New community and crowdsourced financing models for solar will expand the availability of cheap capital — if regulatory risk can be cleared.
No more than 25 percent of U.S. rooftops are suitable for standard solar, GTM Senior Editor Stephen Lacey noted in introducing the Democratizing Solar panel at the GTM Solar Market Insight conference. A huge pool of renters and low-income customers could be brought into the solar market through emerging smaller-investor models.
First-mover Solar Mosaic’s business model is a relatively simple two-step process, explained CIO Greg Rosen. First, raise money and loan it to a Special Purpose Entity (SPE) created to build a solar project, and then offer shares to individual investors. His company has secured investments of over $5.6 million and returned an average of 4.5 percent to 6.5 percent to its accredited and non-accredited investors.
Indicative of the burdensome regulatory complexities, Rosen added, is that Solar Mosaic must use the term “crowdsourced” and avoid using the term “crowd-funded” to remain in compliance with federal and state securities law dictates.
Clean Energy Collective (CEC) also creates an SPE front fund, explained President Paul Spencer. Its utility-centric business model is funded by what regulatory dictates require it to call “customers.” CEC begins with a power purchase agreement from a utility and ends with the customers owning and getting electricity bill credit for individual panels. It presently has 29 projects worth $70 million in six states.
“The community solar space offers huge opportunities for securities lawyers,” joked Village Power Finance CEO Ty Jagerson. Jagerson’s company works with nonprofit organizations that want solar but cannot monetize tax credits. It creates an SPE for investors in rooftop systems for the nonprofits and then builds and manages those systems.
Community-based and shared solar business models fit the DOE SunShot goal of cutting solar costs and increasing the scale of deployment. The aim is to make solar subsidy-free by 2020, according toDOE Fellow Anna Brockway. DOE’s recent workshop on the new models turned up three key needs: reducing regulatory uncertainty, improving utility collaboration, and educating regulators, utilities, and the general public