Where crowdfunding meets Wall Street, a new model for financing solar
Could we interest you in investing in the clean energy revolution? The annual return is 4.5 percent or above, and you can get in for as little as $25.
So goes the pitch from the San Francisco–based start-up Mosaic—formerly Solar Mosaic. The company doesn’t build solar power facilities itself, and it doesn’t directly finance them, either. Instead, the company has an innovative model for bringing down the financial barriers to solar. It connects individual investors (such as, say, you) with solar projects that need financing.
It works like this: a few hundred or so people (the biggest project thus far has more than 900 investors, the smallest only 17) put some money into a specific project—a solar array on a school, for example. Once it is built, the school pays the developer for the electricity the solar panels produce—generally less than what it would pay to a utility for standard electricity rates. The revenue earned from those payments is paid out to the investors, with interest. And eventually, somewhere, a coal plant dies.
It is designed as an everybody-wins scenario. The school or community center gets solar panels on its roof and hence cheap electricity; the solar developer gets lower-cost financing than a bank might offer; the investors get a low-risk return on an initial investment; Mosaic takes a small fee to facilitate that transaction; and the planet avoids breathing out a few more tons of carbon dioxide.
Mosaic wants to spread this idea far and wide, with plans to fund wind-power and energy-efficiency upgrade projects, for example. But they’re not the only game in town, at least if “town” includes Europe. Abundance Generation in the U.K. uses a similar model, as does a company in Germany called crowdEnergy. In the San Francisco Bay Area, where Mosaic is based, a couple of copycats have sprung up but don’t yet offer the SEC-regulated investments that Mosaic does.
So far, Mosaic has helped finance three megawatts of solar (enough to power more than 500 homes), connecting thousands of investors to 15 projects worth about $3.8 million. To date, the returns to investors, ranging from 4.5 to 6.3 percent annually, have paid out 100 percent on time as planned, outperforming U.S. Treasuries by a reasonable margin. And that’s a testament to the power of the market.