industry and I’m looking forward to seeing if James can get some video footage of some of their installations.

What did you think about the interview?

Chris

This comes from our industry insider Matt Marino, founder of Clean Pursuits and Switchback Life.

In Boston, Technology and Innovation are personified like Greek gods, but its mere mortals that bring these forces to life.

Readers of The Green Light Distrikt are likely also technology and innovation enthusiasts.  We have to be – many of us are counting on new energy technologies to meet growing energy demand, while reducing environmental impacts and generating new traction for the economy.

But technology development and technology deployment are two separate endeavors, each with requisite incubation characteristics and catalysts.  Deployment often depends on the scalability and price parity of new technologies, which can take many innovations and years beyond when the initial innovation actually occurs.

This discrepancy is the subject of a great piece by David Owens about MIT alum (PhDs are alums too, no?), MacArthur “genius,” and eco-inventor, Saul Griffith, which appeared in a recent issue of the New Yorker titles: “The Inventor’s Dilemma”.  In describing the market challenges of an early invention for making corrective lenses in impoverished communities, Saul says, “It turned out we were solving the wrong problem.”  David Owen connects the dots: “The real problem with eyeglasses in the developing world isn’t making lenses...its testing eyes and writing accurate prescriptions for people with little or no access to medical care.“  Without hands on and committed deployment, Griffith’s device was just another gadget.  (Note: this is no knock on Griffith; he is, to say the least, an incredible eco-entrepreneur churning through inventions that have the potential to disrupt the Carbon Quo in a major way).

Organizing great people is the value that an organization like Somos Amigos provides.  Somos Amigos is a California-based 501C3 service organization with operations in the Dominican Republic, where volunteer doctors, dentists, nurses and other medical staff – most of them from the U.S. – have served thousands of local patients since 1997. Of course, Somos Amigos makes use of modern equipment and technologies to accomplish its mission.  But without the work and consistent hands-on human effort – 50-strong volunteer teams traveling to work at the clinic for weeks at a time, multiple times per year – the equipment would be collecting dust in the dark.  New technologies have the potential to continue improving the world; but without a plan for and commitment to its application – indeed, a different skill set than the work of innovation itself – we’ll be relegated to the status quo.

Boston has a great tradition of people organizing to channel innovations into communities in need, where new technologies often have the potential to provide huge breakthroughs in standards of living.  I’ve been particularly interested in and impressed by:

• MIT’s Fab Lab – The product of MIT prof Neil Gershenfeld, Fab Labs by themselves aren’t terribly special – a seemingly odd, $50k collection of hardware and (of course, open source) software.  But paired with an evangelical desire to promote the DIY gospel, self-sustainability and distributed manufacturing, dozens of Fab Labs have been deployed to (at least) 16 countries, enabling local partners to develop custom technology solutions to regional problems (for example: wi-max systems for internet connectivity in rural parts of Afghanistan).
• EarthSpark – Based in Cambridge, EarthSpark works “with communities to provide access to clean energy technologies that make sense for their needs.”  Currently, EarthSpark is focused on the reduction of energy poverty in Haiti, through the development and deployment of clean energy products, supply chains, educational resources and training.  By effectively connecting with partners in Haiti, EarthSpark was able to distribute 3000 solar powered lamps in support of the earthquake relief effort.
• Anza – Lest we forget the true definition and purpose of technology, innovative products need not incorporate electronics or space age materials to provide value.  Anza is keen on re-purposing trash to create high utility technology solutions for communities in need.  Currently, Anza products like utility carts and solar cookers are making every-day tasks healthier and easier for thousands of villagers in Mozambique.  A recent post by GLD Insider, Adam Standley, documents a recent Anza deployment trip to Africa.

And I’m happy to introduce (read: shamelessly promote) Clean Pursuits into the mix.  Clean Pursuits aims to support the deployment of innovative technology solutions to communities in need through the promotional activities of a network of athletes and adventurers who participate in inspired, human-powered (i.e. “clean”) endurance events and expeditions.  Currently, Clean Pursuits is working with Somos Amigos to develop a sustainable energy solution (likely solar) for clinic operations in the Dominican Republic (if you’re still reading, a vote for Clean Pursuits in the Network Solutions venture contest would go a long way. You can vote here –> http://pitch.co/entry/44227).

There are countless other example of people putting boots on the ground to share innovation and new technologies in a meaningful way – please let us know examples you’re aware of or participate in…

I am a solar hero. Well, almost. For the past month I’ve been running a crew installing solar in Roxbury. I’d say we’ve installed about 50kW in the past month, not bad on a pitched roof. This is some of our work to the right. The name solar hero started as a joke around the job site but mainly is used to talk about anyone who kicks a#$ and takes names while installing solar.

Over the past 3 months I’ve learned 3 things about leadership, its kinda like a 3 steps process to becoming a leader type stuff. By leader, I mean someone who others would willingly follow. I have to admit the working construction was the last place I thought I’d be learning about leadership but here goes.

Step 1: Gain Trust

The first thing I learned is that you need to gain people’s trust and respect. People don’t listen to the words coming out of your mouth, but they listen to if the source (ie you) is credible. Credibility is determined by trust. This is hard in the beginning because trust usually comes over time. These are not my words either, you can see The Leadership Challenge

Step 2: Provide a vision.

Once you have gained everyone (or most peoples trust) the next step is to provide a vision. Sometimes this can be a direct vision, “we are going to put solar panels on the roof today” or a lot of times I’ve found the best way to get a vision is through asking good questions “what do you guys think is the best path?”. This not only increases trust, but it involves others in the decision making process so they’re more likely to buy in to the last decision.

Step 3: Help Others

Here is the key part. Help everyone else as much as you can to do their jobs even better to reach the vision. When you help others, they will WANT to help you in return.

From my time in school and in past jobs, I’ve noticed a huge difference between formal power structures and informal ones. Most leadership comes down to informal structures. You may ask what is the difference? If you had a group of guys and asked them who they would want to follow, whoever they point to is most likely a leader type figure to them. Even though this might not be their direct boss. Why would they follow this person? Because they probably trust who they choose and he/she helps them to do their job the best. Sometimes people get this confused with formal power structures, where people will do things when they are told because their boss is telling them.
How can we use this to further Renewable Energy adoption?

What I’ve started to think about is how can I use these learning to further renewable energy integration, specifically on a political front.

Here’s what we need to remember, no one will listen to us if they don’t trust us first. It does not matter if every thing about global climate disruption is true, if we are not trusted then we won’t be listened to.

So, here’s the challenge, how do we make ‘non-renewable energy believers’ trust us? Simply stating what we believe to be facts over and over again will not do it.

This comes from one of our new industry insiders, Adam Standley. A very important note: Adam is a fellow Mainer and thus is naturally awesome.

I was working with Anza Technologies in the remote village Matala, Tanzania last month.  We deployed “appropriate technologies” to help rural farmers carry water more efficiently.  I noticed that each of these “dollar-a-day” farmers had a cell phone but no electricity in their homes.  How they charge their phone batteries may be the beginnings of an energy infrastructure unlike any we have seen.

The rural Matala region had largely leapfrogged land-based telecommunications infrastructure—pretty standard in the third world, but the cell phones hit some of the villages before electricity had, which raised some questions for me.  I wondered how they charged them.

I found out that they charged up at one or two houses in a given village with electricity, or they’d give them to a friend to bring into town.  In fact, it seemed they treat electricity like they do water—walk to a source, fill up, bring it home.

The farmers earn close to $1/day, so hooking into the grid is cost-prohibitive—nearly 4 years income.  Getting a gas generator is an option that would cost nearly 1 year’s income.  Alternatives like solar and wind?  1-2 years income.   It is clear there is no solution other than scavenging for what electricity they can to power the few, small electronics they need.  There is very little incentive to make these types of investments even if they could save the cash.  Their investments take other forms.

Driving through the valleys of Kilimanjaro I noticed acres of crops where some corn was about 3-4’ higher than the rest.  I asked our guide, Ibrahim, why.  He said that the first rains came early this year, so farmers had to bet on whether to plant their seed or not. “If it’s a false start to the season, their seed is ruined. But if they wait too long, they miss an extra harvest.”  So the farmers hedge by planting a portion of their crops during the early rain and saving most of their seed for later.  When you’re making a dollar a day, crops are the only currency you have the volume to risk.  Crops are their primary investment.

Accordingly, most farmers typically invest any spare cash into low-risk, low-return items like tools for work—things that bring an element of security and predictability to their business in the fields.  They will not take a leap of faith in a technology which may only marginally improve yield, break, or be too expensive to maintain (take it from Paul Pollack if you don’t believe me). They need real, immediate cashflows from what they invest in—or small investments with short payback periods that hold inherently low risk.

I asked a bit more about alternative ways to get affordable power to the region.  I learned about a company called Egg Energy. They were setting up portable battery charging stations in remote villages of Tanzania where consumers can access electricity at a price they can budget. I didn’t encounter any of the stations, but the idea made a lot of sense to me. It got me thinking about the evolution of the country’s “grid”.

With this “distributed power redemption” model (I dub thee), there is promise that the need for DC power electronics (mainly battery charging & lighting) will pull-through alternatives in remote locations where grid-connected AC is cost prohibitive. It could take the form of distributed DC charging stations.  The model could be a good stepping stone to rural electrictrification by alternatives.  It may even introduce further standardization in global DC infrastructure, as increasing DC power supply & demand cut-out the AC/DC inverter-middle-man (imagine a standard DC wall plug that’s not a jerry-rigged cigarette lighter?!).  It will be interesting to see how elements from this embryonic business model will affect the 1^st world’s AC/DC power infrastructure in the coming years.

There is a lot of news about 37 Million Green Jobs by 3030 and that Competition for Renewable Energy Jobs is Getting Intense. With all this news you’d think getting a green job is easy and they’re everywhere. In the past 6 months, I’ve started to hear the same question A LOT. “How Do I get a Green Job out of College” When I go to conferences, meetups, tweetups as well as emails through my blog I get the same question, “How do I do what you did and get a green job out of college?”

I always wanted to help and noticed I kept giving the same advice so I decided to create another website The Green Collar Job Guide for College Students and also started a Facebook community called “Green Collar Job Guide” to help connect with college students and help them.

I decided to start another website because my blog, The Green Light Distrikt, is focused more on connecting professionals who are already in the industry and not people looking to enter the industry. The goal with the new site will be to post the information about starting a career so it can be a resource for all students.

A couple of my friends have response to this new site asking “Aren’t you afraid you’re giving students information so they’ll compete with you for your own job?” To that I respond very simply

1. I want 100% RENEWABLE ENERGY. Period. To do this, we’ll need a lot more young, passionate, people selling, engineering, installing, and inventing these technologies
2. The industry is growing so quickly, there is room for everyone

Here is the introduction video where I describe the story behind the green collar job guide and how I’m trying to help students.

Right now, the goal is to help college students answer the question in three ways.

1. How to Get a Green Job Blog- Every week I’ll post some free advice, resources or tip for college students looking to get a green job. If you need anything, just ask, I’m here to help. My only request is that you ask publicly so when I answer everyone can benefit.
2. “The Guide” – The Green Collar Job Guide itself. I noticed that I always was giving students the same advice. So, I took that advice and put it into 7 steps with all the advice and resources I’ve picked up hundreds of hours of personal time and years in the industry that will allow any student to take their passion, focus it, and find their place in the industry. I’ve packaged that with over $500 in discounts on industry certified renewabel energy training for students that want to supplement their degrees.
3. The Super Intern Search – The Super Intern Search search allows college students to apply for internships at awesome green companies. Companies comes to us to find awesome interns, and we find them.The problem with the traditional internship search is that 1) its take too much time to sort through 100s of resumes 2) resume and cover letters are not good indicators of someones ability to produce 3) most green companies really need interns but are growing very quickly and don’t have the time to sort through resume or hand hold interns.

Our first company is a Cambridge based start up called Wattzy. See the below video if you’d like to apply for a summer internship in Boston.

If you’d like to apply: Here is the important information

Company: Wattzy. A Boston based company that is creating an online platform where households will compete to save energy
Position: Summer intern. $1k Stipend over 10 weeks

1. Create online content about energy efficiency with short article and blog posts
2. Manage online community, facebook, twitter, face to face events.

Qualifications

1. PASSIONATE about energy efficiency
2. Go-getters, producers, will take the bull by the horns type of people.
3. Amazing writing skills
4. A plus is HTML/CSS, Blogging, Social Media skills and experience

Application Process

1. Create a 30 second video with you name, college, and why you’re awesome and will be a super intern
2. ‘Like’ The Green Collar Job Guide on Facebook so that we can follow up with you
3. With you video attached post the following to your Facebook status: “@Greencollarjobguide this is my video application for the Wattzy Super Intern Search” This will be how you submit your application, we will not accept applications in any other form.
4. The last day for submissions is on Monday May 31st, and we will only be accepting the first 100 applications
5. We will follow up with best applications on May 31.

Why Are we using Facebook and Video instead of resumes?

1. Resume are too susceptible to good writing skills that cover up actual passion and ability to get things done, video is not.
2. With the video, you still have to prove your qualifications
3. Growing companies really value interns but don’t have to time so sort through stacks of resumes
4. Everyone is already on Facebook
5. Video is harder to make, so naturally only those who are the most passionate will apply.

I look forward to seeing all the applications. As always, I’m always looking for feedback and input and if you have any questions please ask them.

This is my attempt to help college student start their career in the green industry. What else can we do? Perhaps a mentor-ship program? Very interested to hearing any and all feedback.

Chris Williams

This post comes from one of our 11 industry insiders, that will all start writing in May, stay tuned! Jesse Gossett is a partner at Emergent Energy Group.

So there’s this lawsuit that just popped up where a Canadian energy company is suing the Massachusetts governments over a law that requires utilities to purchase their renewable energy from Massachusetts based firms.

Basically, I’m curious to see what holds water. I talked to some energy lawyers recently who think the interstate-commerce part of the suit may hold water, but the SREC (that a Solar Renewable Energy Credit) related charges are mostly hot air.

The inter-state issue is very… interesting. I personally find the interstate clause kind of murky, as it’s nice to give states the ability to bolster their own economies, though I suppose there’s a reason for the interstate commerce laws that goes deeper than just this one issue.  And if Cape Wind (the main reason behind the suit, I think) looses out on the added benefit of this particular law, it could put a dent in the ‘financability’ of the project. Then again, this is the first offshore project in the states, I have a feeling the investors know they’re taking a risk to begin with.

As for the SREC issue, many states are currently acting out the same system without problems. There is no exclusion happening, it’s more a ‘if you want to operate in our state, you have to follow our rules.’ You could almost view it as a tax. Trans-Canada might get away with a lower SREC supply component than their competitors as a settlement out of the suit, but I doubt it’ll go too far beyond that.

The final thing here is, the SREC market, while lucrative for solar developers, is a small potato for Trans-Canada compared to the 2.4 billion dollar field of sticks in the ocean that Jim Gordon has planned. The Cape Wind project itself is larger than the entire solar market is expected to be in MA in 6 years.

Anyways, let’s see where this lawsuit goes. Strangely, you don’t see too many in our field. Must be because it’s always been small potatoes. I guess that means we’re growing!

For as long as I can remember, since I was 16 and first stated going to NESEA, the renewable industry has talked about renewable investments in terms of this silly little term call ‘the payback period’. you might have heard this before, and from now, when you hear this term YOU HAVE the responsibility and obligation to correct the individual that uses this term.

At first, I went with it and used that term which we will no longer name. Then I went to school and learned something. I learned about finance, accounting and marketing and realized that ‘it’ is the least useful and most stupid metric to discuss investments, its paralyzing the renewable energy industry.

When you are thinking about investing you money, lets say in the stock market, a CD, or on a house, how often do people talk about ‘that’ term (the payback period that is)? They don’t! There’s a reason that Wall Street does not talk in terms of payback period.

Basic finance tell us that if free cash is available, if the discount rate (or internal rate of return, IRR) is greater than the weighted average cost of capital (WACC or just CC for short) the investment should be made. Thus, if an investment (in the worst case scenario) will have an IRR of 7% and the WACC is 4%, you just made 3% profit, or savings for the life of the investment.

The usefulness of speaking in terms of IRR really hit me when I was talking with my cousin, who is very interested in installing geothermal, solar thermal and solar PV on his house to reduce his substantial utility bills. The conversation went something like this:

Me: Bob, you could substantially reduce you utility bills by installing renewable energy systems on your house.

Bob: Really? Like what?

Me: Geothermal for your heating and cooling, solar thermal for hot water, and solar PV for your electricity

Bob: Hmmmm, what’s the payback on something like that?

Me: Actually, payback period is not really a useful way to compare this investment to another. For example, whats the payback of your IRA? What’s most useful is IRR and in Massachusetts most investments are usually at least 10% over the life of the system, so its a better investment then the stock market and has no risk, because you’re going to use energy even during a recession.

Bob: really?! Better than the stock market? That’s amazing! So, I might as well put my money into this.

Me: Yes, yes you should. blah blah blah

Lets be honest, most customers that can afford solar and geothermal can afford the large upfront payment and thus tend to have a lot of money. These type of customers also tend to have a lot of investments and understnad IRR much better then payback period.

Here’s my point. Stop saying/using/marketing payback periods, you’re shooting yourself in the foot! Start educating your customers about why the IRR is a much better metric and this will allow them to effectively compare this investment to other investments.

We need to remember that we’re the expert, and that we need to educate our customers about how to talk about these investments. To use a sale term, we need to frame the discussion so no objection can even be made and a renewable energy investment is the best choice.

Here’s the real pickle, why the heck was payback ever used in the first place?