My two great passions in life and clean energy and personal finance. Until now, I’ve been a huge advocate of energy efficiency in the home in order to reduce your environmental impact while saving a bunch of money. But now I’m excited to bring you an entirely new venture that might just revolutionize the world of clean energy and give you a new investing option!
Mosaic is a brand new company that is crowdfunding solar projects. It’s a way to provide financing for projects with incredibly low rates of default, and solid rates or return, while helping to ween American off of fossil fuels. So think about how KickStarter (the orginial crowdfunding website) or Prosper (Peer to Peer Lending) work, and it’s essentially the same thing except with solar projects.
Why Does Solar Make Sense?
As you probably know, Solar makes up less than 1% of America’s energy generation capacity, but it’s growing at a crazy fast pace. Mostly we’re stuck with Coal, Natural Gas, Nuclear, and Hydro power to generate our electricity, and until recently solar panels have been so expensive that they only made economic sense in remote areas without access to the grid.
Over the past few years all of that has changed. I’ve seen it in the solar projects I’m involved with at work and around the country. The plummeting cost of solar is causing all kinds of unintended consequences (See: Solar Trade conflict With China). The price of installing solar panels over the past 4 years has fallen by about 50%! It’s starting to get ridiculous!
Even with all the progress that’s been made on panel efficiency and cost reduction, solar panels are still expensive, and that’s where federal and state governments come in. Because they want to incentivize the installation of clean energy, they offer various tax credits and cash incentives. The Federal Government is all of this with a 30% tax credit, and various states/utilities are providing the other incentives. So even though New Jersey doesn’t get that much sun, it’s a leader in solar production along with California and Arizona.
The point is that in certain markets around the US, it’s cheaper to buy solar panels than it is to keep buying electricity from the grid. Many solar companies are offering what’s called a Power Purchase Agreement (PPA). They will install solar panels on your roof, as long as you agree to buy power from them. For instance it California, you might be paying $0.13/kwh for grid power, and a solar company will sell you power for $0.09/kwh.
“How are they able to do that?” you might ask. The answer is that they are raising capital from investors to finance the investments… and that’s where Mosaic fits in.
How Mosaic Works
Mosiac works by getting a bunch of people “crowdfund” solar. Think about companies like KickStarter and Prosper. KickStarter gets a bunch of people to give a little bit of money, and incredible works of art/projects are funded through the internet. Prosper is a peer-to-peer lending site where I can lend little bits of money ($25 each) to a bunch of different folks who are looking to get a loan at a good rate. KickStarter doesn’t return your money, but Prosper returns your money with interest.
Mosaic allows you to lend $25 per project being funded in order to decrease your risk. They will return your money with interest over the length of the agreement. The first projects have been providing returns of about 4.5%, but with tiny default rates because the loans are backed by power producing assets.
Once they pool all the funds from the investors, they buy the solar farm and charge the folks using the electricity a lower rate than what they were paying the utility beforehand. The monthly electricity payments pay back the loan over time. These panels last for 25 years, so the economics work well for everyone involved and it’s potential is essentially limitless.
I’m excited to see how this funding mechanism changes the game for institutions and individuals who live in solar competitive areas but don’t have the capital to throw solar panels on their roof. The future looks so bright! (sorry!)
Experimenting with Mosaic
So I signed up for an account (only took a few minutes) and logged in to see all the available projects. It looks like they are a little too popular, because all of their available projects are fully funded. Don’t let that discourage you though, I’m sure they will get some more projects on there soon.
I know that any new type of investment is always risky, so I’m not suggesting that you replace your CDs with Mosaic notes. Although it’s default rates are quite low so far, that doesn’t mean they wont grow in the future. I like to dip my toes in the water of these types of investments before I really commit. Be very careful!
Also, depending on your state, there are some financial suitability requirements, so please look into that before you invest. And I feel compelled to say I am not a financial professional, and you should not take investment advice from me! I’m just telling you about a cool new idea.
That being said, as soon as some more projects are available, you’ll see the Cash Rebel as their first investors. I can’t wait to make money from a project that is making the world a cleaner and better place!
Have you ever dabbled in anything like this? Do any Rebel Readers who are considering rooftop solar panels live in AZ or CA?
I have 18 solar panels on my roof. It’s a 4.32 KW system which can produce almost 400 kWh a month on average. I got mine for $6,000 from SolarCity (who is an amazing company, funded almost entirely by Google). They reduce my monthly electricity payment by more than $50 a month, and they push the value of my home up by about $20k. We couldn’t be happier!
That’s awesome Johnny! I’ve worked with SolarCity before and I’ve got nothing but kind words for them. So it looks like you’ve got a locked in ROI of about 10%. Not bad!
We’re not into the crowdfunding scene (except for Kiva, but that’s charitable) so I would be reticent to invest in something like this. We do plan to have solar panels installed once we buy a home in soCal (many years from now) but I’m sure the technology and funding landscape will be very different from what it is today. Perhaps we would invest in something like this with part of the funds we are saving for our own panels (or paint or whatever it is by then).
I’ve been meaning to check out Kiva… Yea, nobody knows what solar panels will look like in 10 years. It’s exciting!
Looks like the pool of people who are allowed to invest is pretty small since you have to be an accredited investor or a resident of New York or California. So unless you have made north of $200K that last two years and expect it to continue or you have a net worth over $1M (excluding your primary residence) you are pretty much SOL. They did say they might have some investments for people with a finance degree or who have worked in a financial field for 12 months.
It’s an interesting idea and it does look like they are helping keep people from hurting themselves.
Brian, I’ll have to double check those requirements. It looks like they are restricting it to smaller pool of qualified investors for now, but with JOBS act passing, it will be interesting to see if more projects like this become available.
What a cool idea and seems right up your alley. My sweetie was a PM a bit ago in the desert area schools of Cali – they put up car ports in the parking lot with solar panels on top of them that would, in turn, power the schools. Kinda cool!
That’s awesome! Not only are you generating power, but people get to park their cars in the shade. California and Arizona are in for some major changes to the electric grid. Should be fun to watch!
I wish that people would wake up and see the benefits of green power. So many of my colleagues have been brainwashed into thinking it’s too expensive and we should just drill. But there are more advantages to green energy. Not only would it mean cleaner air and water, but innovation usually leads to more innovation which can give a jolt to a sluggish economy.
Justin, I’m with you 100%. The price of solar continues to fall at a ludicrous speed. It would already be cost competitive with the grid most places if we hadn’t figured out fracking, haha… but that’s a whole other story. Solar is here to stay, and it’ll only become more ubiquitous as time goes on.