28 September 2015 by Susan Kraemer, Solarplaza
In a global economy, crowdfunding could shake up solar finance in the way PayPal shook up how we pay for products and services online.
Banks are being forced to question whether they should fight or support crowdfunding as group-sourced lending gives traditional finance a run for its money. Santander, a traditional lender, now supports it. And startups like Pristine Solar are mixing and matching traditional finance with crowdfunding through sites like Fundable and Sunvestment Group, which allows part of each project to be crowdfunded.
“Now [consumers] have an alternative where they can choose very directly where to put their money,” said one solar financing insider consulted by Solarplaza. “They can give their money via a platform to a certain company or project, and know exactly what the money is used for.”
The clearest threat to traditional solar finance is from emerging crowdfunding sites like OpenEnergy, which offers finance backed by Wall Street expertise, with open and interactive ways to estimate loan costs for various sizes of projects. But sites like these are still the exception. Crowdfunding’s potential has barely begun to be exploited by or for solar startups, even though solar has been among the big successes on the big pledge-based platforms.
Solar projects such as Bill Nye’s solar sail, with more than 23,000 backers and over USD$1 million raised, or solar roadways, with more than $2 million, 220% above goal, are some of the most successful campaigns on Kickstarter and Indiegogo. Yet these sites don’t even include a category for clean energy.
“Given the rapid growth of crowdfunding, traditional financiers would be foolish to ignore it,” said Mark Henderson, director of renewable energy debt at London-based investment firm Temporis Capital, which provides capital to green projects. “What they should be asking themselves is: ‘how can we work with it?’”
The global economic crisis not only made banks more wary of lending, but consumers more wary of traditional banking. But now, said Henderson: “I see the opportunity for cooperation between other financiers and crowdfunders through joint financing, or crowdfunding providing the equity and financiers providing the larger, debt cheques.”
He added that the fact that crowdfunding has evolved into a meaningful sector suggests banks have either lost business to it, or lost the opportunity. “Were banks providing the service in the first place, or providing it inefficiently?” he questioned.
Meanwhile, sites that specialise in solar finance are filling a vacuum on both sides of the investment equation: investors get higher earnings than at the bank, while developers looking for cheaper project finance get financed at below standard rates. By offering interest rates that make sense to both investor and developer, crowdfunding looks like an increasingly viable alternative for advancing clean energy.
In the UK, Abundance Generation has pioneered the UK renewable energy and clean investment crowdfunding sector with professional leadership, while Energy4All leads in community energy projects. And in the US, CollectiveSun finances arrays for nonprofits such as churches and schools, which are not eligible for America’s 30% Investment Tax Credit. These might all have been opportunities for traditional lenders. Are banks taking note?
- To find out more about the challenges and opportunities of group-sourced finance, sign up now for the Renewable Energy Crowdfunding Conference on November 5, 2015, in London.