Virtual Net Metering is the Game Changer:
TIME: solar panels have continued to drop in price and gain
wider acceptance. The cost of solar panels today is about 100 times lower than the cost of solar panels in 1977.
TECHNOLOGY: Virtual Net Metering
is a method in which one solar power system feeds one master meter, sending
electricity back to the grid. The power company then applies the credits from
that energy to each of the tenants in the building, thru sub-meters, offsetting each tenant’s electricity costs. The utility handles all
the record keeping, while the landlord collects the utility payments from the
tenants. One of the great advantages of solar multi-tenant housing
is education. Tenants at the solar apartments learn and understand how they are
using energy and how solar energy can help.
LEGISLATION:
Utilities are on board with the California Solar Initiative, in giving the go
ahead thru the MASH Program to Virtual
Net Metering. This is similar to the scene in the movie the Graduate when the advice
given to Dustin Hoffman is, “One word:Plastics”
This is a game changer in
the solar industry. Apartment owners can now become a Utility Company. Assume rents increase roughly 3% per year, and electricity prices increases about 5%: "We
are now in an era of rising electricity prices," said Philip Moeller, a
member of the Federal Energy Regulatory Commission. .. “In California,
residential electricity prices shot up 30% between 2006 and 2012, adjusted for
inflation, according to Energy Department figures. Experts in the state's
energy markets project the price could jump an additional 47% over the next 15
years.”
For EXAMPLE: Historically, rents
and electricity are both rising in price at an average of 4% per year. You
purchase an apartment building and install a VNM system. In your purchase, you
used 4 to one leverage, (a 25% down payment), so a 4% price increase becomes a
16% leveraged return. You have now almost accomplished what Warren Buffet recommends
for a good investment: “Investors are always
looking for stocks that are going to double in a year or two years- that’s why
they want tips. Instead, they should be looking for stocks that are going up a
more reasonable amount, such as 20% or 25% a year for the next 20 years. That’s
where fortunes are made.”
Currently,
there is a bestselling book by Thomas Piketty: "Capital in the Twenty-First
Century.” Per The Economist summary:"Mr.
Piketty derives a grand theory of capital and inequality. As a general rule wealth grows faster than
economic output, he explains, a concept he captures in the expression r > g
(where r is the rate of return to wealth and g is the economic growth rate).” To
boil this down, the landlord owns the apartment building = wealth, receiving a
leveraged return of roughly 16% per year, compounded. The economic growth = wages,
hopefully grow at 3% per year, giving landlords a 5 to 1 financial advantage
over their tenants. Landlords and tenants have historically been a good example
of Mr. Piketty’s theory.
Steve Nauert,
the GreenLandlord.org
