Solar crowdfunding pushes way beyond the social network

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit
Share on email
Email

Kickstarter and the hype over crowdfunding platforms may give the impression that social media can replace the world of corporate finance, at least to some extent. But the Securities Exchange Commission is keeping startups on tenterhooks over its rulemaking for crowdfunding as part of the Jumpstart Our Business Startups Act signed into law by president Barack Obama last year.

Some argue that crowdfunding can only ever be a niche financial tool because of limitations of the JOBS Act, such a US $1 million a year cap every 12 months. A recent Forbes piece by Brian Korn, a securities lawyer, even claimed the “risks, burdens and limitations of crowdfunding render it almost completely useless”.

But sometimes a niche is all that is needed – just look at the rapid progress of crowdfunding in solar, particularly in the commercial segment of the market.

Mosaic, a clean energy finance company based in Oakland, California, has invested US$2.1 million and attracted 1,500 investors and celebrity fans to its crowdfunding cause such as Hollywood actors Mark Ruffalo and Edward Norton.

Billy Parish, co-founder and president, said that Mosaic wasn't waiting for crowdfunding rules handed down by the SEC.

“In hindsight, we made a smart choice not to build our business on a regulatory strategy around the JOBS Act,” he said. “There are a lot of crowdfunding companies on the sidelines waiting for the JOBS Act to [be implemented].

“The JOBS Act is designed for raising funds for startups and it's not very well suited to project finance – many projects are larger than the caps on the amount you can fund raise. We will continue to innovate through our own regulatory framework and we actually don't need the JOBS Act.”

During his Vote Solar presentation last month, Parish said that one major motivating factor behind the crowd was distrust in traditional finance.

“Our vision is abundant clean energy for and by the people,” he said. “We see ourselves as solving two key problems. The first is that people are losing trust in traditional financial markets… they feel like the investment game with Wall Street is rigged.

“On the one hand, we've got lots of people with a lot of money and unhappy with the options. On the other side, the deployment of clean energy is stifled by the lack of lenders in the space and the resulting high cost of capital to the industry. This is a huge pain point for most solar developers and the cost and availability of capital.”

In addition to its 1,500 investors, Mosaic has signed up a further 20,000 would-be investors, and has financed 12 projects with between US$26,000 and US$153,000. Investors receive high-quality debt and equity investments with ~4-10% yields, Parish said.

Mosaic's focus so far has been on the commercial segment of 30kW to 2MW project size where traditional banks fear to tread, such as schools, places of worship, community centres, and non-profit and municipal buildings.

“That sector of the market is particularly unbanked,” he said. “What banks are lending and investing in solar is focused on utility-scale or residential projects and it's very hard for commercial developers to get the funding they need.”

For example, non-profits, such as churches, often don't have tax equity to monetise to back an investment in solar.

Developers benefit from lower cost of capital, often 25-50 basis points below what the banks would offer and on more flexible terms, he said.

“Banks are not very interested in lending to non-profits, places of worship, schools… we're more open to looking at those types of institutions. Over time, we're also working to build the ability for developers to upload their loan applications for projects online so we can really reduce transaction costs.”

But criticism over the limitations of the crowd continues, however successful Mosaic has been so far.

Parish said that the most immediate limiting factor to scale was boosting its numbers of investors, rather than SEC regulations.

“We have a very robust project pipeline, and some amazing commercial-scale solar projects here in the US and are really focused on scaling the investor side of the marketplace – so getting from 1,500 investors now to 15,000 to 150,000,” he said.

Like Mosaic, SunFunder, founded by Ryan Levinson, also targets commercial projects, but in developing countries, rather than the US. SunFunder is also keen to describe itself as a solar finance company rather than simply a crowdfunding platform. But its barrier to scale is developing relationships with solar partners in those countries, he said.

“The biggest thing that would hold us back from scaling really quickly is our ability to develop enough strong relationships with solar companies and source great projects,” he said. “We view this an enormous opportunity; we think there's going to be the need for several hundred billion dollars in investment in off-grid solar over the next decade to alleviate energy poverty.”

In less than a year, SunFunder has launched nine projects and fully funded six projects, with one project repaid within nine months. But the off-grid market is still too nascent to deliver high-impact scale.

“But we also think it's a long-term opportunity,” said Levinson. “If someone wrote us a cheque for U$100 million today and said deploy this in the next six months to off-grid solar projects, I'd have to return that cheque because we wouldn't be able to [do it]. It's a new market, it's going to be huge, but it's also going to be a longer term opportunity.”

Another downside, albeit small, might be the fact that currently such investments are not liquid, although that should change soon, said Parish.

“Currently investments are not liquid but that's another thing we're working on where investors can sell their notes,” said Parish. “We also have shorter term investments that we'll be rolling out soon.”

Another distinguishing factor between the two companies is that Mosaic has SEC approval for accredited investors, which allows the company to return interest, but limits it to taking investments from people within the US, largely in California and New York (to a lesser extent). Without SEC approval, SunFunder has the freedom to take money from investors all over the world (33 countries so far) but cannot return interest.

While the solar crowd may think that it doesn't need the JOBS Act, it's almost certain that regulators are watching the crowdfunding leaders in this “niche” sector with great interest.

Read an interview with SunFunder's Ryan Levinson in the next issue of Solar Business Focus, out July 1

23 February 2022
Held annually since 2016, the Energy Storage Summit Europe is the place to be for senior stakeholders in the European storage industry. Designed to accelerate deployment of storage, we examine evolving chemistries, business models, project design, revenue stacks and use cases for storage. The 2022 edition will include exclusive content around longer duration solutions, energy strategies for wide-scale deployment of EVs and "EnTech", the event which sits at the intersection of digitisation, decentralisation and decarbonation of the power system. Come to meet TSOs, DSOs, Utilities, Developers, Investors and Lenders and leave with new contacts, partners and a wealth of information.
7 March 2022
Take your chance to join the most powerful platform in the MENA region. Middle East Energy (MEE), Intersolar, and ees, the leading energy exhibitions are joining hands to co-deliver an outstanding renewables and energy storage event at Middle East Energy 2021. Renewables and energy storage at MEE is the largest gathering of solar and renewable energy industry professionals in the Middle East & Africa, offering the most effective trade focused platform to international manufacturers and distributors looking to meet regional buyers.
8 March 2022
As Solar Finance & Investment enters its ninth year, we sit on the cusp of a new power market with solar at its heart. The 2022 edition of the event will build on our years of expertise and relationships to bring investors and lenders together with top developers. Connect with leaders in the field and use exclusive insights to drive investment and development decisions for the future. Meet new and existing project partners at the largest gathering of European solar investors and lenders.
23 March 2022
When it comes to storage, the US market exceeded a gigawatt of advanced energy storage installations (weighted towards lithium ion) at 1.46 GW, more than the previous six years in total! An exponential growth rate could see the market hit 7.5 GW p.a. by 2025. The summit will provide a wealth of content around this vital piece in the US power puzzle, with sessions dedicated to explore how companies are making money from batteries, the latest chemistries and their applications as they apply to different use-cases. We ask how investors can match ESG criteria to batteries and we will bring case studies of successful deployment and project execution onto the stage to examine how you can ensure your own projects are successful.
29 March 2022
Now in its 10th sell-out year, Large Scale Solar returns to Lisbon in 2022. We are excited to gather together face-to-face with the European solar industry as we provide unique and exclusive access to a powerful selection of the market's key stakeholders. Join this elite summit to find out how the market is maturing, which new markets are becoming more exciting, how technology is evolving and who's driving the market forward into the 2020s. Always senior, packed with developers, EPCs, utilities and investors this is the event for companies serious about European solar PV.
7 April 2022
Solarex Istanbul, Turkey’s first and unique exhibition on solar energy, provides a huge opportunity to Turkey on the way to being a solar energy hub. Solarex Istanbul will take place on 7-9 April 2022 for the 14th time. It will be a commercial platform to have the latest technologies and combination of new products from all around the world. It takes place annually at Istanbul Expo Center, Turkey. It is also called the most important platform for manufacturers, suppliers and dealers of the solar industry in Eurasia.

Read Next

January 27, 2022
Italian asset manager Green Arrow Capital (GAC) has signed a framework agreement with Spanish solar company Progressum Energy Developments (PED) to acquire 508MW of ready-to-build solar PV projects in Spain in a deal worth over €400 million (US$446 million).
January 27, 2022
Tesla’s solar installations jumped 68% in 2021 to 345MW despite a slight dip in additions year-on-year during the fourth quarter.
January 27, 2022
Major European solar developers have called on the European Union (EU) to develop a PV supply chain strategy to avoid cost increases and disruption to projects, with the group calling for 20GW of manufacturing capacity by 2030.
PV Tech Premium
January 26, 2022
s solar finds itself deployed in further and more far flung climes, it is also having to operate in increasingly harsher climates. In this article, VDE Renewables assesses how such climates affect PV performance and what must be taken into consideration when formulating O&M strategies.
January 26, 2022
The CEO of US utility NextEra Energy has said that while he thinks it is “more likely than not” that the clean energy piece of the country's Build Back Better (BBB) bill gets acted on this year, the company doesn’t need policy support included in the legislation to achieve its targets.
January 26, 2022
Leading US solar installer Sunrun has upsized its loan facility to US$425 million from US$250 million at “enhanced terms and longer tenor” to reflect the company’s higher valuation and strong performance.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
February 23, 2022
London, UK
Solar Media Events
March 8, 2022
London, UK
Solar Media Events
March 23, 2022
Austin, Texas, USA
Solar Media Events
March 29, 2022
Lisbon, Portugal
Solar Media Events
April 25, 2022
Berlin, Germany