Solar Crowdfunding: In Need Of A Kickstart
Tuesday, April 21, 2015
Solar power is going intergalactic.
In an announcement late last month, SolarCity SCTY +1.77%, the country’s largest installer of rooftop solar arrays, announced that private space company SpaceX had scooped up $90 million of its corporate bonds.
The marriage—no doubt blessed by Elon Musk, the entrepreneur at the center of both companies—is partly one of convenience. On the company’s blog, SolarCity Vice President Tim Newell noted that the transaction helps SolarCity “to raise capital at lower cost” while affording SpaceX “the opportunity to earn significantly higher returns than those offered through comparable investments.”
More than that, though, the move represents a clever bit of cross-marketing. And the fact that SolarCity sought to gin up this press suggests that demand for its bond offering—and others like it—has not yet skyrocketed.
The corporate debt in question is an innovative new product from SolarCity known as Solar Bonds. Solar Bonds allow an investor—be it an individual or an organization—to generate a rate of return from the solar power systems SolarCity is installing across the country. At its most basic, the investor lends SolarCity money, SolarCity uses the money to install an array on a household, the household pays SolarCity for the array, and the investor gets paid back, with interest.
The Solar Bonds program, which SolarCity launched in 2014, is a close cousin of the other solar crowdfunding platforms that have blossomed in recent years. One of the many offshoots of the rise of the so-called “sharing economy,” these platforms allow the average household to chip in a few dollars toward a renewable energy project. There is Mosaic, which has a portfolio comprised of commercial and residential projects in the United States; Sunfunder, which focuses on off-grid markets in developing countries; and CollectiveSun, which finances arrays for nonprofits that struggle to meet traditional underwriting criteria.
These platforms hold the promise of democratizing access to solar. According to the National Renewable Energy Laboratory, approximately three out of four households in the United States cannot install a solar array on their own property. And so if we believe, from a normative point of view, that any household should have the opportunity to participate in renewable energy, then we need to create avenues for participation above and beyond rooftop solar. Alongside increasingly diverse options such as community solar, equity investments in clean energy companies, and green power purchase programs, solar crowdfunding can be just such an avenue.