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How green energy crowdfunding is 'coming of age'

posted Oct 17, 2014, 1:21 AM by J Shaw   [ updated Oct 17, 2014, 1:21 AM ]
Triodos Renewables' $7.95 million crowdfunded share issue is a sign that peer-to-peer lending for green energy products is "coming of age," claims the company behind the initiative.

The renewables investment arm of Triodos Bank recently launched the offer to fund an expansion of its 11-project, 53MW portfolio, with investors able to pledge as little as $80 — the lowest minimum investment for a Triodos Renewables share issue.

The company, which has 5,000 shareholders, said it wants to ensure investing in renewable energy is "an option for everyone" and has teamed up with crowd financing platform Trillion Fund to promote and distribute the offer, timed to coincide with Good Money Week.

Investors like reliable returns

The U.K. crowdfunding market hit $3.18 billion at the beginning of this month. It has been identified as an increasingly important method of financing green energy projects, with companies such as Good Energy,Abundance Generation and E2 Energy successfully funding installations.

Julie Groves, chief executive of Trillion Fund and director of the UK Crowdfunding Association, said the predictable returns offered by the subsidies renewable energy projects receive make them highly attractive to the estimated 5.5 million people with savings and investments but no adviser.

"I think it's really interesting that a company as big as Triodos, with a bank behind them, is embracing crowdfunding," she told BusinessGreen. "When you look at the main mass market, what is really appealing are fairly steady returns of 5 to 7 percent which are significantly higher than what we're getting in the banks.

"What we're finding is that a lot of people who are very committed to the environment, but maybe don't feel particularly confident as investors, will come in where there's a low investment amount. You can go through the whole experience and get some things right and some things wrong with ($80) before you make a decision for the bulk of your money."

She added that many of these people represent so-called "patient capital" — leaving money in one place if the returns are sufficient, which also benefits the projects. "People want to put their money in, hear about how it's doing once in a while, but just leave it there," she said. "They don't want to have to switch and churn every two months to make a bit of money for an adviser."

Groves also believes crowdfunded renewables projects should get more support from government, given their potential to lower both energy bills and carbon emissions while feeding into ministers' push for local decision-making and community-based energy schemes.

Having a low minimum investment also ensures as many people as possible can benefit from green energy subsidies such as the feed-in tariffs, which are paid for via a levy on bills, she added.

"We define community as the whole country -— this is an issue for all of the energy bill payers," Groves said. "We can't define it too narrowly as only being small, local groups — we can't be reliant on there being an organized co-op in your town to drive the adoption of renewables and decentralization. We're trying to argue that anybody who pays an energy bill is paying feed-in tariffs and they all should have a chance to profit from them. That's why we think it should be really inclusive and open to anyone."

Green ISAs around the corner

However, while renewable energy project share issues are proving successful, Groves sees the advent ofloan-based crowdfunding being included in ISAs from April next year as the change that truly will kick-start the sector by opening up the green energy market to around $731.8 billion of savings held in Indvidual Savings Accounts.

Green ISAs are likely to be among the first products to be launched as they are asset-backed and marry social and financial returns, an increasingly popular outcome for investors, and offer the potential to raise returns while lowering the cost of capital for developers.

"The fundamental change we see is ISAs in the first half of next year," Groves said. "We've still got a long way to go but we think it's the point where crowdfunding will go mainstream."

With green bonds also expected to hit $40 billion this year and reports showing sustainable investments are outperforming the industry average, it could be a bumper 18 months for greener capital.

Posted from : http://www.greenbiz.com/blog/2014/10/15/how-green-energy-crowdfunding-coming-age