A recent Citibank study (1) concludes that the global energy mix is shifting more widely than anticipated and that the pace of change in the last five years has been dramatic and will likely accelerate, not slow. Another recent study (2) form Deutsche Bank painted a bullish outlook for the global solar market, noting that solar PV is about to enter another growth phase where it can be deployed without subsidies.
While this is encouraging news, our current energy market is far from working in the interests of ordinary people. Energy costs are continuously rising and consumers are dependent on large utilities as well as fuel prices which are driven by global commodity markets. But with decentralised renewable energy technology maturing and becoming cheaper, an energy ownership revolution, which was started by innovative grass-root community networks, is beginning to grow. Such communities of place, and increasingly with the support of social media also in communities of interest, began to develop a niche in the energy sector. They became independent of global energy markets and even started to generate community income by switching from being passive consumers to being active local producers and owners of their own energy supply.
Beginning of the ‘third industrial revolution’
Jeremy Rifkin, economist and writer as well as adviser to the EU and heads of states worldwide, is predicting that the “third industrial revolution”(3) is driven by the creation of a decentralised and connected ‘energy internet’, in which individuals or communities can produce, deliver and receive renewable energy generated nearby, forming and era of distributed capitalism which will generate thousands of new local jobs and business opportunities. It is becoming evident that this is already happening. Small towns across the globe are beginning to revitalise themselves with the help of revenue generated from renewable energy assets which is poured into education, small businesses, and community development. A good example is a small rural town in Italy, Tocco Da Casauria. Because of the windy conditions there, the 3,000 people who live in the town get all the electricity they need from 4 community-owned wind turbines and even make a profit, which supports the school and town services such as street-cleaning and cutting the grass. Another example is Gray County in the US state Kansas with a population 6,000. Thanks to contributions made to the county by a local wind farm the local schools were able to buy iPads for their classrooms, a purchase previously unthinkable due to shrinking budgets. On an aggregated basis such investments can generate an extraordinary benefit to the economy as a whole as money invested locally multiples economic activity (‘multiplier effect’).
Crowdfunding as a catalyst
Community developed renewable energy projects are building on the local expertise and knowledge. There is evidence that community organisations are both more ambitious and more imaginative than the larger power companies in testing alternative energy sources, and finding ways to make them work for the local benefit(4). Building trust networks through personal and digital connections can create resources which are unavailable to state-run or large private enterprises.
Communities around the world are beginning to understand the power of crowdfunding for their cause. On the 23rd September 1,700 Dutch households raised EUR 1.3m in just 11 hours marking a new equity crowdfunding world record at that time. In the US the ‘New Era Colorado’ launched a grassroots ‘David and Goliath’ crowdfunding campaign to create a landmark model for how communities can take control of their energy future. In the UK a peer-to-peer energy marketplace is under development which will allow users to buy local renewable energy direct from the source.
Utilising the collective intelligence of crowdfunding ecosystems, even unexperienced communities can now easily build capacity and replicate proven models. There are unprecedented opportunities for community renewables, and securities crowdfunding can be the ideal catalyst to take the business model into the future and change our society from one of energy ‘consumers’ to one of energy ‘owners’.
Regulatory framework improving
In most countries there is still a regulatory framework in place designed for big, vertically integrated utilities but the landscape is changing in support of community renewables. For example Washington DC Council passed a Community Renewables Energy Act on the 1st October which allows citizens to buy into community scale solar installations. Another example in the US is the Renewable Portfolio Standard (RPS), a law that requires utilities to generate an increasing share of their energy from renewable sources, which has become a major driver behind the development of community wind energy projects. The UK government is currently intending to amend the Energy Bill in order to double the size of community renewable energy projects which have access to subsidised prices (Feed-in Tariffs) to 10MW.
In the US non-accredited investors might not even have to wait for federal rulemaking under Title III of the JOBS act in order to participate in such local investment opportunities. More and more US states are in the process of enacting or have already enacted (Kansas, Georgia) intrastate crowdfunding exemptions which allows for general solicitation to non-accredited investors.
These are very positive developments and could mark the beginning of an era which empowers and powers local communities and helps them to build strong and sustainable local economies. It provides them with investment opportunities they can feel good about and a means to take action on climate change.
Community renewables powered by Crowd Valley
Crowd Valley is ready to support the energy revolution. We have developed a collaborative community renewables incubation and securities crowdfunding platform which is designed to take the sector into mainstream.
For more information please contact: rex[at]crowdvalley.com
1 - Citi, Energy Darwinism, The Evolution of the energy Industry, October 2013
2 - Deutsche Bank Market Research, US Solar Industry, Q2 Preview: Improving Fundamentals, Outlook, 31 July 2013
3 - The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World, by Jeremy Rifkin
4 - Commission for Environmental Cooperation; Guide to Developing a Community Renewable Energy Project, North America
Photo Credit to: sachman75. bit.ly/1mFgcF1
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. Born and raised in Germany, he gained a qualification as banker and a Masters degree in economics from University Hamburg. He currently lives in the UK with his wife and two daughters.