When I first wrote about Solar Mosaic, a startup that’s been building a kind of Kickstarter around funding solar roofs, I was excited about their idea of leveraging crowd-funding to offset the large costs of solar rooftop installations. But the company is only just about to launch the truly disruptive part of its business: as early as this Summer Solar Mosaic plans to start offering people a way to buy into rooftop solar panel projects, and make back a return on their investment over time.
Essentially for the investor it will be like buying the safe and predictable return of a mutual fund. The way it works is that a building owner will lease the solar equipment and enter into a contract for a fixed, low, electricity rate, commonly over about two decades. Solar Mosaic is working with solar lease providers like Sungevity, but Solar Mosaic is the one that organizes the crowd-funding of the money to get the solar rooftop installed. Once the project gets funded Kickstart-style, the rooftop solar panel installation process starts.
Solar rooftops are a surprisingly low risk investment. As Daniel Rosen, co-founder of Solar Mosaic put it in an article for us last month: solar loans are backed by a revenue-producing asset (electricity) and the building owners are just continuing to pay for the electricity that they are used to paying for day in and day out. There is little risk to investors that the buildings owners will default on their electricity payments, particularly since they are also saving money on their energy bills from day one. In addition the costs, timelines and returns for solar panels are pretty transparent as the technology has become increasingly commoditized.
Right now, banks are one of the major ways that solar rooftops get funded in the U.S. An installer like SolarCity (which plans to IPO soon) will raise a several-hundred-million-dollar fund from a bank to provide financing options like leases to building and home owners for solar panels. The bank can get a good return on the investment over time — some estimate 12 percent. Some corporations are starting to see the money-making potential of solar rooftops, too, and Google has created a $280 million fund for SolarCity, and a $75 million fund for Clean Power Finance. Warren Buffett is investing in these types of solar projects, too.
Make money off of the sun
Solar Mosaic is looking to bring that money-making opportunity down to the everyday investor (including you and me). The big question will be how much of a return will investors and everyday people be able to make off of funding these projects?
Nick Allen, a Partner with Spring Ventures — Solar Mosaic’s investor — told me last year that he thought the solar projects could one day provide something like a six-percent return, and the company could offer returns on one- to three-year notes. “How many people are happy with the one-percent return they get from their bank?” Allen explained to me, adding that the concept is “an exciting emerging asset class where people can invest money, create solar and do well.”
Solar Mosaic had planned to start offering this type of return in 2012, but the momentum has been accelerated because of the recently passed Jumpstart Our Business Start-ups (or JOBS) Act. The series of six bills bundled together — which had the support of Google, Steve Case, Angel List and many others — makes it easier for startups to gain access to capital including crowdfund investing. Solar Mosaic was founded in October 2010 and funded by Spring Ventures and a group of angel investors.
Beyond the soon-to-be-launched money-making aspect of SolarMosaic, solar seems to be the perfect application for crowd-funding. Like Kickstarter, lenders to projects are inspired by the project itself and want to have “skin in the game,” as Allen explained it to me. The lenders are also motivated to engage with the project and promote lead generation.“Solar is viral, crowd funding makes it more so,” said Allen.
I’ve experienced it first hand. I bought a $100 “tile” in Solar Mosaic’s first five solar projects, which were all fully funded with $350,000 and 400 investors (one “celebrity investor” gave $250,000). As soon as the Oakland solar project that I helped fund got fully funded last month, I got really excited and sent the link to all of my friends. I think the idea of combining the crowd-funding model with solar rooftops and adding in the potential to make money could be truly disruptive.