Ernst &Young, Renewable Energy Country attractiveness index, May 2013
The industrial revolution originated a centralized model of electricity generation and distribution. Worldwide 93% of all electricity is still supplied this way and every year billions of tons (in oil equivalent) of fossil fuels such as oil, gas and coal are burned in large thermal power stations, transmitting the generated energy via the power grid to the consumers. It is a very inefficient system as it wastes two thirds of the primary energy input; as a result, the electricity and heat sector currently accounts for 41% of the worldwide greenhouse gas emissions. This is a large contributing factor to climate change, whose adverse effects are becoming more and more evident. In addition, 1.2 billion people around the world still are living in energy poverty, having no access to electricity at all.
Governments with their constraint budgets are unlikely to provide those funds, so the largest portion needs to come from private capital. Traditional capital markets with their long supply chains and requirements for large deal size are not an efficient mechanism for financing such an energy revolution.
Decentralized energy installations are typically small in size and involve different stakeholders to those in traditional energy markets. So new ownership models and a decentralized finance solution are needed, which is exactly what crowdfunding has to offer.
Community-based decentralized renewable energy generation financed by a large number of small investors is not a new concept and there are currently hundreds of projects around the world under development. Germany is widely recognized as a leader in this field; in fact Germany's energy-transition (“Energiewende”) was to a large extent enabled by “energy cooperatives” leveraging 800 million euros in investments from more than 80,000 private citizens.
Crowdfunding is the evolution of such a cooperative finance model. Facilitating the investment process via a collaborative internet-based system with great potential for scalability can offer an accelerated deployment of decentralized renewable energy. Crowdfunding is already beginning to offer individual investors great opportunities to invest directly in a transparent and efficient way into renewable energy projects or cleantech startups. The environmental and often affiliated social impact of such projects is measurable and gives people the opportunity to cast a vote with their money for the world they want to see.
The transition to such a sustainable finance model will not happen overnight, but in time crowdfunding will generate the billions of dollars that institutional or corporate developers now provide. The merger of democratized energy with a democratized finance system such as crowdfunding presents the solution to one of the greatest challenges mankind is facing at the moment: giving access to power to everyone on the planet without destroying it in the process.
 IEA, World Energy Outlook 2012, Nov 2012 and Renewable Energy Outlook, Feb. 2012
 Energy Transition The German Energiewende, Craig Morris, Martin Pehnt, 28 November 2012
Rex is an innovative banker with more than 15 years experience in retail banking, treasury and commodity trading at Commerzbank, J.P. Morgan and ABB Financial Services. Through his passion for entrepreneurship and new markets he got involved during the dot-com era in building up a business incubation unit for ABB, subsequently spinning off a company which pioneered the implementation of the European emissions trading scheme. He continued his career in the climate change sector first by joining EcoSecurties, a leading startup company in developing carbon reduction projects worldwide, and more recently as director in the environmental markets team of BNP Paribas.
Rex strongly believes that crowdfunding will cause a paradigm shift in the financial service industry and that it will make a significant contribution to the transition towards a sustainable economy.