Juggling Dynamite

Like most Canadians, real estate forms a large portion of my family’s balance sheet, so it’s not exciting to acknowledge that prices have run far past reason. But denial is a disastrous investment strategy and no up cycle lasts forever. For those who are living in a paid for home that they want to keep and can afford to maintain over the next decade, this is not the end of the world. But for the bulk of market participants who are today highly levered investors/speculators/developers/homeowners who bought for a flip or bought more property than they can afford to maintain, prospects are dangerous.

And for the Canadian economy and its budget deficits that have deteriorated with commodities since 2011 and are now dependent on real estate as the last engine firing…the downside is daunting:   for related services, for taxpayers, banks, pensions and the many investors with a concentrated exposure in the space.  Repeat: denial is not an intelligent financial plan. See: Canada’s one-legged-stool economy.

“…the real estate industry accounts for 12 percent of Canada’s gross domestic product through November.

“It is concerning to see that degree of concentration coming from one sector,” said Brian DePratto, economist at Toronto-Dominion Bank. “This underscores the importance of real estate to Canadian growth, and also reinforces how key of a risk the real estate sector is for the Canadian economy.”

The Bank of Canada warned that real estate may be overvalued by as much as 30 percent. In its December Financial System Review, monetary policymakers cited the elevated level of household indebtedness and imbalances in the housing market as two key vulnerabilities to the financial system.

Abraham Lincoln famously said that “a house divided against itself cannot stand.” One corollary that Canadians can take as gospel: An economy built on housing can’t stand for too long either.”

Unlike other progressive changes in many other places, Nevada Public Utilities is on the wrong side of policy and evolution with their short-sighted capitulation to Buffett’s lobby.

SolarCity, America’s largest manufacturer and leaser of solar panels, was welcomed into Nevada with economic incentives. But then Nevada’s Public Utilities Commission started charging homes with solar panels more to use the public grid. This is bigger than a fight over solar energy – Nevada Energy, is part of Warren Buffett’s business empire.. Here is a direct video link.

As we mentioned here yesterday, finding ways to go off grid and become energy self-sufficient is a growing passion among thinking people, and for every good reason.   Clean, cheap, sustainable, passive energy is ours for the harnessing.

And though traditional utility controllers and their lobbies are fighting hard to limit the amount of free power that households can collect and use, resisting this natural evolution is an antiquated fool’s game. (Sorry Buffett and other old energy moguls, no you can’t own the sun. We can’t afford to make you richer at the expense of  everything and everyone else.  We’ve done that too long already.  And even those who don’t give a wit about the planet, have to acknowledge math: harnessing passive energy is the smart thing to do for all of our finances.

Sanity prevailed yesterday when the California Public Utilities Commission approved an extension to the state’s rooftop solar program.  See:  California’s roof top solar industry wins in head to head with utilities.

Up until yesterday’s decision, the total number of net metered systems allowed was capped at 5% of utilities’ total generation and San Diego Light and Power had estimated it would hit the cap in summer 2016.

The new increased net metering program will phase in time-of-use rates, require customers to pay a $75-$100 interconnection fee, and calculate some electricity fees differently, which will add an estimated $10 a month to the amount solar customers pay towards shared costs. But it will enable continued growth of new rooftop solar installations in California and the jobs that go with it,  while supporting a more robust and efficient grid that benefits all users.

“…rooftop solar is actually a net benefit for customers on the grid. Not only is solar a clean, renewable power source, but generating electricity where it is consumed also reduces transmission costs. Solar can also help diminish peak load on the grid during the day.”

Similar fights are playing out all over the world today. Each time sanity prevails in one municipality, province or state, it offers momentum and precedence for the rest.

Also see how recent decisions by the US Congress (extending solar and wind energy tax credits in the end-of-year budget) and the US Supreme Court (decision in favor of “demand response”— rewarding people for adjusting their power usage away from peak hours )—put energy efficiency and demand reduction on a level playing field with electricity generation and have opened the door for renewables to replace coal and natural gas.  All very important developments in the need to be powered primarily by renewable sources of energy by 2050.