Madison Greene asked:
One of the problems that has plagued us in creating and using alternative energy is the costs associated with making and installing wind turbines or solar panels. This only makes them cost-effective for the long term, and that doesn’t match the lives of most people who, on average, move once every five years. On top of that the business side of the equation makes it difficult and risky for investors to fund the alternative energy companies.
Private Equity Funding
One of the difficulties that wind power has faced throughout its history is the fact that the research and development money required to expand the growth of the industry comes from high risk private equity funding. That is to say, those companies who have a vested interest in the development of wind power are often privately held companies that are not publicly traded. In such an investment, the investment is “paid off” in residual income via dividend payments over an extended period of time.
For example, if one invests $20,000 in a wind power company the investment will cover a seven year period. During this seven years as the company takes in money in the form of profits it will pay out dividends during this seven yea period. Hopefully, by the end of the seven years the payments will not only cover the initial investment, but also provide a percentage of interest that would exceed what one would earn in the stock market. Sounds like a reasonable investment strategy, right?
So why has wind power history shown constant reluctance from investors to provide money? Well, it has little to do with any aversion to wind power or lack in faith in it as much as it is an aversion to a common problem with private equity.
The Problem with Private Equity
Unlike publicly traded funds, private equity funds can not be sold or dumped. That is, if you purchase a publicly traded stock you can sell it anytime you want. With private equity, you are stuck for the whole duration of the investment as it is an illiquid investment into a business.
So, if you are not making any money from the investment, you cannot get your money back. Sadly, throughout wind power history many people have felt uneasy in investing.
This is a shame as many people who have invested in private equity alternative energy companies have made huge amounts of money. However, it will be difficult to get the masses to invest with such risk, making it difficult for the wind power companies to operate at their full potential.
There is no doubt that somehow we need to try and solve this financial problem plaguing the history of alternative energy and wind power. Until we do, it is going to be difficult for alternative energy to be cost-effective enough for the masses to benefit from.
One of the problems that has plagued us in creating and using alternative energy is the costs associated with making and installing wind turbines or solar panels. This only makes them cost-effective for the long term, and that doesn’t match the lives of most people who, on average, move once every five years. On top of that the business side of the equation makes it difficult and risky for investors to fund the alternative energy companies.
Private Equity Funding
One of the difficulties that wind power has faced throughout its history is the fact that the research and development money required to expand the growth of the industry comes from high risk private equity funding. That is to say, those companies who have a vested interest in the development of wind power are often privately held companies that are not publicly traded. In such an investment, the investment is “paid off” in residual income via dividend payments over an extended period of time.
For example, if one invests $20,000 in a wind power company the investment will cover a seven year period. During this seven years as the company takes in money in the form of profits it will pay out dividends during this seven yea period. Hopefully, by the end of the seven years the payments will not only cover the initial investment, but also provide a percentage of interest that would exceed what one would earn in the stock market. Sounds like a reasonable investment strategy, right?
So why has wind power history shown constant reluctance from investors to provide money? Well, it has little to do with any aversion to wind power or lack in faith in it as much as it is an aversion to a common problem with private equity.
The Problem with Private Equity
Unlike publicly traded funds, private equity funds can not be sold or dumped. That is, if you purchase a publicly traded stock you can sell it anytime you want. With private equity, you are stuck for the whole duration of the investment as it is an illiquid investment into a business.
So, if you are not making any money from the investment, you cannot get your money back. Sadly, throughout wind power history many people have felt uneasy in investing.
This is a shame as many people who have invested in private equity alternative energy companies have made huge amounts of money. However, it will be difficult to get the masses to invest with such risk, making it difficult for the wind power companies to operate at their full potential.
There is no doubt that somehow we need to try and solve this financial problem plaguing the history of alternative energy and wind power. Until we do, it is going to be difficult for alternative energy to be cost-effective enough for the masses to benefit from.
