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?