Crowdfunding and renewables: is power for the people by the people about to come of age?
When two wind turbines started spinning on Harlock Hill in Cumbria in the winter of 1997, it was a pioneering moment – for the UK at least. Our first renewable energy co-operative had just proven it was possible to harness hundreds of local people to raise the investment needed to turn such a project into reality. They were motivated by the desire to take action to help our environment whilst making a decent return in the process.
Seven similar co-operative projects have since been built across the country, from Dunvegan on the Isle of Skye to Westmill in Oxfordshire, all coalescing under the banner of Energy4All. Despite this however, the UK has a long way to go before mass financial participation in renewable energy is achieved. Consider Germany, for example, where there are now 600 energy cooperatives, with ordinary Germans owning nearly half of all the country’s renewables.
Enter crowdfunding. Raising investment by connecting people to projects and ideas online, bypassing banks and the capital markets, has been one of the most exciting financial innovations to emerge in the last decade. It is now being applied to the roll out of clean energy technologies, offering a viable mechanism to greatly increase the number of people who can participate and benefit from the greening of our economy.
Two particular developments over the last couple of years are worth drawing attention to.
First, in a number of countries new companies have been launched that allow anybody to directly invest even small amounts in community-scale renewable energy projects of their choosing. In the UK this includes Abundance, in the USA Mosaic, in France Lumo, and in Germany CrowdEnergy.
Is decentralised finance for decentralised energy about to come of age?
What’s more, there’s been a lot of success. In less than a year, Abundance has already raised over £1.6 million for a solar project in the South Downs and a wind project in the Forest of Dean. Just last week, Mosaic exceeded expectations in its first public offering, raising the maximum required $313,000 in less than 24 hours. We can expect much more to follow.
Second, crowdfunding more generally is forcing its way into the mainstream, gaining recognition from both regulators and Governments. Abundance became the first FSA authorised crowdfunding platform in the UK, soon followed by Seedrs. In the USA, President Obama’s JOBS Act opened the path for SEC registration of crowdfunding there. What this means is that people can trust they have all the information they need to make their investment.
A recent report has quantified for the first time the prolific increase in crowdfunding across the globe. In 2011, $1.5 billion investment was raised, over four and a half times more than in in 2007. If this kind of growth can be replicated across renewable energy crowd funding platforms, we will have collectively taken an important step towards a participatory sustainable energy system.
Here in the UK, the Government has an important role to play in facilitating this process, and there are some positive signs on this front. A consultation looking at how to increase community participation in, and benefits from, wind energy projects, has just closed. We wait with hope to see what comes from this.
However this is not going to tackle the obstacles in our financial system that are still holding back ‘democratic’, people-powered, finance. The Government continues to use regulation and tax breaks to steer our savings towards listed securities via the public markets. Given the volatility and complexity of such markets, there is surely a case for this to change? Opening up ISAs to include unlisted renewable energy shares and debentures would be a good place to start (read more here).
2013 promises to be an exciting year. There is much to change and even more to do. 16 years on from that pioneering moment upon a Cumbrian hilltop, decentralised finance for decentralised energy may be about to come of age.