Solar Energy For Emerging Markets: Generating Income With The Sun Exchange
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Today I want to discuss solar energy investment. I am on my ride to maximizing happiness. And a big part of that is achieving financial freedom which will require investments with high returns. The higher the returns and the lower the risks, the better of course. But not at any price. I do my research and due diligence and I want my investments to be ethical and provide as many wins for as many people involved. One such investment opportunity is offered by the Sun Exchange which allows you to earn income from sunshine and at the same time support local economies in Africa.
So, is solar a good investment? Let's take a look.
What Is Solar Energy Investment and Why You Should Care
Solar energy investment is investing in solar power technology to generate electricity. This can mean many things like purchasing solar panels for your house, investing in green energy funds, or innovative projects that advocate leveraging the sun's power to generate energy (like what I will discuss later in this article).
There is indeed quite some controversy around the solar energy industry. Often claims are untrue. Often the technology is immature, may produce a lot of waste, may, in fact, be more harmful to produce, or may often be influenced by certain political agendas. However, one factor is undisputed: the sun has enormous potential to help us consumers -- and people of this planet -- to help make sure we stop harming our Earth and allow future generations of all sorts of creatures to be able to live in this incredible beauty.
The Bigger Picture: We Must Save the Planet to Save Ourselves
The typical climate change narrative goes as follows:
The climate on our planet is changing which is referred to as global warming. This means that the average global temperature increases due to the so-called greenhouse effect. This analogy is used because certain gases (especially carbon dioxide CO2) in our atmosphere have the same effect as the glass used in a greenhouse: Sunlight passes through from space to earth but is then trapped and cannot radiate back. This leads to a constant warming up of the planet. This warming has the most severe effects on our oceans (melting ice sheets, rising sea levels, floods), weather (more intense storms, snowfalls, droughts), food (reduction/shift of fertile land, less water supply), and health (harmful air pollution like smog is also trapped due to the greenhouse effect).
While all this is a logical narrative with the best intentions, it also bears some major dangers. It is too simplistic to "only" focusing on global warming as the main exploitation of our planet Earth. It does not tell the whole story, and worst of all there are too many critics and even industrial and governmental lobbies that claim global warming is totally exaggerated. What if the majority of people start believing these lobbies? Our planet would be doomed -- and we with it.
What if, we would find a model that is a lot more inclusive, holistic, and non-confrontational? The fighting global warming narrative is often too abstract and people leave it up to large institutions including governments and science. But the bigger picture really is that it is not about climate change and global warming. It is indeed about saving our damn planet. And with it saving life (including ours) on this planet.
A much better model is the one of the Living Planet -- following the Gaia theory. In the 1970s, James Lovelock proposed that "all organisms and their inorganic surroundings on Earth are closely integrated to form a single and self-regulating complex system, maintaining the conditions for life on the planet." So, our planet can be considered as a living organism itself with tissues and organs. As soon as we humans intervene, feedback loops are triggered. Everything is connected in this geomechanical machine that we call Earth. It is very difficult to predict what consequences certain actions have. Purely focusing on actions to reduce global warming may have very negative consequences for life on earth. We need to reduce the usage of fossil fuels because they are a major contributor to CO2 emissions. So, are wind turbines and large-scale solar fields the answer? They are certainly part of the answer but not in isolation. We already know that installing wind farms has severe effects on the local ecology. So, it's a trade-off that needs to be very carefully considered.
In that regard I love the view and model of philosopher, teacher, and author Charles Eisenstein who advocates this holistic view of the Living Plant and that everything is connected. He suggests four priorities to improve our situation and save life on our planet. The good news is also that this affects us all and we can all do something about it:
- We need to protect the undamaged ecosystems that we still have on earth. That includes our rainforests, mangrove swamps, seagrass meadows, and other wetlands.
- We need to repair the damaged ecosystems worldwide. That includes regeneration of damaged ocean areas, change of industrial fishing and agricultural practices, reforestation, and protection of the fauna.
- We need to stop poisoning our planet with toxic waste like plastic, polychlorinated biphenyls (PCBs), chemical fertilizers, pharmaceutical waste, radioactive waste, and other industrial pollutants.
- We need to reduce the greenhouse gases in the atmosphere. We can achieve this by actively reducing fossil fuel emissions. Thankfully the other three priorities will significantly contribute to the reduction of CO2 as well.
This is the beauty of the Living Planet approach: everything is interconnected and starting to tackle the four priorities will leverage the feedback loop mentioned earlier to a self-reinforcing virtuous circle.
So what can we do?
Every little helps. We don't need to wait for any top-down policies by any large institution, which mostly have a different agenda anyway. Every one of us can start to look more for consuming local goods, walk and time the bike instead of the car, exchange processed foods by local, organic foods (good for your health anyway), choose smaller, passive houses, decide for repairable rather than disposable goods, avoid plastic, reuse and recycling. It's a bunch of small things -- small habit changes -- but collectively if most of us start doing it, it will make a difference.
Of course, the use of renewable energy has an impact on your carbon footprint as well. Not everybody owns a house and can or wants to install solar panels. But we can still support this idea. With that, I'd like to introduce a project that I found a couple of months ago and which is extremely exciting as it ticks all the boxes of the Living Planet priorities: The Sun Exchange.
Introducing The Sun Exchange
The Sun Exchange is the world’s first "peer-to-peer solar panel micro-leasing platform." Through this online platform, anyone, anywhere in the world, can own solar energy-producing cells and generate high returns. The solar cells are leased to provide electricity to businesses and organizations in emerging markets that would otherwise not have access to energy at that price.
Below is a great video introducing the Sun Exchange.
The Key Business Principles
The Sun Exchange's mission is simple: to connect the world to the sun.
I think it actually goes beyond that and is far more noble. Power infrastructure in South Africa and other African nations is often unstable and expensive. This is a challenge for local businesses. On the other hand, sun power is abundant. Although the solar industry made huge advances, average cost of solar technology is still too high for most businesses.
This is exactly where the Sun Exchange comes in. One of the key business principles is a model that can be compared to the buy-to-let model as explained by Mr H on Tribal Fi. The Sun Exchange leverages crowdfunding to have (many) "financiers" who invest in solar projects, own the solar cells and rent them to the businesses. Electricity generated via the sun is much cheaper than from other power infrastructures, which increases their savings rate and lets them operate more economically.
Hence, another key business principle is their commitment to do some good through ethical and sustainable practices for the local people as well as the planet, all of which is perfectly in line with the Living Planet view that I outlined earlier.
Finally, the use of technological innovation is a further key business principle. You will see on their platform that you can use cryptocurrency such as bitcoin -- and in the future potentially also their own coin (SUNEX tokens). With that everyone in the world can participate without being dependent on local South African currency (ZAR). This opens up a whole lot of new possibilities (apart from being much faster and cheaper than traditional fiat currency). If you are into the crypto world like me, you will appreciate that too.
The Key Benefits
The team behind the Sun Exchange found a gap in the market and by filling this gap they seem to be able to produce a win-win-win really for everyone who is involved or affected:
- In the grand scheme of things the biggest beneficiary of this platform is our Living Planet by reducing global emissions.
- Local businesses benefit from access to lower electricity rates to reduce their cost. Their energy bills are reduced by at least 20% and sometimes up to 60%. No expensive loans or banks need to be involved.
- The local economy is supported by collaborating with local workforce and products and by creating jobs.
- As a cell owner, you can offset your carbon footprint and generate an attractive return on investment.
How Does The Sun Exchange Work?
The Sun Exchange follows a very simple process to deliver the benefits mentioned before to all stakeholders.
First, the Sun Exchange sources solar projects. These projects can include schools, local businesses, or organizations that want to make use of more cost-efficient energy. Solar engineers and solar construction partners evaluate proposals based on economic and technical viability and social and environmental responsibility.
Once projects are confirmed they are published on the Sun Exchange projects page and the crowdfunding starts. Anyone can then buy as many solar cells as they want.
After the crowdsale is completed, the solar cells are purchased and installed on the property. This is typically done by local construction partners and takes about four to six weeks (with larger projects longer). The status of the project is transparently shown on the Sun Exchange dashboard.
Finally, after the installation, the good part starts: the supported schools or businesses start to leverage green energy at a much better cost. As a funder of the solar cells via the Sun Exchange you own the solar cell over its lifetime (usually 20 years) but lease it to the project.
As soon as the cells start to produce energy, they produce monthly income for you. Except your initial investment, you have nothing else to do. The Sun Exchange takes care of installation, maintenance, and insurance.
You can find a detailed how-to-signup guide by Matt on The Working at Home Man.
Invest In Solar Panels for Nhimbe Fresh - Water Pumps
One of the current solar panel investments on the Sun Exchange is the Nhimbe Fresh - Water Pumps project in Marondera, Zimbabwe. Nhimbe Fresh is an agriculture leader in Marondera, that supplies the world’s supermarkets with berries, stone fruit and vegetables. This solar power project will power the farm’s water pumps.
Here are some details about this investment opportunity:
- Exact number of available cells is TBC
- USD 7.- fixed price per cell. You can also pay in EUR, GBP, ZAR or BTC (currently BTC 0.00014687 per cell).
- 13.58% IRR
- 20 years lease term
- 6.516 kWh energy yield per cell per year
The Nhimbe Fresh project is a very typical and representative project offered by the Sun Exchange. To me, this is a real win-win-win for everyone involved. You help the farmers, you help local economies, you support the local workforce, and you support clean energy and the Living Planet vision with it. On top of all of that the IRR is over 13%, which makes it a super attractive investment opportunity. It is above my average IRR across my whole portfolio.
Remember, if you use one of my affiliate links to register at the Sun Exchange and buy solar cells, you'll get one cell for free.
How to Improve Your Investment Portfolio With Solar Energy
Kevin O’Leary was recently quoted on a Forbes article about the importance of diversification. And I could not agree more. My portfolio is highly diversified into close to 70 projects and platforms as I wrote in my article How to live a happy life.
Just recently I discovered the possibility to invest into a clean and sustainable asset class. Solar energy via The Sun Exchange is one such example. There are others which I will introduce in another article like investments into farmland, kettle, organic wine, or other natural products. The beauty of this is that these platforms are direct, i.e. they work with the end-consumers directly. It's not some sort of fund that is registered at a stock exchange. I want these projects to be detached from the stock market and I want to have fewer layers in between. This reduces complexity and cost. At the same time most of the projects suggest a compelling annual return rate of between seven and ten percent on average. And the best part: you are doing something good with it (in line with the Living Planet view). I rather put my money into one of these projects and accept a potentially lower interest rate.
Yes, these projects are high-risk. You never know. The platform may go out of business. The end-consumer may have troubles. Disasters may strike. Anything. That's why it's so important to spread the risk over the whole portfolio to balance it out. I like this clean asset class and it will continue to be the fastest-growing class in my portfolio.
How Solar Energy Investment Fits Into My Happiness Formula
I wrote about my purpose and goals earlier. One important part is achieving financial freedom via a frugal lifestyle, my fitness business 4legsfitness.com (and its automation) and investments in different asset classes that generate income and allow me to live my lifestyle. So, I am depending on my portfolio and hence it is important to spread the risk. I achieve this by diversification into as many different asset classes as possible. This includes classics like markets and stocks, pension funds, real estate, gold but also more exciting and volatile classes like crypto (eg NFTs), angel investments (Seedrs is an easy-to-use platform) or tiny houses. I also mix different risk profiles, short- and long-term investments so that I can achieve an average annual rate of returns that is fairly stable and most importantly enough to deliver a sufficient income.
I love to learn about and investigate new investment options. The asset class of "clean energy" in my portfolio is the one I am most proud of and interestingly also one of the most profitable on average.
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Full Disclosure and Disclaimer:
I am an affiliate partner of the Sun Exchange, so I may get a commission. If you do sign up and purchase solar cells on the Sun Exchange via my affiliate link, you will get one solar cell for free in addition.
I am not a financial advisor. I present my view on things that work well for me. I am not taking any responsibility for your decisions. Always do your own due diligence before you invest.