Two companies are figuring out new ways to finance solar power—they're taking cues from microfinance and peer-to-peer lending.
For many years, solar customers paid for their panels in the same way they might pay for a TV: upfront or in installments. But as the solar industry has grown, new opportunities for financing solar projects have emerging. Some draw lessons and inspiration from microfinance and peer-to-peer lending, making small-scale solar available to families and community organizations, like schools and nonprofits, that could not afford the purchase on their own.
Years ago, Dan Rosen tried to get solar panels installed on his high school and couldn’t find the financing. Now, Solar Mosaic, the Oakland-based company he cofounded, allows individual investors to fund just that sort of solar project. Investors can bankroll solar systems in increments of $100, represented as “tiles.” One of the company’s first big projects will power the Asian Resource Center, an Oakland community group. The project has 982 tiles, all of them funded.
The opportunity, as Rosen puts it, is to “decentralize finance and energy”—to maximize the solar energy out there by obtaining funding from many sources and installing clean energy in many places. Investors might not be able to afford a whole solar system, but they can contribute to one.
Simpa Networks, which is selling solar panels on a pay-as-you-go system, is also drawing lessons from microfinance to help “make good customers.” Instead of loaning customers money to buy a solar system like a bank would, the company loans solar panels to their customers until they’re paid off. The company has also considered microfinance techniques like group loans or community incentives to keep their customers loyal.
Right now, Solar Mosaic is only offering investors the eventual return of their money and a sliver of satisfaction at keeping carbon out of the atmosphere. But in the longer term, both of these companies want solar assets to be an investment vehicle that delivers financial returns for those who buy in. Solar Mosaic will still have small investors and more of them. “But as our platform grows, we will attract also big investors — companies, endowments, and private equity,” Rosen says. Simpa Networks is thinking about creating a revolving fund in which investors commit funds for a five year term. Since its customers generally pay off their panels within 12 to 36 months, the same initial investment could be used to fund multiple solar purchases.
Both Solar Mosaic and Simpa Networks have socially conscious goals in mind: They intend to give access to solar power to communities that might not otherwise have the option. But more traditional companies are also considering the potential of solar assets as investments. SunRun, a large solar leasing company, has considered bundling its solar investments into “solar-backed securities.”
“[Solar] is an emerging and proven asset class that generates strong, safe, and secure returns for investors, saves organizations and people money, and cuts carbon out of the atmosphere,” says Rosen. “What could be better?”