Community Research and Development Information Service - CORDIS

Social, green, but primarily as an investment: all the features of energy crowdfunding

Contributed by: youris.com EEIG

Platforms to raise funds for renewable projects want to take care of our planet and its inhabitants, but often they’re also looking for good returns
Social, green, but primarily as an investment: all the features of energy crowdfunding
There are three ways a crowdfunding project can be financed. Lending: the entrepreneurs borrow money and pay interest; equity: investors in the project become its shareholders; donations: no reward is to be expected (there is a fourth way, a mix of equity and lending called “hybrid”).

A lending crowdfunding project has a 90% chance of success according to the Review of Crowdfunding for Development Initiatives released in 2013 by Oliver Gajda and James Walton, two strategic consultants in innovative businesses. This percentage compares favourably against the 40% of positive results for both equity and donation projects.

In every field where crowdfunding has been used, these three models are commonly used. Energy crowdfunding is no exception. In a study (March 2016) by Chiara Candelise from Italy’s Bocconi University, the state of the art was captured: fourteen of active platforms specifically dedicated to energy crowdfunding were funded through lending. They use debt instruments – mini bonds or invoice financing – to finance projects via third parties who have to be paid back for their capital and remunerated for their loans.

The second choice of platform creators is equity, which consists of investors becoming project shareholders. Six such platforms were active in March 2016 while others were on the way. The return on investment, which is more variable than in the previous case, is provided by dividend payments. Investors also have a right to participate in the activities of the entity, mostly in the case of cooperatives.

Five working platforms use the donation method, based on solidarity for communities and no-profit renewable energy projects or for rural electrification, mostly in developing countries. There is no financial return on this kind of project.

At the end of the list are the hybrid platforms of which there are only four. Here people can find both debt and equity projects.

Lending is not only the biggest part of the market, but also the most dynamic, as shown by very young projects like the French GreenChannel, which begun its activity in late 2015. In January 2016 its first campaign was launched to raise money for a photovoltaic project. It successfully scraped up over €260.000 (116% of the amount required). The investment will yield an annual gross return of 4.5% over 9 years. A truly competitive return, given the current market conditions.

But are lending renewable energy investments generally profitable? Or are they more of a risk? “There is no absolute answer”," says Uwe Lebelt, in charge for business development at GreenChannel, “We take all due precautions and are careful in selecting only projects that can be sustainable”. But different risk conditions may be found on the market.

However, nowadays it is easier than years ago to obtain a return on investment, since “the price of alternative energies has dropped. In Germany, for instance, a photovoltaic roof is cheaper than fossil power generation”, Lebelt adds.

Northern European countries have more efficient channels and laws, but southern Europe has greater potential “not in investment terms but in natural resources such as sun and wind. That is why we aspire to become a European platform”, he says.

Among the pioneers of this sector is Trillion, founded in 2011 in the United Kingdom. Principally loan-oriented, it has also featured equity projects.

According to CEO Theresa Burton, the platform is ready to support equity fundraising through its latest addition: YourBrandCrowdfunding.com. It offers a white-label crowdfunding service (Trillion provides its expertise for campaigns that are re-branded with the name of the customer) for medium-sized businesses which seek to crowdfund on their own websites.

Read more at: http://www.crowdfundres.eu/news/social-green-but-primarily-as-an-investment-all-the-features-of-energy-crowdfunding/

Contributor

Organisation

    youris.com EEIG
    Drève du Pressoir 38
    B-1190 Brussels
    Belgium
    Website

Contact

Related information

Programmes

Countries (8)

  • Germany, France, India, Italy, Kenya, Sweden, Uganda, United Kingdom

Keywords

green investment, energy, crowdfunding, funding, finance, lending, equity, donations, business model, renewables, sustainability, regional development, invest
Record Number: 134976 / Last updated on: 2016-08-26
Category: New products and technologies
Provider: WIRE
Revision: 0