I was having dinner with my brother in law, Ovid, tonight and we got on the topic of alternative energy. One thing led to another and we came upon the idea of creating "Power Backed Securities" to fund the development of solar panel arrays.

The basic premise is that individuals purchase solar panels that are part of a remote solar panel array. (Solar panels that are a part of an array located in a desert generate more power than rooftop panels, and are more efficient as they are installed and managed in bulk.)

The dinner napkin math is as follows:

An 8'x4' solar panel as a part of an array costs approx. $800

It takes about 5 of these panels to power an average house: $4,000

The panels are good for 25 year.  Assuming maintenance, upkeep, and land costs are another 50%: $2,000

So $6,000 will power a home for 25 years. That breaks down to $20/mo per house; I know that is much less than I currently pay in utilities!

There are two problems with this scenario:

1. Most people are not in the position to shell out $6k upfront for 25 years of power.

2. Even if they were in that position there is no mechanism to trade the offsite solar panel power for grid power.

The solutions as I see it:

1.Create a "Power Backed Security". Individuals will guarantee the Solar Panel Purchase loans, and in addition to the personal guarantees the power output from the solar panels will act as additional security.  So if someone defaults on their "Solar Panel Mortgage" they lose the rights to the power generated. Organizations could group these Power Backed Securities together and sell them on the investment markets. Similarly to Mortgage Backed Securities.

2. Create a system that matches up individuals with the solar panels they own. Have the solar panel power output connect to your SSN or something. Wherever you live, the power credits will follow you.  If the solar panel owner has a surplus then they can sell their power credits automatically through the power utility.

 

22 Comments on Power Backed Securities - US energy solution

Ok.  Good idea.  Keep thinking and blogging about it.  I like where this is going!

04/27/2008 05:13 AM by Melody Botting Real Estate Network


Jon,

Interesting idea!  But, if this is a government project,  don't forget to factor in salaries for administration people... figure a couple executive people, maybe eight or nine staffers, clerks and interns, and you've easily got total salaries of around $1,000,000 per year or more.

And, sadly, those individual salaries would barely qualify the person to buy a home in either of our markets.  :-)

04/27/2008 05:44 AM by Cheryl Johnson, Bob Taylor Properties, Inc., Los Angeles, CA


If only we could get everyone thinking about energy solutions in a creative way.  Great post. 

04/27/2008 06:21 AM by Shannon Livingston (John R. Wood)


Very interesting. Maybe a wind turbine component would be appealing as well, to help diversify the security, but maintain the alternative power characteristics.

04/27/2008 06:44 AM by Craig W. Barrett - Hughesville MD Real Estate (RE/MAX 100)


I've thought about solar panels for my home... more so as of late. What a difference it would make if only a third of us tried it out.

04/27/2008 07:27 AM by Crossville Real Estate & Community Blog Christina Williams (FIRST REALTY Company Crossville )


Jonathan~ 

It's quite possible that you will have 600 AR members cheering when you post this to the Eco-All-Stars Group . I bet they/we not only will think you are on the right track,but totally and completely ECO-brilliant!..

04/27/2008 07:58 AM by Asheville's GREEN Land & Homes ECO-Steward Realty


Jonathan,

Respectfully, I don't think 'Solar Power' is the answer...from everything I've read and studied over the years...I'm not ruling it out for some 'low energy' applications, but to replace current sources and rising energy demands...go back to your premise...there are 2 major factors to consider when discussing 'electric power'...generation and transmission...wouldn't it make more sense to focus our attention to ways of eliminating the cost of 'power transmission'...where each residence would have its own 'energy source'...be it some form of 'micro nuclear'...hydrogen cell...or others currently in the development stage...just think...no poles. transmission towers, underground lines to install or maintain...no polluting power factories...no unsightly solar panels...no need to generate power at one location, only to have to transmit it hundreds of miles to other locations, then redistribute it to individuals...just think, no wires, no cables, no towers, no transformers, no poles, no dams, no digging, no 'solar farms', etc. Just some more 'food' for thought!!! Thanks,   Fran 

04/27/2008 09:22 AM by Fran 'The Title Man' Gaspari Title Insurance-PA & NJ (Patriot Land Transfer, Inc.)


Thanks for the comments!  Just about to jump on a plane so I can't respond to them individually right now.

But I did join eco-All-Stars

04/27/2008 09:47 AM by Jonathan Washburn (ActiveRain Corp)


I love the environmentally conscious dinner conversation.  I have been thinking of adding solar panels in my sunny back yard, but so far the cost has kept me from doing so.  I am sure this is true for many people.

04/27/2008 10:00 AM by Ginger Wilcox, Marin County Realtor (Pacific Union, Marin Real Estate)


I think it is an incredible idea.  Here are the drawbacks I see.  Line losses.  There would be a certain percentage of power that would be lost in transmission.  That would have to be accounted for.  Administration and Maintenance.  The cost would probably at least double to run the project and keep the cells producing at peak efficiency. 

If it were administered by a government agency or non-competitive monopoly, double costs again. 

04/27/2008 10:36 AM by Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty)


I think you should throw this idea out to the Northwest Energy Trust...

I like it.  We want to go solar at some point.

04/27/2008 12:54 PM by Melina Tomson, M.S. Salem Oregon Real Estate Specialist (Tomson Burnham, llc)


I agree it sounds good how about us Northerns that get sun 10% of the time during the winter?

04/27/2008 03:08 PM by Terry Westbrook ~ Realtor(R) Grand Rapids Mi Ada/Cascade Real Estate (Five Star Real Estate, LLC Grand Rapids , MI)


It would make a lot of sense and could even get some backing if those in the real power to do something about "GREEN" power would be serious about their efforts instead of using fake ice shelf imagery and flying around in their private jets.  (in case that lost anyone, Al Gore claims to be this huge environmentalist but used footage from the fictional movie "The Day After Tomorrow" in his "Inconvenient Truth" movie)

04/27/2008 07:00 PM by Ron Tarvin's Katy Agent Team-- Katy Texas Real Estate (Re/Max GRAND)


Hi Jonathan, A recent article here in San Diego showed that the power costs actually increased measurably for commercial solar use. Hard to believe. I like your ideas but the sales job of how beneficial solar power would be and how much it would save, has been greatly obscured by the reality of how the power companies allocate the credit. That is not the fault of the alternative power generation but rather the power companies and how they view the alternative source of power. Until such time as there is a guaranteed return on investment that is measurable, there will be continued resistance to going solar.

04/27/2008 11:00 PM by San Diego Real Estate Voice authored by William Johnson GRI CRS e-PRO (RE/MAX Associates)


This is not a bad idea at.  There was an article in the New Hampshire paper, The Telegraph, about how it was not feasible for most to invest in solar panels.  There was one mention of a company who was going to place solar panels on homes and then lease them to the owners -- however, so far it has not been feasible.  That idea with the solar backed securities may make all of this a reality! Active SOLAR!

04/27/2008 11:09 PM by Joan Whitebook, ABR, e-Pro, CEBA (Buyer's Option Realty Services)


Man, how I would love to be a fly on the wall in your house!  YOu had way too much time on your hands at dinner!  

04/27/2008 11:19 PM by Jeremy Blanton- Myrtle Beach Real Estate ,Coldwell Banker Chicora (Coldwell Banker Chicora Real Estate)


Solar has been pretty good for hot water in Hawaii.  It really pencils out dollarwise because of all the local tax credits.

04/28/2008 03:15 AM by Randy L. Prothero - Hawaii REALTORĀ® (Century 21 Liberty Homes)


Wouldn't it be interesting if you could get a small town or even a subdivision to do this? If my area was doing it, I'd jump on board in a heartbeat. You'd need an NGO or grass-roots org to run it - you'd be in bureaucratic doggie-doo if you let the government try to run it.

Respectfully, I disagree with your listed problem #1 - I don't think $6,000 up front would make this cost prohibitive for most people. Some - yes. But it's doable and well worth the return on investment. For crying out loud, when the Rams moved here to St. Louis we had to buy PSLs (personal seat licenses that you must have in order to buy season tickets) which were $2500 and up. All the local banks started offering small loans so folks could come up with the up-front money needed. And that was for a football team (not a very good one at that, but that's another story). I would think they'd offer something similar were this crazy napkin idea to come to fruition.

Keep us posted!

04/28/2008 08:27 PM by Jenn Beilmann, St. Louis MO Realtor (Coldwell Banker Gundaker)


Capitalism at work! Go for it! Find a need, fill the need and create an income generating system. Only in AMERICA! 

04/30/2008 04:55 PM by Nestor & Katerina Gasset, RealtorsĀ® Wellington Florida Luxury Homes (International Properties and Investments, Inc.)


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