Dr Chiara CandeliseCEO Ecomill

Bocconi University

Smart financing and empowerment: crowdfunding in energy

CROWD-FUNDING

Crowdfunding models

Crowdfunding market

Source: Massolution 2013, 2015

Crowdfunding in energy

Candelise, C. “The application of crowdfunding to the energy sector”. In Crowdfunding for Sustainable Entrepreneurship and Innovation. Ed. W. Vassallo, IGI Global. 2016

• Need for new sources of funding (since financial crisis)

• Transformation of energy sector (liberalization energy markets, decarbonize energy systems, decentralized generation):

Drivers

• Need for new sources of funding (since financial crisis)

• Transformation of energy sector (liberalization energy markets, decarbonize energy systems, decentralized generation):

-> smaller, modular energy projects-> open entry to new players, e.g. small firms, local authorities, citizens-> energy consumer can become producers (prosumer)-> Communities, local authorities, can become energy producers

Drivers

• Need for new sources of funding (since financial crisis)

• Transformation of energy sector (liberalization energy markets, decarbonize energy systems, decentralized generation):

-> smaller, modular energy projects-> open entry to new players, e.g. small firms, local authorities, citizens-> energy consumer can become producers (prosumer)-> Communities, local authorities, can become energy producers

• Diffusion of community energy and shared ownership approaches

Drivers

• Need for new sources of funding (since financial crisis)

• Transformation of energy sector (liberalization energy markets, decarbonize energy systems, decentralized generation):

-> smaller, modular energy projects-> open entry to new players, e.g. small firms, local authorities, citizens-> energy consumer can become producers (prosumer)-> Communities, local authorities, can become energy producers

• Diffusion of community energy and shared ownership approaches

citizens as participatory actors, invest little amount of money, harvesting benefits of clean energy investments, contribute to CO2 emission reduction

Drivers

New, but dynamic

• Begins in 2012• At Nov 2015

29 active platforms 13 in pipeline ~ 390 projects

• PV, wind, hydro, biomass, energy efficiency

• Majority investing crowdfunding

Financial/Investing (~80%)

Some numbers• Total volume raised:

~ €165mil ~ 0.75% of worldwide

funding volume

(at Oct 2015)

Larger projects

Higher success rate

… who is investing (and why?)

Source: Abundance generation (2014)

Experienced older investors, who plan for their financial futures

Younger investors, looking for new opportunities to expand their portfolio

Actively consider the impact of their investment activities

Projects proponents

Source: CrowdfundRES, 2015

Community vs institutional finance?

ModelNumber of

projectsMoney raised €

Average raised per project €

Average returns

Lending (with Trillion Fund's lending projects ) 219 127,555,407 768,406 9.29%Equity (community shares) 38 22,740,049 733,550 7.00%Hybrids (no Trillion Fund's lending projects) 40 13,949,090 348,727 4.58%Donation/reward 93 814,883 14,050 -

Trillion Fund Equity Community shares Loan Fund

Money raised € 4,747,208 6,972,470 34,017,910 56,358,206

Number of projects 1 9 13 3Average return 9.5 5.29% 7.34% 15.13%Average raised per project € 4,747,208 774,719 2,616,762 18,786,069

• Peer to business lending dominates (more projects, more money raised, larger size) – third party financing

• Still, strong environmental and public engagement mission and explicit community and local focus (e.g. Lendosphere)

• However, loan and fund raised over 50% of total worldwide funding volume

Trends• From ‘family and

friends’..• ..grass root

projects• to scaling up:

Larger projects New instruments (e.g.

loan and fund) Collaboration with

utilities and institutional finance

• Improved citizens access to investments in clean energy• Started as a niche practice in grass root, community energy projects• Showing signs of scaling up and entrance of institutional actors

Open questions:

• will participatory and shared ownership approaches coexist with institutional and structured finance?

• Financing energy efficiency? In EU: reducing policy support to renewable energy sources (RES) and increasing need to develop and implement energy efficiency

Looking forward

THANK YOUchiara.candelise@unibocconi.it

chiara@ecomill.it