Crowd Funding for Energy Access

Overview

The off-grid energy sector is capital-intensive. Especially market players offering pay-as- you-go (PAYG) financing to their customers require high working capital. Often they do not have access to traditional, big investors.

Social enterprises, charities and other organisations raise capital for off-grid energy projects. They use donation, reward, debt and equity campaigns to fundraise for money to finance energy access projects.

Currently, the crowdfunding market is predominantly a developed world phenomenon, but the potential exists for developing countries to capitalize on this new form of funding.

Crowdfunding: Definition

“Crowdfunding is an Internet-enabled way for businesses or other organizations to raise money in the form of either donations or investments from multiple individuals.”

There are 5 different business models:

Donation-based
Reward-based
Equity-based
Lending-based
Royalty-based

History and Market Outlook of Crowdfunding for Energy Access

Crowdfunding emerged after the 2008 financial crisis in response to the difficulties faced by early-stage enterprises attempting to generate funding.

So far, the market is very small. In 2015, only 3.4 million USD were raised.

• 75% of all funds raised are debt campaigns, mainly micro-loans
• It is expected, that the crowdfunding landscape will change significantly: equity and debt crowdfunding could grow in the short term because small projects might get crowdfunding (but no funding from traditional banks)
• In the long term, crowdfunding will play a limited role as the relevant companies reach scale and are better suited with capital from other investors than the crowd.

Impacts of Crowdfunding

[Impacts?]

Examples and Experiences

Crowd Investing Platform: Ecoligio

ecoligo is a solar utility that provides low-cost solar energy to businesses in emerging markets. By financing the solar systems through a crowdinvesting platform, they close the finance gap that prevents these projects from being realised.

• ecoligo presents opportunities to finance solar energy systems in emerging markets to the crowd, at an attractive interest rate.
• Once financed, subcontractors and partners of ecoligo implement the project.
• When the project is completed, the energy off-taker pays for the electricity they use, through business models such as a Power Purchase Agreement or lease contract. This gives them clean energy at a lower cost than the national grid.
• The proceeds from the sale of electricity is used to repay the crowd, with interest.

 

Crowd Power: a programme by Energy4Impact

A three-year programme to stimulate, develop and learn from crowdfunding of renewable energy enterprises in sub Saharan Africa and Asia. DFID has committed a total of £845,000. This is providing direct financial support to crowdfunding campaigns trialling approaches such as match-funding, guarantees (insurance) and/or “gift” vouchers. Energy 4 Impact is running the programme and producing in-depth research and analysis.

• Energy4Impact. ‘Crowdfunding for Energy Projects’. Energy For Impact, 2017. https://www.energy4impact.org/what-we-do/innovative-models/crowdfunding-energy-projects.

Conclusion

Crowdfunding offers several advantages for small energy projects and start-ups that might not have access to products of traditional finance institutions like banks.

Further Information

• Portal:Financing and Funding
• Financial Instruments & Support for Renewable Energy
• Debt Finance
• Crowd-financing via Blockchain Technologies
• ‘Solar Crowdfunding Non-Profit Wins DOE-SunShot “Solar in Your Community” Seed Funding’. Microgrid Media, 9 March 2017. http://microgridmedia.com/solar-crowdfunding-non-profit-wins-doe-sunshot-solar-community-seed-funding/.
• Cogan, Davinia, and Simon Collings. ‘Mapping the Market for  Energy Access An Overview of  the  Crowdfunding for Energy  Access Market to Date’. GVEP International, 2016. https://assets.publishing.service.gov.uk/media/58da0abbe5274a06b300002a/Crowd_Power_-_Mapping_the_market_for_energy_access.pdf.