Environmental Quality / 2013
Renewable Financing for Renewable Energy
Take Back the Grid's mission is to massively expand the financing for, and adoption of, renewable energy projects.
The idea is to create an evergreen fund for renewable energy, where every investment in solar creates a revenue stream that can be reinvested in more solar. It changes the equation from savings to earnings. In this model, every $1 dollar invested in renewables creates a revenue stream worth $3 to $4 over time. By reinvesting these revenues into even more solar projects, our initial investment compounds and grows exponentially. With even a moderate return of 10% (typical for an average solar project), compounding means that you'll double your solar capacity in just 7 years, triple within 11 years, and by 2050 our initial investment will have multiplied 34 times! For creating local jobs, reducing energy costs, and combatting climate change, there's no better way than to make investments today that renew themselves tomorrow. And all we have to do is start. When we divert money that we already spend away from dirty energy and toward clean energy, the compounding nature of the evergreen fund takes care of the rest.
This is a modification of the existing third-party-ownership/solar leasing model that has drastically increased solar adoption over the last 5 years, in which a financing company owns the solar panels on your roof, and you pay them a fixed monthly payment for the energy generated by the solar panels. This solar lease is a 20-year contract, where the investor gets paid back over time and allows the customer to "go solar" without the upfront cost while locking in savings relative to current electrical rates.
My innovation is in the fund behind this deal. Currently, solar leases are financed by big banks, so all of the incentives, credits, and lease payments intended to fund solar energy just go back to the banks. That is fine, but there's a more powerful way. By backing these solar leases with an evergreen fund, we directly reinvest a project's revenues back into financing more solar. Once a project has duplicated itself, its revenues can return to investors while the "new" project starts duplicating itself. This way, every project we build will finance another project. Every dollar spent on solar energy is an investment in more solar capacity. It compounds our effort, insuring savings for our customers and that more solar will be built than with any other model for renewable energy financing.
In the case of the LA2050 grant, there is no investor to repay, only tons of solar to build, so all lease profits will be reinvested for the lifetime of the project.
What are some of your organization’s most important achievements to date?
Working with Dan Rosen, Billy Parish, and Arthur Coulston at SolarMosaic (www.joinmosaic.com) to develop the financial model for the “Oakland Solar Mosaic” was an incredible time for me. Through that effort, $400,000 was raised from “the crowd” to develop solar projects for non-profits in Oakland, CA. The support we had in developing a crowdfunding model for solar finance was absolutely humbling, and to see what happens when a good idea’s time has come was inspiring.
Please identify any partners or collaborators who will work with you on this project.
Progressive Power Group of Garden Grove is my installer of choice and Ivan La Frinere-Sandoval of Solar First has provided the tax equity investment that covers the 30% Federal Tax Credit portion of the project (a critical piece of any solar lease/third-party-ownership arrangement). Matt Moses of Mimeos Sustainability has shown me the ropes of getting solar built while leading a customer-first enterprise.
Please explain how you will evaluate your project. How will you measure success?
Success will be measured by the existence of solar projects financing more solar. Success is where ALL of your utility payments go to building more clean energy for our city, not just a couple cents per bill by checking the “green energy” box. <p>
Specifically, we will be able to measure our success in:
1) Total Solar Capacity deployed (first year and every successive year)
2) Total Savings to customers
3) Annual revenue for reinvestment
4) Total carbon emissions offset (megatons/year)
Since $100,000 spent purchasing solar projects from typical developers would only deploy about 25kW of capacity, and we’ll build nearly 3x that in the first year, I’m confident the metrics for success will be significant.
How will your project benefit Los Angeles?
It will create an enduring investment in renewable energy and prove a new model for solar leasing that can scale across the city and country.<p>
Specifically, it will install 70kW of solar energy in the first year (7-10 households worth), and will create a revenue stream that will finance another 9kW of solar the following year. Because the investment is compounded and the total revenue grows each year, the impact compounds as well. 9kW in the first year, 10.2kW the second, 11.5kW in the third, etc. Within 6 years, the initial 70kW of solar built will have doubled to 140kW of clean energy that is saving customers on their utilities while producing financing for more projects. <p>
It’s a virtuous cycle where the more good we do, the more good we can do. We turn our customer’s utility bill into an engine for financing renewable energy on their neighbor’s roof, and that neighbor’s roof, until all of the roofs are full with clean, efficient power plants. The larger we start, the sooner we can reach our goal of removing fossil fuels from our electrical grid.
What would success look like in the year 2050 regarding your indicator?
In 2050, we have a utility system owned by the community, powering the community with 100% renewable energy. We no longer have need for fossil fuels and are running our cities and transportation systems completely on renewable sources of energy.<p> If we let 37 years worth of compounding interest apply to our investments today, it won’t take long until we’ve kicked the carbon habit!