Is crowdfunding the answer for financing renewable energy?

Are crowdfunding and renewable energy a good match?

And at the same time, can we get the public to participate in projects that will benefit their communities?

As we wrote back in July, we found that energy cooperatives offer a big “Yes!” to each of these questions.

To get renewable energy off the ground, the industry first needs to gain acceptance from local communities. The so called “Not in My Backyard” problem has long been a thorn in every project developer’s side. This is understandable, since foreign developers often leave only crumbles for the communities in which projects are built, and the money generated by the new resources flows out of the country.

In Croatia for instance, citizens pay for subsidies for renewable energy from their electricity bills (0.005 kuna per kilowatt). Since citizens have very little ownership over the renewable power capacity being built, most of this money flows out of the country. In effect, the citizens are financing the renewable energy boom, without having any benefit.

This could lead to a “boom and bust like” scenario, such as the one in Czech Republic, where in less than two years the country installed 2,000 megawatts of solar power, only to see the market crash later on. The country wanted to boost solar energy through an attractive feed in tariff (~0.5 euros per kilowatt). Investors took the opportunity and built large photovoltaic parks, at the same time creating a financial burden for the country and taxpayers. The Government reacted by imposing a retroactive tax on renewable energy profits, leading to claims by international investors.

Today the Czechs have to pay billions of euros for projects they do not own and leave them with no benefits. Apart from creating a financial burden, this also created very bad sentiment about renewable energy in the country. This is a problem within many other European Union (EU) countries, where governments failing to involve citizens are now reducing renewable energy subsides, leading to investor uncertainty and bad public relations for the European green transition.

But in many countries, like Denmark, 70 percent of wind turbines are owned by citizens, and public acceptance of wind energy projects is at over 90 percent! These projects are largely organized under energy cooperatives, such as the famous Middlegrunden project (pdf) off the coast of Copenhagen.

The principles of democracy, openness, transparency and solidarity have attracted many individuals to the cooperative business model. Today, one out of every three European citizens is a member of a cooperative. Germany leads the way with 51 percent of the country’s renewable energy projects in the hands of citizens.

Croatia has set binding targets (pdf) for developing renewable energy resources, as have many other EU member states. Reaching these targets is not only a matter of economy and technology, but it’s also about gaining buy-in from the public.

One way to do this is to encourage policy makers to focus on developing locally owned projects rather than relying on foreign investment. When citizens own their own energy resources, money flows back into the community, not out of the country to line the pockets of foreign investors.

Right now, Croatia lacks markets for citizen-led investments. There is little institutional support, and the banks still do not see jointly owned projects as creditworthy.

The problem is simply that poor, rural populations have abundant renewable energy resources butlack the funds to finance projects, while more well off and educated (climate change aware) urban populations lack the renewable energy resources to finance them, or such projects are simply too large and complex for an average citizen.

To bridge this gap, UNDP in Croatia has proposed an innovative approach: develop acrowdfunding platform for community energy projects.

Crowdfunding is the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.

So our idea is to develop several projects that would motivate citizens to join forces and invest in their own communities.

Getting started

• So far, we have issued a call for cooperatives to submit project proposals and have gone on the road delivering 10 seminars across Croatia, explaining the whys and hows of energy cooperatives.
• We will select the three best applications and showcase these cooperatives on our project website (currently in development – check back soon!) and our Facebook page. In cooperation with the Renewable Energy Sources Cooperative 202020 project (funded by EU Intelligent Energy Europe) we will also organize a conference on Island of Krk in October, where we will discuss the possibilities of achieving a 100 percent renewable energy island through citizen involvement. The conference will also involve a workshop for representatives from the three selected coops, where we will develop their coop business plans.
• We analyzed crowdfunding platforms specifically designed to support renewable energy projects, such as Solar Schools, Abundance Generation, Sun Funder and Solar Mosaic. To get exactly what we needed, we picked the best elements of these platforms and then teamed up with web developers to design our own crowdfunding platform.

Source: EuropeanCIS. UNDP.org