In a recent interview, Greg Barker, UK Minister for Energy and Climate Change, described crowdfunding as “an incredibly powerful” funding model with the capacity “to help deliver my ambition for a far more decentralised energy system and achieve the goal of turning the Big Six into the Big 60,000”.
It is the latest boost in what’s turning out to be a defining 12 months for crowdfunding in the UK. At the end of 2012 the nascent movement established its own code of practice, and earlier this month a major Parliamentary report into the future of Britain’s banking sector highlighted the benefits crowdfunding provides by offering an alternative to banks and introducing important new asset classes to ordinary people.
In essence, crowdfunding is where businesses and projects are directly funded by large numbers of people putting in relatively small amounts of money. It has been called ‘democratic finance’ because it lets people choose exactly where their money goes.
Renewable energy crowdfunding
It’s not hard to see why renewable energy and crowdfunding are happy bed-fellows.
On one side, renewable projects can offer financial returns which are long-term, inflation-linked and relatively low-risk, in part due to Government backed mechanisms such as the feed-in-tariff.
And on the other, crowdfunding resonates with a number of current social and political drivers. These include ordinary people demanding the chance to invest their money in something profitable andworthwhile; the Government’s desire to get more of us financially involved in energy projects; and the fundamental challenge our nation faces in raising huge amounts of capital to upgrade our energy infrastructure over the next decade.
On top of all this, we now know it works. Abundance Generation is the UK’s first regulated crowdfunding platform that allows anyone to invest in renewables for as little as £5, and has raised £3m to date for one wind and four solar projects. In the USA, Solar Mosaic launched earlier this year and raised$313,000 in its first 24 hours.
It’s important to stress here however, that such investments are not risk free. Abundance debentures, for example, are long-term investments, returns are variable, and you may not get back all of your original capital.