Crowdfunding Emerges As Valid Route For PV Funding

Crowdfunding, where small investors contribute to project or start-up costs via the Internet, is emerging as a valuable way for solar companies to get backing. Last year a solar start-up, Solar Roadways, became the biggest-ever fundraising success in terms of backers on Indiegogo, the world’s third-largest crowdfunding site by traffic. The company, which plans to commercialise PV road paving, made USD$2.2 million in two months.

Solar Roadways, which has also received $850,000 in grants from the US Department of Transport and a $50,000 community award through GE’s Ecomagination challenge scheme, has been criticised over the feasibility of its technology. Nevertheless, its crowdfunding success is one of the most startling episodes in solar funding history. And many other companies are looking to imitate it. Solar fundraising campaigns on the Indiegogo platform alone include Solar Liberator, a smart solar appliance venture that raised more than $412,000; Rawlemon, a concentrated PV concept with more than $231,000; and Dominican developer Conuco Solar, with more than $50,000.

“So far there have been many solar power-related campaigns,” noted Anastasia Emmanuel, head of tech and design at Indiegogo. “As a global platform, every month over 16 million people from all over the world visit Indiegogo to fund their favourite projects.” For developers and start-ups, meanwhile, “crowdfunding gives people an opportunity to fund their ideas, passions or projects quickly and directly, as an easier alternative to taking out bank loans, maxing out credit cards or raising capital from venture capitalists,” Emmanuel said.

“Anyone looking for an alternative to traditional financing would find enormous value in crowdfunding and since there’s no money that needs to be returned to contributors, there’s no monetary downside to launching a campaign.” Compared to traditional fundraising routes, crowdfunding also offers a range of other benefits. One is that it allows companies to gauge the level of acceptance of a particular project or product. Another is that campaigns can be a handy way of marketing start-up brands or solar initiatives. “One of the most common misconceptions is that crowdfunding is all about money,” said Emmanuel. “There is much more to it. “Crowdfunding brings other benefits such as awareness, media coverage, market validation and serendipity.”

Guy Auger, chief executive of the renewable energy asset management firm Greensolver, is sold on the benefits. “On the lending side, its quite effective,” he said. “It’s a grand way for small projects to raise extra debt.” Crowdfunding can also help lessen local opposition to particular projects, he said. But one criticism of the concept is that the cost of borrowing is high. “The reality is that with solar you pay too much,” Auger said. “You can get money cheaper from the bank.”

Haresh Patel, chief executive of the solar energy investment platform Mercatus, echoes this view. “Crowdfunding is an innovative way to get projects financed,” he said, “but will likely only be a piece of a much larger puzzle. Crowdfunding will have some role if it can compete with a yieldco rate of sub-4% cost of capital. The market will need in excess of $7 trillion and the only way for the capital to flow is to unlock large buckets of institutional money. This will require scalable investment mechanisms.”