Over the past five years a new trend has emerged in the changing and more digitised energy sector of crowdfunding for projects.
With the ability to post a project with all its details to the web and its global reach, the opportunity to tap into the minds and investment wealth of large numbers of people is an obvious one. This is particularly true for smaller scale projects that are outside the scope of the traditional larger investment institutions or investment banks.
For their part, the investors aren’t in it for nothing and the lure is an often attractive projected return over the project lifetime, generally based on energy sales.
Illustrative of the growing popularity and potential of crowdfunding, an estimated €4.2bn was raised through platforms in Europe in 2015.
Crowdfunding renewable energy
Statistics on crowdfunded energy projects are limited. A 2015 estimate put the then amount raised at €165m worldwide on 300 clean energy projects, although by now both these figures will be substantially larger.
The earliest crowdfunded renewables project we could locate is Windcentrale, which was launched in the Netherlands in 2010 to enable investors to acquire wind turbines and thereby support the development of renewables in that country.
To date, Windcentrale has raised more than €16.5m in total, potentially positioning it among the energy crowdfunding frontrunners. The company raised €230,000 in half an hour on one project and €1.3m in 13 hours on another.
Another example of a renewable energy company exploiting the emerging blockchain technology is the South African-based Sun Exchange, which crowdfunds solar photovoltaic projects for commercial and industrial operators on a blockchain-based platform.
To date, three projects have been funded in South Africa and the fourth, the largest to date for microgrid electrification of a rural village in Lesotho, is currently under funding.
The majority of crowdfunding platforms are dedicated to company projects but a growing number are taking a more general approach in providing a posting space for project developers with varying levels of sophistication and varying requirements and restrictions.
Among these are Oneplanetcrowd in the Netherlands, BetterVest/GreenCrowding in Germany, Lumo in France and Abundance in the United Kingdom.
The latest to join this movement is the US-based GridShare. The focus is on renewable energy projects and the raising of capital by cleantech companies, although the intention is to expand it in the future to include funding opportunities for energy efficiency initiatives and early-stage cleantech ventures.
Describing GridShare as a game-changer for the alternative energy industry, CEO and Co-Founder Jack Jacobs said in a statement: "Raising money has been a huge impediment to the growth of the capital-intensive renewable energy industry. Now a project developer or cleantech venture can tap into a new funding channel and ultimately spend less time fundraising and more time focusing on its core business."
Initial offerings on GridShare include a $250,000 secured debt offering for a community solar project, a $350,000 equity offering for a floating solar project, and a $100,000 secured debt offering for a community wind project.
Posting a project on GridShare is free and once approved it is published online. Investors then have the opportunity to review the project details, and invest online. With respect to US offerings, GridShare earns a commission from the offeror only if its funding goal is fully achieved.
"For too long, large financial institutions and accredited investors have controlled renewable energy financing," says Troy Helming, President of Pristine Sun, a US solar project developer and sponsor of two listings currently on GridShare. "Pristine Sun can now get support from the crowd to complete its solar projects, and the crowd can now own part of our projects and participate in the growing market for clean energy in the United States."
Accelerating renewable growth in Europe
The European Union has also recognised the value of crowdfunding in advancing renewables and through the Horizon 2020 programme is supporting the CrowdfundRES project.
The three-year project which kicked off in February 2015 was conceived to bring together project developers, investors and crowdfunding platforms with the main objective of “unleashing the potential of crowdfunding” to accelerate renewables development.
Specific focuses of the project include gaining a deep understanding of the public’s perception of crowdfunding and analysing the challenges faced by the application of crowdfunding for renewable projects in Europe. From these, guidelines are being developed to support easier, more effective and wider accepted practices in crowdfunding projects.
The intention also is to improve the market and regulatory framework and to promote the crowdfunding concept and its advantages among those who could contribute or raise funds.
Some of the key challenges that have emerged for crowdfunding in the project are scaling investor numbers, ensuring supportive financial services regulation and the consistency of regulation across Europe. A consequence is restrictions on cross-border crowdfunding, which appears to be a major obstacle in the region.