This entry is in response to a discussion at Gil the Jenius' blog regarding a small scale windmill technology and whether or not it is worth the investment (see here).
If you read the discussion, you are going to see all kinds of formulas and calculations for KWH, average wind speeds, peak energy consumption rates, windmill output, cost of energy per KWH in Puerto Rico, and # of years until return on investment, etc.
The result of all that created a pessimistic, or at least doubtful outlook, on whether this new technology was worth bothering with at all.
When I first read it, I thought "Yes - this makes sense". But then I re-focused on my commitment to always thinking about "opportunity cost" (the comparative cost of the next best opportunity forgone when making an economic decision), as well as other factors that may occur as a result of taking an action.
There are many ways to create actual monetary value, beyond a simple KWH saved x Cost Per KWH calculation, followed by Total Cost of Technology / Annual Energy Savings to find out how many years it takes to pay it off and start banking some of the savings.
Perhaps we need to look at the ROI, using a different multivariate economic model. Allow me to actually disregard KWH production & cost savings for a moment.
- How much can be knocked off the list price with a little negotiation? I assume they must have built margins in there for the sales team. Going direct may allow for some take back of those margins.
- Early adopters may need to eat the cost. However, with scaled up production, manufacturing efficiencies, we should expect an eventual reduction in price.
- What if we consider depreciation/amortization as a tax incentive. What is the return there?
- What if we consider State & Federal tax credits and rebates? What is the return there?
- We could consider it an investment in "personal energy conscience awakening". That is, we make such a significant investment & add this towering symbolic structure to our property to create a catalytic effect. It therefore encourages us to become proactive about other energy savings that come with much lower investments, such as:
- Taking advantage of the 1-degree factor. 1 degree up on the air conditioning thermostat = 2% energy bill reduction.
- Reducing water heat temperature, installing low flow shower heads, and turning off the heater on extended departures (or installing a timer to disable it during away/sleep times).
- Proceeding with a home energy audit.
- Doing a full household power bar assessment to see how much phantom load we can remove to save 1 KWH daily in the average American home!
- Using reflective window covers in the day, sacrificing some natural light to reduce internal temperature / reduce air conditioner workload.
- Changing outdoor/roof surfaces to a more heat reflective color.
- Sealing those Puerto Rican style windows to save on cool air leakage.
- You can bet if you have a huge wind mill in your yard you are going to be reminded that you made that investment and you need to conserve in all other manners. You probably already do much of the above low cost energy saving solutions. However, both you and your family members may be further motivated to do everything you can collectively do once it is installed. Without it, you might be stuck in the "waiting" state of mind. I would not go so far as to tattoo the Energy Star symbol onto your spouse and children just yet!
- You can certainly take advantage of the non-financial gains of knowing that you are setting a positive example for your neighbors that may quickly have a viral effect within your community. What value do you place on happiness, pride, recognition, moral confirmation, environmental progress, positive impact on your community, etc? What are your personal values? How will they be impacted?
- Use it as a networking tool. It creates quite the conversation piece. Perhaps it may act as a beacon for attracting the curious. Depending on your career or business, this might be very valuable to you, especially if you are selling windmills.
- Use it for PR. Do you have your own business? How much would you pay for a 1 page feature in multiple news papers, television news programs, etc. If you are the first in your region, you can easily leverage that towering green energy symbol into major value for you.
- Perhaps we could see it as a great way to "take our money out of the volatile markets". If you have bonds, mutual funds, 401k, stocks, and even the blue chips now, you are taking a hit. Why not redirect some of that investment capital (or disposable income cash accounts) to something that is going to be paying you back on a calculable schedule into the future with low risk.
- What will be its impact on equity for your home? This may be particularly relevant once we start to see an economic recovery.
- If you are first in your region, contact local banks not for financing, but for "sponsorship"! Let them place their logo on it. That will drive home the message for those looking to finance their windmill to visit "Banco Popular" (or another) first. Charge them $200 a month with a 5 year contract, or $100 a month with 5 years paid in advance.
- Whether you are first or not, sell some ad space on it. Depending on your location, this may be acceptable. Depending on your personal expectations for aesthetics, this may be acceptable
What else? This is just a brain storming session. You may find some or all of it out to lunch. But perhaps you can find factors that work for your particular situation, that may allow you to break free from those simple calculations I highlighted above.
I do believe it is very possible that an investment of this sort, depending on your particular situation, could provide an ROI in a much quicker time frame! But it requires a more extensive analysis than just how many KWHs we save, how much they cost (assuming that would be constant, or developing an inflationary model), and how much we save as a result each year.
Maybe we'll have free energy after all, but from the sun, imitation photosynthesis, and fuel sales courtesy of our friends at MIT: