Community Energy Crowdfunding.
Germany’s energy crowd-funding start-up CrowdEner.gy aims to make community energy easy. But recent government changes to the feed-in-tariff have made it a difficult market. I met their founder, Dr Peer Piske, to see how they might adjust their strategy.
Dr Peer Piske founded Berlin based energy crowdfunding start-up, CrowdEner.gy with the aim to create a platform which would let all Germans access community energy investment projects.
“Having worked many years in solar around the world, my family and friends would often ask how they could also benefit from such projects. So I created CrowdEner.gy in 2013”.
Peer also saw a potential target market in energy co-operatives, who could bring their capital raising activities ‘online’ via the Crowdener.gy website.
CrowdEner.gy’s first operating year was promising, with 4 small commercial solar projects successfully raising almost €200,000 (A$320,000) in equity crowd-funded projects. Investors are promised a 5 – 8% target return on investment by investing in the specially established project co-operatives, which CrowdEner.gy helps set up and maintain.
German energy co-operatives facing new challenges
What Peer didn’t foresee, however, was that the bottom would fall out of the solar energy sector almost as quickly as he began.
“There are simply no new projects happening in Germany right now for co-operatives.”
The level of co-operative registrations in 2014 dropped to to just 29 co-operatives, down from an average of 150 per year from 2009-2013. The government’s recent reductions in feed-in-tariff support are largely to blame.
Travelling through Germany, it is clear that the solar market now faces even more challenging market conditions than what we have in Australia. Uncertain support for utility solar projects means that smaller ‘behind-the-meter’ projects are the only ones which could potentially stack up. Harder for the German’s is the fact that there is 30-60% more sunshine in Australia and, even worse, energy sold via third-party ownership models are also subject to the €0.06/kWh (10c/kWh) energy tax, even if it is located on the same premises.
According to Peer, such projects are not commercially viable once you factor in the additional costs of running a co-operative.
“It’s tight. Co-operative members are no long motivated to volunteer time in running the project. We thought they would be more engaged. So if you factor in director payments it doesn’t make sense anymore in Germany.”
At the same time, a sustained attack on the reputation of renewable energy was making it harder to find investors for this asset class.
“Renewable energy used to be welcomed as a positive impact investment. But that perception is changing amongst a large segment of the investor community”, said Peer. “Investors are frightened off because of political uncertainty”.
A new strategy for CrowdEner.gy
But Peer is still hopeful. CrowdEner.gy is pivoting to overseas markets, such as Tanzania, Kenya and the Philippines to find profitable projects for German citizen investors.
“We are building up a pipeline of solar projects in developing markets which I hope can yield 12 to 15% internal rate of return over a shorter time period, say 5 years. Particularly if there is a positive story behind the project, such as a school or hospital, we think this could really interest investors and fill a gap in the market.”
What is it? Online platform for crowd-funding of renewable energy projects in Germany and abroad
- Allows new co-operatives to raise funding online and reach more investors
- Helps co-operative set up project legals and administers projects on behalf of co-operative
- Allows investors to find and invest in renewable energy projects
Revenue mechanisms: 5-10% comission on the capital raise of projects. No ongoing management fee for existing projects.
Seed funding? No
Current project turnover: approx €200,000 (A$320,000).
Target Turnover: €1m per year