September 7, 2016
When discussing the scale of the energy challenge around the world, some huge numbers come up. Getting a steady supply of electricity that is secure, affordable and low in carbon is going to cost a pretty penny. Many energy companies are scrambling towards global and institutional investors to source funds for these power projects. However, there is a more practical resource that does not get enough mention when it comes to solar energy systems: the people.
Crowdfunding is one of the most powerful ways to create a decentralized energy system and achieve the goal of steady and secure renewable energy. Using crowd funding to solve climate change challenges is a great solution because there is no greater resource than the people are. There is already community owned renewable resource schemes running in various parts of the world but in small scale.
Peer-to-Peer lending/online crowdfunding
Online crowdfunding is one of the systems currently in use that allows individuals to raise money for energy projects directly. It has kickstarted community ownership of renewable energy resources in places like the UK and Germany. It is essential for crowdfunding to come into the renewable energy space because most of the energy projects have almost hit a glass ceiling. Many people in the community are also greatly interested in being part of the process. With the huge gains to be realized from being part of the change in energy sources in the world, it is no doubt that many people are buying into the community-based system.
The different online crowdfunding platforms have a variety of approaches to garnering funds from the community. Some have a minimum contribution level that entitles the individual to a single solar panel which is leased to developers, while others allow the investor to choose the mode of investments. Crowdfunding has helped raise a lot of money for solar projects that were still under construction and needed the boost to completion.
The growth of online platforms has come as a relief for solar power companies that were experiencing difficulties borrowing money from banks and other institutions. Individuals interested in broadening their source of wealth have risen to the challenge and taken these opportunities to be part of the energy shift.
Initial Public Offering (IPO)
Another means of crowdfunding that energy companies have opted for is the Initial Public Offering from companies involved in solar projects and solar investment intermediaries. Companies such as Solar Power Inc are planning to raise $300 million in an IPO on NASDAQ to have a presence on capital markets. The Shanghai-based company is seeking to move its listing to the U.S. markets because it offers the most stability. This listing is considered a long-term move.
Impact of Crowdfunding
Many people are committed to the environment. However, they do not feel as confident as large scale investors do. This is why they welcome a low investment amount that allows them to go through the entire experience of investing before putting in a greater bulk of their money. This is one of the reasons why crowdfunding has had such a great reception in the community.
Various campaigns have been rolled out to fund renewable energy projects in solar technology and wind technology. Diversification in the types of projects to invest in is intended to meet the demands of the customer. With millions of registered users on online crowdfunding platforms, a lot can be done on the various projects.
Crowdfunding is expected to help energy companies access about $2 trillion in capital from the community with successful application in the finance utility and commercial scale projects. Comparing this figure to the $20 billion capital currently available from accredited investors, the potential for immediate growth in the renewable energy field is massive. This has led to the development of crowdfunding regulations that controls how the general public invests in renewable energy with reasonable expectation on return of investment. Currently, these regulations allow start up renewable energy companies to raise up to $1 million in capital through crowdfunding platforms.
Crowdfunding for renewable resources has greatly helped underserved communities such as disaster affected areas and third world communities to access affordable solar solutions through business and organizations that provide such technology. It facilitates fundraising and financing of specific solar projects in these areas.
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