Jesse Jenkins calls Mosaic a pioneer in crowdfunding renewable energy. Jenkins is a featured columnist and digital strategist on The Energy Collective, an independent, moderated forum on energy policy and analysis. He is also a graduate researcher at MIT.
“It lets you own a project,” Jenkins said. “I do think it opens up investment in solar to a whole new class of people, like someone who wants to invest but can’t have their own, they can invest in someone else’s, and that’s what might change things.”
An array of crowdfunding models
“Solar is in some ways the ideal product here because there is very little risk involved once it is on someone’s roof,” Jenkins said. “It’s a low-risk loan. It’s pretty hard to break [solar panels] and maintenance costs are low, solar is free, and the investment sizes are pretty reasonable.”
Over the last decade, companies like SolarCity and Sungevity have allowed owners to lease rooftop solar arrays. Solar Power Purchase Agreements (SPPAs) are financial agreements in which a third party developer owns and operates a photovoltaic system that a host has on its site. They purchase the electric output from a solar energy provider. The cost is usually slightly below an electric utility rate, according to the EPA, and the host pays only for what the system produces. The contracts can last anywhere between six and 25 years.
Federal and state governments offer tax credits and rebates for those who invest in solar power. The federal government allows a 30 percent deduction off solar system on tax credits, but this expires at the end of 2016. Solar module prices have fallen 80 percent since 2008 and almost a third of U.S. electricity in 2013 came from solar power, which provides even more motivation for investing in projects, but it is still a largely untapped—and lucrative—market for most consumers.
“There will be pressure to cut the cost of solar projects, even though the costs of modules have fallen dramatically, they are a small portion,” Jenkins said. “Installing and hiring labor and contractors, balance systems costs, wiring of converters, and electronics haven’t fallen at the same pace.”
Regulations by the Security Exchange Commission (SEC) have prevented Mosaic from allowing non-accredited investors in all 50 states to invest in their solar project offerings. Crowdfunding platforms like Indiegogo and Kickstarter, who offer projects in every state, are prevented from offering return on investments, which is why projects offer gifts or other paybacks. Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 is a step in the right direction, allowing an unlimited number of unaccredited investors without SEC registration to invest, and provided many investor protections. The JOBS Act affects companies that want people to crowdfund shares in their projects. However, Congress left much of Title III rulemaking up to the SEC.
“Mosaic is pioneering this in a lot of places, setting the precedent in clarifying rules in more and more parts of the country,” Jenkins said. “There is a set of regulatory oversight. Crowdfunding is a new, gray area.”
Because of ambiguous crowdfunding investment laws, companies are trying to navigate the murky waters through experimentation. Various models of crowdfunding, as well as several models of payback and return on investments, are being used.
A new example of this is Divvy, a New York-based startup founded by Rob van Haaren and Kyle Fricker, phD students at Columbia University’s Center for Lifecycle Analysis. The platform is crowdfunding for renewable energy, with a specific focus on solar systems. Its two pilot projects in New York included a solar farm and a project exploring the synergy between green roofs and solar systems, and they do not offer return on investments, but they do want to offer discounts on utility bills and coupons and other deals for institutions that participate.
“We took a user survey where we gave different payback scenarios, and people said they would appreciate a reduction on their electricity bill, instead of payback with investors,” van Haaren said. “The reduction would be proportional to what percentage of total project that you own.”
In the future, Divvy would like to expand into energy efficiency crowdfunding projects as well. “A teacher could replace light bulbs and the students would learn from experience,” he said. “Education is very important and we have always had a focus on schools.”
Part of this education program would be on their own platform: a system to monitor each investor’s carbon footprint. The more projects they invest in on the site, the more they can see their carbon footprint lessen.
“The crowdfunding sector is fairly new and Mosaic was the very first big player for renewable energy,” he added. “It’s all still so new, and these innovations, the way you present these projects to people, makes a big difference to the success of the platform.”
Wind farms, energy efficiency retrofits, solar arrays, and urban gardens are all possibilities of crowdfunding projects that could come from the influence of solar system funding platforms like Mosaic, Jenkins said. Here are some other startups funding solar power and other renewable energy projects: