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Crowdfunding For Renewables Attracts Ethical Investors

The U.K. is the most developed and mature market for renewable energy crowdfunding. It accounts for more than 80 percent of the crowdfunding across Europe, followed by France, Germany and then the Netherlands.

Last year, Abundance, a U.K. company that specializes in peer-to-peer investments that create social and environmental benefits, raised £1.7 million (US$2.1 million) from 874 crowdfunding investors. This money was used to purchase and install more than 400 solar panels on social housing in Berwickshire, Scotland.

“The tenants in those homes get to use as much of the electricity produced as they can free of charge, which is helping some of the most vulnerable people in the U.K. save money on their energy bills,” explains Karina Sidenius, marketing executive at Abundance.

Any generated electricity not used by the tenants is sold to the grid at a fix price per kilowatt hour (kWh) under the U.K.’s feed-in tariff scheme. The investors’ income, however, is not based on the amount of electricity generated. The investment is a debenture that provides a fixed rate of return of 7.5 percent on the initial investment over the 20-year lifetime of the project. 

Attractive interest rates, coupled with the opportunity of ethical investment is causing more people to become interested in crowdfunding renewable energy projects. 

Irene Maffini, PhD crowdfunding researcher at Sussex University, believes there are three types of investor:

  • Financial planners, who just care about the financial returns,
  • Progressive investors, who are looking for new opportunities to expand their portfolios,
  • Ethnical investors, who have a financial and social interest.

Research shows that crowd investors typically straddle across all age groups, ranging from 18-year-olds to individuals in their 90s. The majority are male and they invest anything from a few euros to hundreds of thousands.

Alex Raguet, a former investment banker and president of the French crowdfunding platform Lumo, thinks that investments that generate a social and environmental impact alongside a financial return, so-called “impact investments,” will be important for renewable energy in the future.

Lumo enables citizens to invest directly in renewable energy projects. One of their flagship projects is on a factory roof in Iteuil, France. Crowdfunding generated €150,000 from 193 investors, which covered 8 percent of the cost of installing 13,000 m2 of photovoltaic panels. The remaining cost of the project was covered by a bank loan and the developer.

Once up and running, the €1.9 million installation is expected to generate 1.3 GW hours of electricity per year. Investor returns depend on the amount of electricity generated, but Lumo expects them to make 3.19 percent gross interest per year over the nine-year lifespan of the project.

This article was originally published by ALLEN & YORK and was republished with permission.