Crowd Funding for Energy Access

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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. [1]

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.[2]

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.”[2]

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.[2]

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.[1]

Impacts of Crowdfunding

[Impacts?]

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.[3]

  • 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.

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


References

  1. ↑ 1.0 1.1 Davinia Cogan and Simon Collings, ‘Mapping the Market for Energy Access An Overview of the Crowdfunding for Energy Access Market to Date’ (GVEP International, 2016), https://assets.publishing.service.gov.uk/media/58da0abbe5274a06b300002a/Crowd_Power_-_Mapping_the_market_for_energy_access.pdf.
  2. ↑ 2.0 2.1 2.2 info Dev , Finance and Private Sector Development Department. ‘Crowdfunding’s Potential for the Developing World.’ Washington, DC: World Bank, 2013. http://www.infodev.org/infodev-files/wb_crowdfundingreport-v12.pdf.
  3. ↑ Patmore, Emma. ‘Crowdinvesting’. Ecoligo. Make Investments. Make Them Matter., 7 September 2016. https://www.ecoligo.com/crowdinvesting/.
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