Startup Mosaic today launched a service to let individuals invest as little as $25 in solar projects, bringing the practice of group online investments to solar.
The Oakland, Calif.-based startup is one of many companies seeking to spread solar power by innovating around finance. In its case, Mosaic is emulating the alternative funding model of Kickstarter, where individuals commit to investing money in startup companies and projects online.
The cost of the actual solar hardware, such as panels and inverters, has dropped precipitously over the past few years but a great deal of cost can be wrung from the downstream end of the business, including installation, permitting, and maintenance. (See, Why Solar Installations Cost More in the U.S. than Germany.)
Mosaic, formerly called Solar Mosaic, today said that it is taking money from individuals for three projects in California at affordable housing buildings, promising returns of about 4.5 percent over nine years. The company says its service is available in New York state as well and intends to spread to more states and countries in the future. It’s already funded six installations in California as it developed its business model.
The driving idea behind the company is to bring capital to solar projects that are too small to be worthwhile for banks, says president and co-founder Billy Parish. As a startup, Mosaic says it can offer financing cheaper than institutional investors and still collect enough money for rooftop solar projects at places, such as multi-family buildings or commercial buildings.
For individuals, the return on their investment compares well to other options, he says. So far, the projects have ranged substantially in size but the largest now collecting investors is a 102-kilowatt system at an affordable housing complex in California which will require more than $180,000.
Mosaic loans money to project developers who sign a power purchase agreement with building owners. This type of financing, which is designed to lower monthly electric bills for building owners, has driven rapid growth of solar in the U.S. the past few years. With the money generated from those power purchase agreements, project developers can pay back their debts to Mosaic and Mosaic can provide a return to individual investors in projects, according to the company.
The rules around crowdfunding and online marketplaces are still a work in progress. Still, Mosaic’s chief investment officer, Greg Rosen, says that the company can still operate and give investors a return on their investments in California and New York.
The company’s business model is a good example of what many call the Cleanweb, or using information technology to advance renewable energy or use natural resources more efficiently. (See, Web Natives Take Aim at Energy.)
In the area of downstream solar, in particular, there are a number of companies trying to bring more automation and efficiency to the buying and installation process. The Department of Energy’s SunShot Initiative gave grants to nine companies, including Mosaic, last June to create applications, such as online marketplaces to connect financiers with installers or tools to reduce the time to create an accurate solar assessment for consumers.
There are also a handful of efforts to lower solar purchasing prices with group purchases. Solar Gardens in Colorado, for example, provides tools for people to organize community-owned solar arrays.
Solar power, however, still relies on a federal tax credit and state incentives. Once the federal tax credit phases out, Rosen says the company expects to continue finding attractive solar projects in the U.S. and other countries “where the solar value proposition is cost effective.”