The blockchain renewables crowdfunding phenomenon

Five blockchain based crowdfunding initiatives are under development in the energy sector.
Published: Tue 08 Aug 2017

While blockchain initiatives in the energy sector are growing apace in particular in Europe and Australia, and to a lesser extent in the United States and Asia, arguably the biggest growth at present is in crowdfunding.

The blockchain energy crowdfunding concept was pioneered in South Africa back in 2015 when Bankymoon developed a platform for donors to prepay electricity to schools in the country. More recently the Sun Exchange is focusing on commercial and industrial scale renewable energy projects.

But now alongside these, no less than five ‘new kids on the block’ are jumping into the space. While expounding the ‘smarts’ and other benefits of blockchain, they each have a slightly different endgame but their intent to get there is the same – by extracting investment in the form of ethers (ETH, the value token of the Ethereum blockchain) from the ‘crowd.

Usually there seems to be promise of an early participant discount or bonus, or ‘bounty’ as one company calls it. And for those ethers, the investors will receive the particular company’s own crypto tokens, which should then become a digitally tradeable commodity.

Energy trading

The most advanced of the five is SunContract out of Slovenia, which has just completed a US$2m sale to launch its platform, to which there were 2,274 contributors.

The SunContract Energy Pool is aimed to connect solar power producers and consumers to trade energy and serve as the first step towards a peer-to-peer energy exchange and energy services platform.

The initial focus is on Slovenia and then Austria and Germany in Europe and in the Middle East UAE (Dubai), Jordan and Turkey, which are countries on which the company claims to be most knowledgeable and the solution fits within the existing regulatory framework.

Another energy trading platform about to launch is Gibraltar-based (but Lithuania background) WePower.

The company is currently taking registrations for its pre-launch fundraiser, stating that the partner agreements and all necessary letters of intent are in place.

WePower says the project is supported by Lithuania’s Ministry of Energy and anticipates that services will start being provided in Spain, Germany, Portugal, Italy and Greece within 6-9 months after completion of the fundraiser. Further expansion within 12 -18 months after the fundraiser should cover the US, South America, Middle East and Australia.

Crowdfunding platform

Another initiative currently under way is from MyBit, with a crowdsale aimed to raise the funding “to finalise the development of (its) platform, conduct pilot studies and bring the product to market.”

Running until 15 August, so far the sale has raised over 3,200ETH, corresponding to over US$870,000, from more than 1,200 backers.

The Swiss company, which intends to launch its activities in Germany, describes itself as the “platform for tokenising revenue streams” by “commoditising solar panel installation and other forms of renewable energy.”

In simple terms, MyBit is intended as a platform where project developers such as landowners and others can post projects for a crowdfund.

Such platforms are not uncommon. A study undertaken as part of the European CrowdFundRES project found that 17 of the 28 member states have crowdfunding platforms which present renewables projects with nine of these having platforms focussed exclusively on renewables. However, MyBit appears to be the first of this type that is blockchain based.

Distributed energy

Yet another initiative currently underway is from Solar DAO out of Israel, which has launched what it calls a “closed end investment fund” for the development of solar projects around the world.

The pre-initial coin offering (ICO) has raised to date over US$200,000 from over 200 investors and runs until the end of August. This will be followed with the core ICO, scheduled to start by the end of October.

Solar DAO’s main focus is on the Israeli, Portuguese, Kazakhstani and Ukrainian markets, with the company claiming a long history in the development of the solar PV market since 1991. This includes 70MW of PV plants across Europe, 270MW in Russia and 150MW in Kazakhstan and production facilities in Russia, Spain, Germany and South Africa.

Solar DAO’s investment ambition is US$80m, based on the supply of a total 80m tokens at an initial price of US$1 per token.

Just as Solar DAO’s pre-ICO draws to a close, Farad Energy will be launching its pre-ICO on 25 August. This will run until 14 September and will be followed by the ICO running to the end of that month.

Farad Energy’s approach is slightly different in that it is offering what it says is a “novel way of commoditising Intellectual Property Rights related to a set of technologies.” The technology in this case is metal oxide based ultra-capacitors for energy storage applications and the company is looking to crowdfund their manufacture and supply.

Farad Energy appears to be Hong Kong-based but also has connections to the UAE and Indonesia.

Crowdfunding challenges

Any new area of business attracts its share of startups, some of which will survive while others won’t.

This is facilitated by the internet, with which it is possible to establish a company structure and a virtual presence. And as blockchain is an IT based technology its ease of deployment and the associated business models is further facilitated.

However, these are early days for blockchain with little in the way of regulation. Crowdfunding also requires tightening up at the regulatory level, at least in Europe according to the CrowdFundRES findings.

The digital world also makes it very easy for individuals to participate in such offerings. What this means for potential investors – especially with what appears from social media behaviour to be a growing generation of ‘act first, think later’ – is that they need to look closely at each of the offerings and to be aware of what they are investing into and what the conditions are, similar to any other form of investment.

With renewables projects having a lifetime of 20+ years, such investments could potentially be long term.

The big question, however, is the appetite for such investments. In Europe, crowdfunding raised an estimated €4.2bn in 2015 while globally €165m has been invested in energy projects.

The Sun Exchange sold out its first three projects and its fifth is over 40% complete with over a month still to run. However, the fourth project, for a microgrid to electrify a rural village in Lesotho, came in just below 30% in the first round.

In SunContract’s case, the sale raised 8,732ETH, which was below the target 10,000ETH – enough, a blog states, that the company will “have to adjust some of (its) plans.”

With the current and planned ICOs of these new companies, before the end of the year an update should emerge on the current potential for crowdfunding in the energy sector and the preferred project types.

Related Webinar