Crowdfunding community energy

 By Jim McClelland

Facilitated by booming growth in digital and mobile technology, plus global spread of internet access, the ‘Sharing Economy’ is forecast to be worth around $335bn by 2025, with the crowdfunding market alone having racked up an estimated $34bn of business last year. Now, whilst much of this revenue involves private individuals engaged in small-scale enterprises via peer-to-peer (P2P) lending, there is also a surge in collective investment in larger community projects. Already understood as a viable financial model for supporting investment in clean energy schemes in developing countries, this approach is also now being considered for community energy projects in major world cities, such as London. The diversification into these alternative funding arrangements has primarily been forced on community and third-sector organisations by such market constraints as cuts to Feed-in-Tarrifs and reducing government loans making more traditional finance harder to secure. Jim McClelland explores the emergence of this innovative new route to project funding for energy schemes…

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If you think crowdfunding is all just about raising cash for charity bike rides, or appeals to save the village pub, then you are wrong. It is big business. Facilitated by booming growth in digital and mobile technology, the “Sharing Economy” is forecast to be worth $335 billion by 2025, with crowdfunding alone racking up $34 billion of business last year, making it bigger than venture capital.

In the renewable energy sector, peer-to-peer (P2P) lending for larger community projects has typically targeted developing countries, drawing on support for charitable giving. Looking to crowdfund West African rural electrification projects, French start-up Benoolend, for instance, talks up investment potential in a multi-billion dollar market, but also calls for help reducing numbers without access to power.

In Africa, energy access remains a critical development issue and the global crowd can help, explains Dr Richard Munang, Coordinator, Africa Regional Climate Change Programme, United Nations Environment Programme (UNEP): “Africa, despite abundant clean energy sources, has the lowest energy access. Over 60% of Africans are not connected to the grid. In rural areas, this is worse with grid access at only 1-8%. Crowdfunding for off-grid renewable energy will go a long way to addressing gaps and bridge this energy divide.”

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This approach is also now being considered for community energy projects in major world cities. Sustainable P2P investment specialists such as London’s Abundance have wind, biomass and solar projects in their portfolio. Berlin-based began with an African solar project in Tanzania and has since funded schemes across Germany.

Diversification into these alternative funding arrangements has primarily been forced on community and third-sector organizations by market constraints, making traditional finance difficult. Crowdfunding renewable energy is not, however, easy. Feed-in-Tariff cuts and loss of tax relief mean it is even getting harder in places such as the UK, as evidenced by the decision of early adopters Trillion Fund to withdraw.

Community energy is nothing, though, if not adaptable, argues Alex Germanis, CEO of business-led charity and leading social investment provider Pure Leapfrog: “In the future, decentralized energy will be smarter and more sophisticated. This requires new business models and new types of investors and the evidence is that the public is hungry to have a stake. There are plenty of investors happy with returns between 3-6% on their investment.”

According to Germanis, while risk and return play a part for investors, it is the positive impact and story behind each project that is critical. One such good news story is Brixton Energy, a not-for-profit cooperative pioneering the first inner-city community-owned solar power stations in Britain. Since 2012, its projects with RePowering London have not only been generating energy, but also funding programs to raise awareness about energy efficiency, tackle fuel poverty, plus provide training and employment for local people.

In a sharing economy, community energy offers a win-win funding scenario that is attractive to the crowd. People like to invest their money in other people; they also like to make a profit. It’s good to share.

MUST READ: The solar crusaders by RP Siegel


about the author
Jim McClelland
Editor + journalist for supplements to The Times + Sunday Times, also quoted in Guardian, Sunday Telegraph. I blog for such as GE + Gap. Active on social media. Specialisms include Sustainability.