Why You Should Pay Attention to Renewable Energy Crowdfunding
While the concept of voting with one’s dollars is often debated, there’s no denying a grain of truth runs through it. Products that sell well continue to hit the market and those that don’t are often times scrapped. It’s pretty simple—you like it, you buy it, and they keep producing it.
The argument against this is generally one involving control. While the consumer is telling the company what they want by purchasing it repeatedly, the company is still the one who controls what the products are in the first place.
In recent years, this has been disrupted by a democratization of the marketplace via crowdfunding. Anyone with an idea can come forward, ask for money, and reap the benefits if the product is delivered. It’s a very powerful tool that’s been used to great effect in the entertainment industry for reviving franchises in one form or another. It’s also been used to fund one man’s project to make potato salad.
The one unexpected place crowdfunding is taking off, though, is in the renewable energy sector. The demand for consumer-focused renewable energy is high and through a number of crowdfunding sites, it’s becoming much more accessible. To utilities and other renewable energy companies, the numbers may look like small potatoes when viewed independently of one another, but renewable energy crowdfunding is turning average consumers into investors in a now $10 billion portion of the industry.
How it Works
Renewable energy crowdfunding is a bit different than something such as Kickstarter or GoFundMe, in which someone proposes a project, sets a financing goal with incentives for backers, and then receives the money once the goal is reached. With renewable energy crowdfunding, the cycle is one of investors and consumers.
Generally, people seek out renewable energy projects to invest in. These projects can be wide-ranging and vary based on the crowdfunding platform used. Investors spend their money knowing they will eventually see a return on it—even if it’s not for some time—and that they’re helping reduce carbon emissions.
It’s a simple platform concept that can reach just about anyone with basic internet access. Sites often allow contributions of even just $5.
It’s made clear, though, that it isn’t a sure-fire investment. U.K. renewables crowdfunding site Abunance has a whole page dedicated to the risks associated with investing capital. In so many words, the site lets investors know that once their money is invested, it’s up to the holder of the energy project to pay it back. This same sentiment is seen across most of the models.
Failed investments don’t seem to be on the horizon, though, as the models have all be extremely successful, with investors seeing an average 6% ROI.
By the Numbers
So, worldwide, what do the numbers for renewable energy crowdsourced funding look like? Overall, they're quite strong and something traditional utilities should take note of. In the past 5 years, $10.76 billion was gathered via renewable energy crowdfunding sites. The growth has been exponential, seeing as roughly half of that was gathered in 2013. In an infographic from SolarPlaza, it’s estimated that renewable energy crowdfunding is growing by 76% year to year.
Also important is the speed at which this all takes place. The internet has certainly made everything much more immediate, but the speed at which funding has been received for these projects is staggering.
The project that gained support the quickest was the Netherlands’ de Windcentrale, which saw €1.3 million in wind turbine investments pour in over a 13 hour period. The funding came from 1,700 Dutch households with the intended goal of building a 2 MW turbine in the town of Culemborg. The project has 6,648 shares which output around 500 kWh annually.
While that is certainly impressive, it’s only one project. The top 5 companies have raised millions in investments, with the numbers rapidly growing.
de Windcentrale is the largest crowdfunding site with a total of roughly €14.3 million raised. It’s followed by Abundance with €8 million and Mosaic with €6.3 million. It doesn’t seem like a ton of cash, but companies such as Mosaic are barely a year old. Rounding out the top 5 are Trillion Fund with €1.4 million (though it has a stated goal of €1 trillion, hence the name) and GenCommunity with around €1 million.
A Scope Both Broad and Narrow
While the projects funded are generally smaller and community focused, crowdfunding projects are taking place all over the globe and have far-reaching effects.
Sites mainly exist in the U.S. and Europe, though projects range from Israel to Australia and several places in between.
The scope of implications this will have on the industry run this gamut as well.
“Overall, I think Solar Mosaic seems like a smart idea that comes at a smart time,” TechCrunch’s Colleen Taylor writes. “Thanks to debacles such as Solyndra’s, government bodies and traditional venture capital firms are now a bit skittish about investing in solar energy and green projects. Opening up the space to crowdfunding could give the industry the jolt it needs to keep innovating.”
The Guardian’s Nicolette Fox wrote specifically about Abundance, and believes crowdfunding efforts are a game-changer in the shifting of scope.
“By giving individuals the chance to invest in renewable energy,” she writes, “Abundance has helped to change the debate from just focusing on the costs of renewable technologies, to seeing what benefits they can bring to individuals, their communities and the environment.”
This October, the first Renewable Energy Crowdfunding Conference is taking place in London. With more than 450 platforms worldwide, the conference hopes to bring together the industry and discuss its future—one that is certain to see crowdfunding become more prominent.
The Guardian estimates it will require 1 trillion each year in renewable energy funding to combat climate change and crowdfunding could be a way to reach that goal. If nothing else, utilities and investors should be aware of this shift in energy funding.
Katie Fehrenbacher notes the potential for funding such as this on a larger scale.
“If just one percent of retail investments in savings accounts, money markets and U.S Treasuries was put into crowdfunding of solar projects—that can provide a 5 to 9 percent return to the investor—then that would deliver more than $90 billion for the creation of clean energy projects, according to a new white paper from Bloomberg,” she writes.
While the future of crowdfuning projects may still include things such as potato salad, it could also lead to a cleaner, greener (for both the environment and companies) future.
Drax advances biomass strategy with Pinnacle acquisition
The Group’s enlarged supply chain will have access to 4.9 million tonnes of operational capacity from 2022. Of this total, 2.9 million tonnes are available for Drax’s self-supply requirements in 2022, which will rise to 3.4 million tonnes in 2027.
The £424 million acquisition of the Canadian biomass pellet producer supports Drax' ambition to be carbon negative by 2030, using bioenergy with carbon capture and storage (BECCS) and will make a "significant contribution" in the UK cutting emissions by 78% by 2035 (click here).
This summer Drax will undertake maintenance on its CfD(2) biomass unit, including a high-pressure turbine upgrade to reduce maintenance costs and improve thermal efficiency, contributing to lower generation costs for Drax Power Station.
In March, Drax secured Capacity Market agreements for its hydro and pumped storage assets worth around £10 million for delivery October 2024-September 2025.
The limitations on BECCS are not technology but supply, with every gigatonne of CO2 stored per year requiring approximately 30-40 million hectares of BECCS feedstock, according to the Global CCS Institute. Nonetheless, BECCS should be seen as an essential complement to the required, wide-scale deployment of CCS to meet climate change targets, it concludes.