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September 18-20, 2017 in Denver, Colorado, USA? The conference now has sponsorships and speaking opportunities available. Early Bird registration begins May 31, so save the date!
Traditional funding methods often make it difficult to raise capital for microgrid projects, especially those created to specifically for populations with limited means. Funding from NGOs or government agencies is difficult to secure. Crowdfunding, on the other hand, raises capital through the collective effort of individual small investors, making microgrid and other critical projects a reality all over the world — in fact, the World Bank predicts crowdfunding in the developing world will exceed US$96 billion per year within the next 10 years.
Last fall, HOMER Microgrid News & Insight reported on the 2016 Solar 4 All contest and its winners, writing that “The two first-prize winners, Boond Engineering and Mera Gao Power, each received €200,000 ($218,000) in low-interest loans to build microgrids in India.” The source of these loans? Small investors in Bettervest GmbH, a German crowdfunding company. With a 6% interest rate, these loans are far more affordable (in India, a bank’s interest rate could be as high as 18%) and easier to secure than bank loans for “high-risk” projects.
How does microgrid crowdfunding work?
Microgrid crowdfunding gives organizations a single, efficient platform for their investment opportunity, making it easier to reach more people: Instead of going to individual investors to deliver a pitch to each, the organization can create an appeal and — through crowdfunding platforms and social media — reach a broad pool of potential microgrid investors in an efficient, streamlined process.
There are three major types of crowdfunding methods, dependent on a project’s goals:
- Donation-based (charitable giving for the microgrid project)
- Reward-based (incentivizing backers with tangible rewards based on level of giving)
- Equity crowdfunding (providing equity in the project in exchange for funding)
A research-based approach at Cal
In 2015, when crowdfunding grew to an impressive $2 billion globally, the University of California, Berkeley, saw an incredible academic funding opportunity. the university launched a beta of what has become a successful academic crowdfunding platform for the university. The university wanted to determine the platform’s viability and test the infrastructure needed to make crowdfunding available to researchers campus-wide.
“Just as social media changed norms and expectations for communication, crowdfunding is changing the future of fundraising,” explained crowdfunding expert and consultant Richard Swart at the time. Berkeley found a worthy test case for its crowdfunding platform in a microgrid project by CAL-REA. This interdisciplinary group researches and implements RE access in the developing world to create lasting change and was at that time working on an ambitious project to design and implement a community microgrid on Lake Victoria’s Kitobo Island, in Uganda.
With 100% of the funds raised by the beta testing deadline, CAL-REA headed to Uganda and the university implemented its crowdfunding platform. Interestingly, larger microgrid projects have sprung up on Kitobo Island since the CAL-REA project showcased the potential of investing in the island’s microgrid future.
In India, entrepreneur turns college project into microgrid business
Nitin Saini, founder and CEO of Free Spirits Green Labs, started his journey in rural electrification at university, where he created a research project distributing small renewable energy products (mobile chargers, solar home systems) to energy-poor communities in India. That idea eventually led to Free Spirits, a company that brings solar energy solutions to rural regions.
Earlier this year, the company was determined to further fund a worthy microgrid project it had undertaken for villages in Gorakhpur, Uttar Pradesh, home to 27,000 people living in energy and economic poverty. The project held little hope of making a profit to attract traditional investors. A successful crowdfunding campaign enabled Free Spirits to electrify 50 shops, but the community needed to power the villagers’ 150 additional shops and begin bringing power to homes.
Free Spirits has now launched a new crowdfunding campaign. The goal is basic: “Expansion of the grids to include more shops and homes can be done with more funds,” the company explains. To date, the project has reached about 10% of its goal of 3oo,000 Indian Rupees (approximately $4700 dollars), and hopes to reach its goal by the end of June.
Other examples of microgrid crowdfunding organizations abound, including:
- SunFunder, based in San Francisco and Tanzania, provides capital for solar energy projects in emerging markets.
- Cape Town’s Sun Exchange, a crowdfunding platform, offers investors worldwide an opportunity to purchase and earn a profit from leasing African solar cells by via a bitcoin-based blockchain system.
- Abundance Generation‘s “democratic finance” investments-based model has raised more than £6 million ($6,500,000) for microgrid projects.