This post is discussing the alternative energy businesses and follows our previous post about the renewable energy business  evolution. You might want to read that post first before reading this one since it is the 2nd post in a series we are doing about alternative energy businesses.

As we write this post, the big electrical companies are wondering if they are going to meet their targets of 30% power generation from renewable sources by 2020. The price of solar panels is coming down which makes home solar solutions more economical. Many government grants are either ending and not being renewed or they are being reduced which also impacts the solar panel demand. Finally the environmentalists are getting into the act and delaying or in some cases stopping the construction of solar farms and even wind farms.

Our last post discussed how the industry was in it’s infancy and had many more evolutionary steps to take before it became mature. But what is the average homeowner supposed to do? should they invest in a small solar panel farm on the roof of their house? Should the investor invest in one of these solar companies and hope to reap millions as the business and the industry matures? These are just some of the very difficult questions. One company we talked to indicated that in California, with the weather they get, they can pretty much guarantee a 4 year payback. In addition they establish a reserve fund that pays for any maintenance that is needed on the units installed on your roof.

Investing in Alternative Energy Businesses

There are also thousands of small businesses that have invested in training and materials in order to get into the business of installing and maintaining solar systems for consumers and also for small business people who want to generate their own power.

This is a tough business which is impacted by some of the issues we have just mentioned, but also the ongoing competitive oil industry. Generally speaking the higher the price of oil goes, the better it is for the solar and wind farm industry. If oil peaks and then falls again, this will take much of the steam out of the push to become independent of the Mideast oil as a country.

Watch Every Dollar

Having worked in an unrelated business start-up, the advice that can be provided is that you need to watch every dollar and only spend it when you are sure that there is going to be decent ROI associated with the investment.

This statement applies to everything including manpower, training, tools, vehicles and office space. With the industry in such turmoil, you need to make sure you have the cash flow to withstand any upticks and downturns in the business cycle and the mood of the consumer to get involved in the solar power generation opportunity.

With unemployment so high, this is not the time to pay high salaries, however you do want to have great staff. A combination of salary and bonus based on how well the company does is one way of tying the business results to keeping good people.

Consumers Beware of Long Term Alternative Energy Deals

Just the fact that this business is in its infancy should tell you that there will be lots of change over the next 10 years let alone 20 years. 20 years is the contract term of some agreements. The technology will change and improve immensely. the price of equipment will certainly fall as the technology is mass produced and the government subsidies will die out to be replaced with other potential market supporting systems.

The only way to protect yourself whether you are a consumer or a small business is to invest very carefully, look for solid ROI’s and short-term payback on your investment of 5 years or even less. Some people would suggest that even 5 years is too long in this volatile market.

We will be writing more on this subject, so please stay tuned for more posts on this subject and others. Comments are appreciated and your thoughts on this business as well.

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