Condo Media - October 2013 - 32

ENERGY CONSERVATION
There does exist the potential for
institutional investors to finance the
purchase and installation of the solar system, and lease it back to the community
association long-term. In this scenario,
investors claim the federal tax credit and
depreciation benefits, while the community enjoys cheaper electricity and the
satisfaction of utilizing clean, renewable
energy. But traditional financing sources
are reluctant to lend on these projects,
citing the relatively small sizes of these
systems and inadequate credit quality of
most community associations.

If unlocking the solar finance puzzle
for community associations and other
non-profits continues to confound
even the most ardent supporters of this
proven technology, the crowdfunding
approach holds promise.

Crowdfunding Arrives

As evidenced by the rapid growth of
websites like Kickstarter, Crowdfunder,
and Indiegogo, “crowdfunding” is an
idea that’s pushing its way into everyone’s consciousness. People from artists
to entrepreneurs turn to these virtual

communities to launch capital-raising
campaigns to fund projects ranging
from documentary films and technology
startups to big-ticket items like streetcars
and bike-sharing programs. If you think
this is just the latest internet fad, then
the Crowdfunding Industry Report
from Massolution may convince you
otherwise: In 2012, the global crowdfunding industry raised $2.7 billion
across more than 1 million campaigns,
and in 2013 that total is expected to
almost double to $5.1 billion.
While the crowdfunding model
got its start through donation-based
funding for creative projects like those
found on Kickstarter, recent rule
changes related to the 2012 JOBS Act
liberalize federal regulations to allow
investment crowdfunding for private
startups, so a business can now tap the
general public to raise capital by selling
company shares or partnership interests
in the form of equity or debt.
Investment crowdfunding has the potential to reshape the finance landscape
for small- and medium-scale commercial
projects. Bloomberg estimates that if
just 1 percent of the retail investment
market were captured, the market would
be $90 billion. Investment in solar is
attractive to many individual investors,
both for the positive social implications
and for the steady returns. Solar investments outperform many instruments
offered by banks, including money
market funds and certificates of deposit.
Consider that Ally Bank’s 12-month
CD returns just 0.94 percent.

Solar Crowdfunding

Two different approaches are emerging in the solar crowdfunding space.
One approach provides refinance debt
to owners of existing solar systems,
providing precious liquidity that solar
developers can use to expand their business. This approach was used to provide
a $152,700 loan to the owners of the
114 kW solar system that sits atop the
Ronald McDonald House in San Diego,
Calif. The loan was crowdfunded with
contributions from 171 individual
investors, each of whom will be paid
32

Condo Media • OctOber 2013
Condo Media - October 2013

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