Crowdfunding has become a popular tool for people and organizations to use to test out their new ideas for green products while securing funds to begin operations. The most well-known crowdfunding websites, Kickstarter and Indiegogo, have helped a significant amount of projects in renewable energy and sustainability get off the ground, projects that have been the focus of previous installments in my ongoing articles series about crowdfunding in energy.
These two sites mainly focus on consumer products such as renewable energy generation for your home, educational tools, and home energy management. However, many budding innovations in renewable energy or sustainability are larger and more transformative, thus requiring more initial capital investment in larger funding amounts. Whereas Kickstarter and Indiegogo often target funding in iterations as low as a few dollars in exchange for early access to a product, discounts once the product is commercially available, or other rewards, ideas that have the potential to truly disrupt the energy market need to focus on larger sums of capital. These more substantial projects — the industry gamechangers — warrant a different audience, one looking to actually invest larger amounts of money in ideas and bet on the future profitability of a company.
Kickstarter and Indiegogo are not built for such investments, but luckily there are crowdfunding platforms that give funders the ability to provide capital in exchange for equity or future return on investment. Rather than turning supporters into customers or a charitable donors, these crowdfunding platforms turn backers into investors or micro-VC funders in green projects, allowing the true democratization of capital-raising. This trend underscores how clean tech projects today should not be looked at as experiments or feel-good charity, but rather real money-making opportunities.
Let’s look at some of those crowdfunding platforms that allow investment in sustainability-related projects and a few of the projects that are funded from them.
To begin, StartEngine was established in 2016 to facilitate investment in early-stage startup businesses, both in renewable energy and not. By allowing anyone in the world to see nascent companies seeking out funding to turn their ideas into realities, StartEngine works with entrepreneurs, small businesses, and others and has completed about 150 successful financings through their platform. So, while not as widespread as Kickstarter in terms of number of projects, the businesses that have been funded have been larger and required bigger lifts. When supporting projects on StartEngine, funders are not just offering a helping hand to these startups but are actually purchasing stock in and betting on the companies and their ideas. In that way, this crowdfunding platform requires more serious thought from funders but offers potentially more substantial rewards for said support.
Successful Project: Affordable Community Energy Services Company
As an example of a clean energy project that’s been funded via StartEngine, Affordable Community Energy Services Company (ACE) raised $22,500 on the platform. ACE’s mission is “to bring environmental and financial sustainability to owners and residents of low-income housing” through green retrofits by providing disadvantaged households with 100% of the capital needed for energy upgrades. After providing these upgrades, ACE receives revenues via a developer’s fee and contract revenues over a 10-year agreement paid for from energy and water savings, as well as payments and/or government subsidies for solar and cogeneration production. This model ensures ACE isn’t just providing an environmental solution and helping low-income families, but “in the process, provide a return to our social impact investors.”
Active Project: G3C Technologies Corporation
One project that’s actively seeking funds through StartEngine is G3C Technologies Corporation (G3CT). I’ve written about G3C previously, and what they’re seeking to address is the environmental and economic waste presented by the options available for end-of-life (EOL) tires. Currently, EOL tires can eithe
End up in landfills, where they will contribute to soil deterioration and quickly disappearing space available for landfills;
Be reused/recycled in road pavement, sports fields, or other similar second-life options, though these applications are also responsible for soil deterioration as well as groundwater contamination; or
Get incinerated, an option that results in millions of tons of harmful greenhouse gas emissions per year.
G3CT has created, and is actively seeking to raise funds to implement, technology that converts EOL tires into recovered carbon black that can then be used to make brand new tires or other products. In this way, the clean tech of G3CT fights climate change by preventing the emissions that would come from otherwise incinerated tires while also reducing the energy and emissions associated with the creation of virgin carbon black, instead providing a sustainable option in recovered carbon black.
G3CT has already raised nearly $100,000 in their campaign as of this writing but is looking to see how far they can raise towards their stretch goals by the middle of February. The campaign page offers non-voting common stock in the company for your investment and notes “When you invest you are betting the company’s future value will exceed $22M.”
Another platform that allows for the raising of direct investment funds in clean energy and sustainability is Citizenergy. This site allows funders to acquire equity, participate as a loan, or purchase a bond (as well as some projects with traditional crowdfunding ‘rewards’ for more charitable endeavors) specifically for energy projects across Europe. In fact, the Citizenenergy platform is co-funded by the Intelligent Energy Europe Programme of the EU and brings together energy-focused crowdfunding investment opportunities across various smaller platforms into one place. As such, Citizenergy’s value comes both in vetting and aggregating these sustainable energy investment opportunities.
Successful Project: Mar De Fulles
To demonstrate the potential of Citizenergy to fund successful clean energy endeavors, consider Mar De Fulles. The goal of this eco-tourism project was to establish a sustainable eco-management network of bioclimatic tourist complex, next to a nature park in Castello, Spain, and other natural reserves. To embrace a sustainable relationship with the surrounding land, Mar De Fulles sought to get all of its electricity through solar PV and energy storage with a 46 kilowatt (kW) solar generation system with 592 kilowatt-hours (kWh) of battery storage.
The budget for the entire installation was €280,000, with €174,000 of those funds ultimately coming from the collective loans of investors on the crowdfunding platform. For their support, these investors were to receive yearly paybacks with interest on top over the course of seven years.
Active Project: Wind Energy Efficiency SRL
If such a successful project inspires you to peek around at others active raising funds right now, you might come across the Wind Energy Efficiency SRL. Where Mar De Fulles was a loan-based fundraiser, this one is offering equity in the project as it seeks out €40,000 by February 11, 2019 (a goal they’re extremely close to reaching). This capital is going to the purchase, installation, and operation of a 60 kW wind farm. These wind turbines are expected to generate almost 200,000 kWh per year and are expected to provide positive cash flow for the next 20+ years, putting them in a position to “repay the debt contracted and remunerate the shareholders.”
With all the momentum that green crowdfunding has in establishing these innovative businesses, not just on Kickstarter but on platforms that are helping to energize new companies through true investment, the traditional financial world has taken notice.
Green banking has been around for a while, with the Connecticut Green Bank becoming the first example in the United States in 2011. These green banks partner public support with private funds to invest in projects that enable states or regions to more quickly meet clean energy goals. But these types of green banks seek out private investment for projects themselves, they don’t enable any regular person to check them out and invest.
That orthodox model is being inverted though, as at least one traditional bank has started to allow its customers and the public to seek out and invest capital through the green crowdfunding platform of projects. In early 2018, Triodos Bank in the United Kingdom announced its crowdfunding platform that “allows investors to invest directly in renewable energy projects.” Those who invest are doing so at their own risk, but an early project through this platform—a 5 megawatt operational solar farm in Somerset that was funded into community ownership—succeeded and now earns its investors 5% interest per year over the next 17 years. The Managing Director of Triodos bank noted that they’ve “been crowdfunding since before it became a well-known term,” but by taking this act public represents an exciting pivot point.
The UK represents an unsurprising breaking ground for this kind of crowdfunding through banks because as far back as 2013 the UK Minister for Energy and Climate Change described crowdfunding as “an incredibly powerful” funding model with the capacity “to help deliver my ambition for a far more decentralized energy system.” While Triodos Bank’s investors must be UK citizens, it begs the question of whether this model could work in other nations as well. The United States has seen solar bonds for going on five years as a financial model, but this type of crowdsourcing is even more democratic.
Whether such new directions from banks are them being opportunistic or self-preserving, eyes should be kept on how the traditional financing markets turn to similar democratizations of investment in renewable energy and other sustainability ventures.
Renewable Energy World