For the nonprofit People’s Grocery, solar power is a natural fit. The Oakland, California-based organization manages an urban farm and supports programs that make sustainable, healthy food available to the city’s low-income population.
“There is an obvious connection between farming, food, and the sun, and it seemed only fitting that we use solar energy to power our office,” explains Nikki Henderson, the group’s executive director.
Like so many nonprofits, People’s Grocery must manage its limited resources wisely and faced the challenge of finding affordable financing to realize its solar dream. The group worked with the building owner and explored different options. Discouraged by the high rates and fees of traditional lenders, People’s Grocery turned to Berkeley-based Solar Mosaic (solarmosaic.com) for help.
The People’s Grocery project is one of the first to be “crowd-funded” through Solar Mosaic’s online platform, which pools individual small amounts of funding from a large group of backers to provide low-interest leases for solar projects. For People’s Grocery, the goal was to raise $38,800. It took about seven weeks and 70 investors—including one anonymous celebrity donor who covered half of the cost—to fully fund the 8.3 kW rooftop installation.
Kickstarter (kickstarter.com), a popular fundraising website, brought the idea of crowd-funding to the mainstream, using the power of multiple donors to fund creative projects like independent films and art installations, but Solar Mosaic is the first company to apply the approach to solar projects. Another popular program, KIVA (kiva.com), crowd-funds a wide spectrum of projects mostly in developing countries, including solar and other renewable projects.
So far, Solar Mosaic has raised more than $320,000 for three solar installations. In addition to its work with People’s Grocery, Solar Mosaic completed a 28.8 kW system at the Asian Resource Center in Oakland and a 1.5 kW system at the home of artist Shonto Begay, one of the 18,000 homes without electricity on the Navajo Reservation in Arizona. Other projects—including a 25.7 kW system for the Society of St. Vincent de Paul in Oakland and an 8 kW system for the Murdoch Community Center in Flagstaff, Arizona—are featured online and are close to being fully funded.
Crowd-funding is filling a niche in solar financing, appealing to nonprofits, schools, places of worship, small businesses, and homeowners with relatively small-scale projects that are often overlooked by traditional lenders. “Projects up to $2 million are having a hard time. Banks haven’t been lending to this segment of the market because the amount is not enough to justify the expense of performing due diligence and going through the underwriting process,” says Billy Parish, president of Solar Mosaic and author of the new book, Making Good: Finding Meaning, Money and Community in a Changing World.
Frustrated by the lack of progress in clean energy financing and policy, Parish and his partners—Dan Rosen, Arthur Coulston, and Steve Richmond—decided to take matters into their own hands and launched Solar Mosaic in October 2010. The company embraces social responsibility, combining nonprofit sensibilities with for-profit enterprise and is no stranger to the solar movement—Parish co-founded and helped grow the Energy Action Coalition (energyactioncoalition.org) into the world’s largest youth organization focused on clean energy and climate solutions. And Rosen was named one of the “30 Under 30 in Energy” by Forbes.
Currently, Solar Mosaic is working almost exclusively with nonprofits but hopes to scale up and diversify its solar projects after attaining the necessary clearance to pay 6% to 10% annual returns on its solar investments. Due to securities laws, Solar Mosaic’s current projects operate under a zero-interest loan model—meaning that if someone puts $100 in, they get $100 back over the number of years specified in the project. However, Solar Mosaic is working with the U.S. Securities and Exchange Commission and hopes to launch its return product by the end of summer 2012. It remains to be seen how the returns will work into the equation and affect the rate structure for leases.
But Parish maintains that the model will still come out ahead of traditional lenders. “As an online marketplace, we don’t have the same overhead costs that banks do, so we can offer attractive returns to investors and still provide capital to develop solar projects at a lower cost than banks are able to,” he says.
As it stands now, projects benefit from leases that take advantage of available incentives, and are structured with lower interest rates than traditional bank financing—on average, 2% to 4% lower. Even after Solar Mosaic takes a developer fee from installers and a small percentage of lease revenue for the duration of the project, host organizations should see long-term savings—money that can be rolled back into their programs. With electricity rates predicted to rise 5% to 8% per year and the solar lease cost increasing by 3.5% annually, Solar Mosaic estimates that People’s Grocery should save more than $30,000 in utility bills over its 20-year lease, even after paying back the investors.
After 10 years, once all the investors have been paid back, the host site has the option to buy the system. In 20 years, Solar Mosaic will automatically transfer ownership to the host site. All of Solar Mosaic’s leases are structured such that the host site begins saving money on day one and makes lease payments at a significant discount to their normal utility bill.
Solar Mosaic is a for-profit, mission-driven company that was recently certified as a B Corporation (see article in this issue’s Circuit News & Notes). By negotiating lower costs with installers and ensuring capital efficiency, it is able to provide services without adding to the overall cost of projects.
With no return on investment for the short term, why would someone “invest” their money in a Solar Mosaic project? The idea is that people have the opportunity to support change. Member Ayla Schlosser, who invested in a now-completed 29 kW PV system for Oakland’s Asian Resource Center, says, “As a renter, I don’t have the option of installing solar panels on my own home. Yet I can still invest in the renewable energy solutions that I believe in with Solar Mosaic.”