by David Drake
Renewable energy sources are said to be the way of the future that will supply the energy needs of the future and new generations. These sources are naturally replenished, and include energy from sunlight, rain, wind, geothermal heat, sea waves, plants and tides.
However, harnessing some of these renewable energy sources need high capital costs for the communities and individuals, so alternative financing models are needed to promote their commercial and residential use.
Using renewable energy sources will reduce our carbon footprints. Here are 5 alternative ways to finance renewable energy projects:
1. Crowdfunding for Renewable Energy Projects
Crowdfunding for a project, especially if it benefits the community usually draw the interest of the crowd. Definitely, crowdfunding for renewable energy projects would gain the support of the people who believe that clean energy is the way of the future.
There are many crowdfunding platforms that entrepreneurs can go to for a commercial project or those still at the research and development stage.
Entrepreneurs and startups can go to these top 5 renewable energy crowdfunding platforms, classified according to the amount they have raised so far. Or they can crowdfund at Indiegogo and Kickstarter for their projects.
2. Zero-upfront cost model of solar financing
Installing solar panels in residential and commercial buildings is expensive. However, with zero-upfront cost solar financing model, homes and business establishments can avail of this clean renewable source of energy for their electricity needs without draining their resources.
SolarCity, established in 2006, aims to provide clean energy service to the country. Using this zero-upfront solar financing model, a residential building with a 3 kW system starts paying “$25-$100 per month with an annual increase of 0-2.9% each year for 20-30 years, on approved credit.” The site further says, “We make clean energy available to homeowners, businesses, schools, non-profits and government organizations at a lower cost than they pay for energy generated by burning fossil fuels like coal, oil and natural gas.”
Another company in Asia adapted this zero-upfront cost solar financing model. Solar Philippines’ commitment is for a sustainable development and renewable energy, to help consumers reduce cost of electricity and carbon footprint. By partnering with financial institution, the company provides zero-upfront costs of installing solar panels in both homes and commercial establishments. The company has recently partnered with SM that made SM North into the biggest solar powered mall in the world. It has 5,760 solar panels that can generate up to 1.5 megawatts (MW) of electricity, which can supply electricity to 16,000 light fixtures, 20 elevators and 59 escalators.
3. Renewable Energy Bonds
Despite the pressing need for research and development as well as commercialization funds, the general investing community are hesitant to commit their money to renewable energy investments. The International Energy Agency (IEA)says, “In order to limit global warming to 2 degrees Celsius and avoid the the worst effects of climate change, investments in low-carbon energy technologies will need to at least double, reaching $500 billion annually by 2020, and then double again to $1 trillion by 2030.
Cleantech bonds, green bonds, and climate bonds are issued to finance projects that will bring down greenhouse effect and promote a sustainable environment that includes clean energy, efficient energy and renewable energy such as harnessing the energy from the wind, sun, water, tides and more. These bonds are issued by organizations such as The World Bank, and the European Investment Bank. Corporations also issue these green bonds, and it amounted to $10 billion last year. These bonds are issued for long term haul.
To provide a more transparent transaction, the Green Bond Principles was issued by 13 investment banks consortium to guide the issuance of this type of bond, for both the investors, entrepreneurs and corporations.
SolarCity has recently issued solar bonds, for investments only in the United States.
A yieldco is a publicly traded company established to own operating assets to produce a predictable cash flow. The cash flow is distributed to the investors as dividends. Yieldco is focused on income, rather than growth. It is used in the renewable energy industry to safeguard investors from regulatory changes.
Some US-listed yieldcos are: Abengoa Yield (NASD:ABY), Brookfield Renewable Energy Partners (NYSE:BEP | TSX:BEP-UN), Hannon Armstrong Sustainable Infrastructure (NYSE:HASI), NextEra Energy Partners (NYSE:NEP), NRG Yield (NYSE:NYLD) and Pattern Energy Group (NASD:PEGI).
5. PACE Financing
Property Assessed Clean Energy (PACE) is financing energy upgrades or renewable energy installations in buildings. The amount financed is paid over a fixed period of time, ranging from 15 to 20 years. In the United States, 31 states and the District of Columbia, where 80 percent of the population are, are PACE enabled. In PACE financing, the loan is attached to the property and not to the individual per se.
One major factor to sustain renewable energy investment is to increase awareness of the urgent need to use renewable energy for a clean sustainable environment – on all sectors, especially the investing community.
The “RenewFi: New Industry Opportunities in Renewable Finance” is one event along this line. It was a conference on financing renewable energy and international solar development projects at the San Francisco Bay Area last January 28-29, 2015. Organized by The Soho Loft Conferences with Victoria Global, it was held at the Topline Accelerator, 1402 Marina Way South in Richmond.
Scott Purcell, CEO of FundAmerica, one of the sponsors in this conference, says “Education is the key to the success of the crowdfunding industry, and I am pleased to be a part of The Soho Loft Media Group’s efforts to work with portals, law firms and other key players at this conference.” FundAmerica provides escrow, clearing, payment and compliance tools for your 506(b) and 506(c) portals.
Corey Call, CEO of WholeCom Corporation, a diamond sponsor of this conference says, “WholeCom manages the development of Solar Opportunities throughout the world. We do this through intimate knowledge of financing/government programs and through International Solar development partnerships.” He further adds, “We provide solar technologies uncomplicated and financially rewarding for developers. Our aim is to forge enduring partnerships with developers and investors to ensure these technologies are sustainable and profitable as well. When cleantech efforts started, the solar panels were $3 a watt. Now, it costs $.60 a watt. The early cleantech entrepreneurs and investors made possible the future we are now seeing. This is the time for leaps in Energy.”