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

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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
• Role of Crowdfunding in Raising Finance for Energy Access Businesses and Projects
• 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/.
• Report #1: Crowd Power: Mapping the Market for Energy Access (May 2016, Authors: Davinia Cogan & Simon Collings) This report reveals how crowdfunding for energy access is a niche market segment, with only $3.4 million raised for individuals, charities, NGOs and social enterprises in Africa and Asia in 2015.
• Report #2: CROWD POWER: Can the Crowd Close the Financing Gap? (July 2017, Authors: Davinia Cogan & Simon Collings) This report, the second of a series, looks at the energy access related crowdfunding across donation, reward, debt and equity platforms, and showcases examples of successful campaigns by WakaWaka, BuffaloGrid, and Okra Solar, among others. To download the first Crowd Power report, click here.