Solar - Aditya

With the PM's first task after Sri Ram temple inauguration was the launch of Suryodaya Scheme or every house with rooftop solar, the question that quickly comes is what happens to the distributors and generators of electricity  companies.

The way electricity works so far is that Power companies generate power using a variety of methods/fuels- Coal, gas, diesel, solar, wind etc. These sell to Power Transmission companies which in turn sells to the final consumer. Many of the Power Transmission companies are in serious financial situation either because govt. is asking them to give free up to a limit and more than that the illegal drawal of electricity by many.

With smart meters and net monitoring, while the meter manipulation is reduced, the issue is still of illegal drawdown of electricity during transmission. If only Tesla had popularised the wireless electricity, this issue would not have come as like internet everyone has to prepay or get a postpaid connection to tap the electricity. No need for cables and wires and a huge savings due to that. But fortunately for Power Transmission companies Tesla's wireless electricity remained in books only.

Now the next issue to hit the power transmission and power generating companies is the rooftop solar. There are two types of rooftop solar - One is called Off grid and one is called On grid. Off grid is expensive and difficult to maintain. It calls for a series of costly batteries to be kept for storage and will have to be changed after a few years. The other one On grid is with the help of a switch/meter the power generated is delivered to the power company. A separate standard connection is given for the electricity consumption. End of each month, the solar electricity generated vs the electricity consumed is netted and payment is made to electricity company if consumed more than generated. The other way around is credited to your account and not paid.

The issue comes if a large number of people opt for the solar electricity that the demand side from suppliers gets reduced.  The transmission company has now to pay for the electricity generated by these numerous solar roof tops. Thus to make these transmission companies profitable, they may introduce a minimum drawdown payment i.e. even if you travel and lock your house, while the solar is generating, you are not consuming. To offset this Transmission Companies may seek a minimum drawdown payment which is assumed to be consumed even if not consumed. i.e if you say that you want a minimum drawdown of 100 units at time of connection, and you use 20 units of electricity, you will be assumed to have consumed 100 units of electricity.  This mechanism is essential as electricity generated cannot be stored and has to be consumed on production.

As the electricity cannot be stored, one more issue that arises is the skewed production. During day, Solar will generate electricity, while at night it won't. Power generating companies have to work full load in the night to provide power.

These are the issues that need to be discussed by experts  in making the Suryodaya project a success.

 

EGO vs SANITY

It is often noted, ad nauseum, that once people taste a wee bit of success, they start to feel that they are demigods and anything they touch will turn into Gold.

Success often does not come in leaps and bounds, but through steady work. Yes, sometime luck turns the table, but do not think those as Midas touch.

Take the example of Anil Ambani, one of the richest businessman at that time. After the split between brothers and got lot of money and modern era business - like ICE- Infrastructure, Communication and Entertainment. He went on to establish Ultra Mega Power Station, he went on to buy internet cable companies and set up a huge infra for mobile and internet and of course the Bollywood area thanks to his actress wife- the entertainment business. All these businesses required huge amount of CASH and TIME for it to fructify. He was on steroids, borrowing left, right center to finish his projects. End of the day, he ended up in such a huge pile of debt, that he has not been able to come out till today. His brother helped to buy for a pittance, the communication part of the business and renamed it Jio.

His elder brother has refinery, which is a cash cow and generates cash, which he can slowly deploy into communication and wait it out. No need to go in for large borrowings or Ego issues to grow big quickly.

 The fundamental lesson you learn from above is that taking a small debt where you have the ability to repay by sale of some of your assets is fine for a short term, but longer growth financed by debt where the outcome is not a certainty would land you in one big hole that will be difficult to come out.

Ego in business may be good, but has to be accompanied by Sanity. Ego helps you to push forward, but Sanity roots you to the ground. When the going is good, repay Debts, try to hoard cash for a rainy day and when opportunity comes you can use it. Life is a cycle. It is not that you miss one you are out, there will come a time to join the cycle. One has to wait out. This equally applies to our investments. Just because everyone is making money on a flavor, you may be tempted to join. But just check out and do not put everything into that as one day the flavor goes out you have huge debts and unable to sell. That is the most difficult situation for a businessman.

 In any case, ensure that family is assured of a steady income stream not linked to any business venture to avoid creditors and govt. to come after that. 

Trade Skills vs Knowledge Skills- The fear of AI

 With Artificial Intelligence gaining ascendancy and everyone jumping on to the band wagon, a thought occurred to me that the Knowledge based skills like finance, MBA's, lawyers etc. will soon become redundant as the knowledge will be all with the likes of google and anyone can search and use AI to get a solution.

Many clarifications, like what computer I want to buy based on my requirement, what type of agreement required for a particular action, etc is easily done with the help of CHATGPT. And this is just one of the tool. So, what does knowledge based AI do that a human can also do. It takes the information available and analyses and provides solution as per your requirement. Take for eg. to file a tax return, it will seek some basic information and then use the database of knowledge of the tax information and churn out a tax return for submission to the IT department. Eg is clear tax. Thus a CA or Tax consultant is made redundant.

Or to prepare a business plan, one may not need an MBA to do. Put in the basic inputs or even that is not needed in an ERP environment(Enterprise Resource Planning), which may have past data and looks at trends (which an MBA also does) and churns out a 10 year forward Business plan, cashflow and various other reports.

Even for doctors, the symptoms put out and AI generated reports of your blood, pressure, heart rate etc. makes an ordinary doctor redundant as all the 5 years knowledge from the Harrison's Principle of Internal Medicine, Gray's Anatomy etc. are input in AI.

Even for translators, Google and other machines fluently translate and speak on your behalf in a language you choose.

Thus Knowledge based info is thus passe'. What will be required in future is the physical aspect of skills. That is someone whose physical presence may be required to help out. Examples of such ones are Nurses, Plumbers, Farmers, Electricians, Surgeons etc. who has to physically come and sort out the issue. Even software guys will be made redundant - already with GITHUB, standard routines are put up there and people can easily copy the coding.

Trade skills will be the key learning of the future. And the value of those will increase.

THINK - Do you still want to send your child to a high paying college getting a knowledge based education or to a Trade School.

RISK Profile

 Risk profile is generally asked by any financial advisor. What does Risk Profile mean? In simple terms it is your capacity to take risks. You may want to take a 100% risk with your capital, but the questions they ask before slotting you in a particular risk profile is the real risk YOU can take. I may have 10 Lakhs and may want to invest it in a 100% risky investment. It can fetch you good returns after a few years or it may not. But till such time how are you going to survive. So, the risk profile takes your income, expenses, emergency fund etc and your age (key) to determine the risk profile.

Risk Profiling is important and I have categorised as follows: 

a) 20 years to 35 years (assuming you start earning) - High Risk (Equity/Ipos/crypto/nft) - Risk (Equity/Mutual fund) - Safety (some long term debt funds)

b) 36 years to 45 years (assuming you have invested above and have some capital)- Risk (Primarily Equity, Index funds and some IPO's)- Risk (Mutual fund -aggressive ones/sectoral)-Safety (some medium term debt funds)

c) 46-59 (assuming you have made a neat pile by now)- Risk (Mutual fund- Multi asset/Multicap/some sectoral, Equity large caps/index)- Safety (More medium and short term debt fund)- Income (funds/equity that generate dividends or deferred annuity plans)

d)60 and above - Safety (liquid funds, short term funds)- Income ( funds that get you regular income). By this time, your investment should focus on Safety and getting regular income for living a normal life. If over and above that you have funds, you can risk by trading/playing the market for time pass.

The above may or may not be applicable to all as each one may have some other commitments in terms of debt of house/family commitments/health issues etc. But investments like above sample is required for ensuring a financial freedom, at the age of 60