5:18pm

Wed September 25, 2013
Health, Science, Environment

A Kickstarter for your electricity bill

Fly low over California, and you’ll see a patchwork of black and shiny rooftops fitted with solar panels. It didn’t always look like this. Just over a decade ago, there were fewer than 500 solar rooftops in the state. By 2012, that jumped to over 160,000. Much of that growth has happened in just the past few years. It doesn’t stop there; national industry analysts say the solar sector grew by a third in just the first quarter of this year, with California leading the charge.

A few things are making solar more accessible, among them: cheaper panels, rebates, and new ways to for pay for them. Among these new and creative ways to finance solar panels is crowdfunding. Instead of one person or organization paying tens of thousands of dollars to install solar, other people pitch in and get something in return. It’s like a Kickstarter for your electricity bill – and it’s a business model that allows people to participate directly in making solar a reality.

Multiplying solar

Rooftop solar recently became a reality for the Shawl Anderson Dance Center in Berkeley. As piano melodies spill out the door, and dancers walk in and out, managing director Rebecca Johnson explains how and why her studio made the change. For one thing, she says, they were spending too much on utilities, about $400 a month. Then they noticed their neighbors.

“All our neighbors are totally residential homes and when they got solar, we thought wow our roof is the same exact slope as well,” she says.

She and her colleagues thought installing solar could help cut those costs. As they were figuring out their options and getting quotes, they got an unexpected offer. A man named Andreas Karelas offered them a lease-to-own system that would supply all of their electricity. They wouldn’t owe any money upfront, and their monthly bills would drop.

When she saw the offer, Johnson says she thought, “it looks too good to be true.”

It wasn’t. The dance center signed the lease with Karelas’ San Francisco-based nonprofit, RE-volv.

First, RE-volv launched a campaign through Indiegogo. In the campaign video, Karelas encouraged people to think about energy as a shared good.

“Think about individuals and community centers that are generating their own power on their homes and places of work that use that energy and then share it with their neighbors,” Karelas said in the video.

RE-volv raised about $25,000 through foundations and donations from 300 people around the world. That money covered all of the dance center’s up-front costs. Once the project was underway, they started paying about $300 a month to lease the panels. That money went into a fund that generates interest, and helps pay for future projects. So someone who donated $50 to the dance center’s roof wasn’t just supporting them -- she was also helping other projects down the line.

“So our hope is that people will be eager to kind of put their money into something where it does earn a return but they're not asking for the return back themselves,” says Karelas. “They’re asking for the return to be reinvested into more and more solar, allowing it to grow exponentially.”

This is pretty different from how solar providers usually work. In a typical lease, the dance center would make payments to a solar company for 10 or 20 years, then either renew the lease or buy the system at market value. If they didn’t, or couldn’t, the company might take the panels back. With RE-volv’s model, the dance center will own its system outright after 20 years. Already, their monthly bill has dropped by more than $100.

Skin in the game

Dan Rosen is the CEO of Mosaic, an investment crowdfunding company based in Oakland. Their model also offers a return -- but this one is for the investors.

“Where our base of investors can become advocates and some of the best advocates for clean energy because they're invested in it. Because they have skin in the game,” says Rosen.  

Mosaic provides an online platform where anyone can invest directly in a clean energy project. Investments can be as little as $25.

The way Rosen sees it, “Warren Buffett is investing tremendous amounts of money in solar right now. But someone asked you know who has more money than Warren Buffett? We all do.”

So far, Rosen says Mosaic has raised $3 million to finance 15 different projects. For example, 138 people paid to put solar panels on the roof of the Asian Resource Center (ARC), a building that houses nonprofits and businesses in Oakland. ARC now makes monthly lease payments of about $340 to Mosaic. That money is used to pay each of those investors a return. Rosen says it can be up to six percent.

“So Mosaic is bringing a new source of capital to the table that is people power. That is powered by individuals and small institutions. And institutions that want to invest in clean energy,” says Rosen.

The outlook  

“I think that has the appeal for some investors who couldn’t otherwise get into investing in solar PV very easily of being able to make small investments and still get into this market,” says Severin Borenstein, Co-Director of the Energy Institute at the Haas School of Business.

He says the crowdfunding model makes solar more accessible, but it’s still a niche market. “As far as the growth of this industry, I think it’s going to be driven by the economics, both the true costs of installing solar relative to retail electricity prices and the tax treatment,” he says.

Borenstein says that right now, the retail cost of electricity in California is higher than the actual cost. That’s because most utilities roll the fixed costs of the transmission lines and managing the grid into our electricity bills.

“Those very high prices you’re paying don’t reflect the actual cost of supplying power to you,” says Borenstein.

Going solar means you produce most of your electricity needs, but you still depend on the grid. So you’re no longer paying most of those fixed costs. Instead, the utility absorbs them.

“The utility recognizes it’s giving incentives for people to install solar instead of buy their power from the utility and as a result they are trying to change those tariffs,” says Borenstein.

So for example, changing the rates to charge everyone a monthly fee for being connected to the grid -- no matter how they get their power. If that happens, Borenstein says the whole solar sector could slow. But for now, it’s still growing.

The vision

“Crowdsourcing and crowdfunding is a way that we can democratize energy,” says Rosen from Mosaic. He sees crowdfunding as a way to change the whole energy industry. He anticipates major growth in solar rooftops, enough to disrupt the way utilities currently work.

“A world where every home could essentially be a power plant. Because it really is inevitable. It's cheaper to put solar on your home than not. It will happen. It’s economics,” says Rosen.

Solar still makes up less than 1% of the country’s total electricity production today -- and rooftop solar makes up even less of that. Crowdfunding projects have a long road ahead. But they’re hoping it’s a sunny one.  

This work was supported by a 2013 New America Media Energy Reporting Fellowship in collaboration with SoundVision Productions’ Burn: An Energy Journal.

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