Hard Assets in Hard Times
By Cam Mather
I thought it was just me, but sometimes lately it seems like everyone is becoming a “doomer.” A few nights ago we were in Almonte, Ontario. Bill Kemp, author of “The Renewable Energy Handbook” had been invited to speak about the Feed In Tariff (FIT) program here in Ontario which pays you an excellent return for green power. Even though it was a cold and windy night, 40+ people were packed in to a coffee shop to hear Bill’s talk.
After the talk Bill took questions and I’ve got to say, even I was surprised with the nature of many of the questions. I assumed they’d be about specifics, such as how to mount the panels on your roof or how to account for the income and deprecation on the equipment. Instead, the theme of many of the questions seemed to be about the ability of the Government of Ontario to honor its commitment to pay you .80¢/kWh for all your solar power over the life of the 20 year contract. What? You don’t trust the Ontario Government? What’s going on here?
Similar to the U.S. and Canadian Governments, which can never go bankrupt (right?), the Government of Ontario has had a stellar credit rating. Ontario was the engine that powered the Canadian economy. The manufacturing base of the country was here. The jobs were here. The highly trained workers and infrastructure, and heck, the government jobs are all here. So how could people suddenly be concerned about it honoring its obligation on a 20 year contract?
This was a real eye opener for me. It means that the realization that we are in uncharted waters these days has reached a larger audience than I thought. I just figured most people had gone into “hunker down, go to work, take the kids to sports on the weekend and not think about the big picture” mode. But apparently I was mistaken.
As people began to ask Bill these questions about the potential of the Ontario government to honour its contracts, he was quick to point to me as the great prognosticator of the coming doom. We ended up selling equal numbers of Bill’s book “The Renewable Energy Handbook” and my book “Thriving During Challenging Times” that night. Even though this was supposed to be a renewable energy event, and that’s how it had been promoted, apparently some people who are thinking of installing solar panels aren’t just doing it for the cheque that the government will send to them for their electricity.
That’s one of the themes of my book. Own hard assets. Too many of us put way too much faith in those bank statements we get where they show the value of our “investment portfolio”, all those stocks and bonds and mutual funds. Soft assets like these can devalue quickly, as they did in the economic collapse of 2008, and some of them can go away permanently. When Nortel was at the peak of stock market dominance in 2001 you couldn’t talk to a broker without the broker insisting that Nortel was a guaranteed safe investment. They had 90,000 employees and dozens of plants in 13 countries. Come on, they made switching equipment for the internet. Ever heard of that? How can you go wrong making stuff for the internet? Well it turns out you can and lots of people bought that soft asset when it was valued at $124 a share, and today it’s worth less than a dollar. The company has declared bankruptcy. That’s a soft asset for you.
Now solar panels on the other hand, they never really lose their value. Even if you chose to cancel your contract with the government, or something catastrophic happened and the government wasn’t honouring their contract to you, you could just use the power yourself. They are committing to pay you the .80¢/kWh hour for 20 years and can’t break the contract. If they break the contract it means they are bankrupt. And you’re left holding the bag. Yeah, the most valuable bag on the street. Because you end up with an asset that will keep your lights on, and your fridge and freezer keeping your food cold, and a washing machine that cleans your clothes and a pump that pumps your water if you live in the country. Could that possibly be a problem? I don’t think so.
Regardless of where you live in North America there are incentives out there to make your home more efficient and to invest in renewable energy equipment. The Database of State Incentives for Renewables & Efficiency http://dsireusa.org/ in the U.S. and Natural Resources Canada http://nrcan.gc.ca are a good place to start to see what’s available.
But even if there were no incentives available it still makes sense. You need to take back control over the things that make your life comfortable, and making some of your own energy is a good place to start.
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Thanks to Mill Street Books and Palms Coffee Shop (both in Almonte, Ontario) for hosting this event!
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