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.
Carbon dioxide removal revenues worth £2bn a year by 2030
Carbon dioxide removal revenues could reach £2bn a year by 2030 in the UK with costs per megatonne totalling up to £400 million, according to the National Infrastructure Commission.
Engineered greenhouse gas removals will become "a major new infrastructure sector" in the coming decades - although costs are uncertain given removal technologies are in their infancy - and revenues could match that of the UK’s water sector by 2050. The Commission’s analysis suggests engineered removals technologies need to have capacity to remove five to ten megatonnes of carbon dioxide no later than 2030, and between 40 and 100 megatonnes by 2050.
The Commission states technologies fit into two categories: extracting carbon dioxide directly out of the air; and bioenergy with carbon capture technology – processing biomass to recapture carbon dioxide absorbed as the fuel grew. In both cases, the captured CO2 is then stored permanently out of the atmosphere, typically under the seabed.
The report sets out how the engineered removal and storage of carbon dioxide offers the most realistic way to mitigate the final slice of emissions expected to remain by the 2040s from sources that don’t currently have a decarbonisation solution, like aviation and agriculture.
It stresses that the potential of these technologies is “not an excuse to delay necessary action elsewhere” and cannot replace efforts to reduce emissions from sectors like road transport or power, where removals would be a more expensive alternative.
The critical role these technologies will play in meeting climate targets means government must rapidly kick start the sector so that it becomes viable by the 2030s, according to the report, which was commissioned by government in November 2020.
Early movement by the UK to develop the expertise and capacity in greenhouse gas removal technologies could create a comparative advantage, with the prospect of other countries needing to procure the knowledge and skills the UK develops.
The Commission recommends that government should support the development of this new sector in the short term with policies that drive delivery of these technologies and create demand through obligations on polluting industries, which will over time enable a competitive market to develop. Robust independent regulation must also be put in place from the start to help build public and investor confidence.
While the burden of these costs could be shared by different parts of industries required to pay for removals or in part shared with government, the report acknowledges that, over the longer term, the aim should be to have polluting sectors pay for removals they need to reach carbon targets.
Polluting industries are likely to pass a proportion of the costs onto consumers. While those with bigger household expenditures will pay more than those on lower incomes, the report underlines that government will need to identify ways of protecting vulnerable consumers and to decide where in relevant industry supply chains the costs should fall.
Chair of the National Infrastructure Commission, Sir John Armitt, said taking steps to clean our air is something we’re going to have to get used to, just as we already manage our wastewater and household refuse.
"While engineered removals will not be everyone’s favourite device in the toolkit, they are there for the hardest jobs. And in the overall project of mitigating our impact on the planet for the sake of generations to come, we need every tool we can find," he said.
“But to get close to having the sector operating where and when we need it to, the government needs to get ahead of the game now. The adaptive approach to market building we recommend will create the best environment for emerging technologies to develop quickly and show their worth, avoiding the need for government to pick winners. We know from the dramatic fall in the cost of renewables that this approach works and we must apply the lessons learned to this novel, but necessary, technology.”
The Intergovernmental Panel on Climate Change and International Energy Agency estimate a global capacity for engineered removals of 2,000 to 16,000 megatonnes of carbon dioxide each year by 2050 will be needed in order to meet global reduction targets.
Yesterday Summit Carbon Solutions received "a strategic investment" from John Deere to advance a major CCUS project (click here). The project will accelerate decarbonisation efforts across the agriculture industry by enabling the production of low carbon ethanol, resulting in the production of more sustainable food, feed, and fuel. Summit Carbon Solutions has partnered with 31 biorefineries across the Midwest United States to capture and permanently sequester their CO2 emissions.
Cory Reed, President, Agriculture & Turf Division of John Deere, said: "Carbon neutral ethanol would have a positive impact on the environment and bolster the long-term sustainability of the agriculture industry. The work Summit Carbon Solutions is doing will be critical in delivering on these goals."
McKinsey highlights a number of CCUS methods which can drive CO2 to net zero:
- Today’s leader: Enhanced oil recovery Among CO2 uses by industry, enhanced oil recovery leads the field. It accounts for around 90 percent of all CO2 usage today
- Cementing in CO2 for the ages New processes could lock up CO2 permanently in concrete, “storing” CO2 in buildings, sidewalks, or anywhere else concrete is used
- Carbon neutral fuel for jets Technically, CO2 could be used to create virtually any type of fuel. Through a chemical reaction, CO2 captured from industry can be combined with hydrogen to create synthetic gasoline, jet fuel, and diesel
- Capturing CO2 from ambient air - anywhere Direct air capture (DAC) could push CO2 emissions into negative territory in a big way
- The biomass-energy cycle: CO2 neutral or even negative Bioenergy with carbon capture and storage relies on nature to remove CO2 from the atmosphere for use elsewhere