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August 26, 2020
Matt Moroney spent five years in the private sector cleaning up contaminated land before returning to grad school. During that time, he noticed that his work often cleared the way for condos and high-end retail rather than projects stemming from the community.
"The communities that had been suffering the impact of the pollution didn't really get any share of the benefits," Moroney told Cheddar.
This experience inspired him to explore new ways to get money into local sustainable projects. The result was Raise Green, a crowdfunding investment platform for solar energy projects that Moroney co-founded with Franz Hochstrasser, a former Obama administration official who worked on the team that helped negotiate the Paris Agreement.
Moroney touts the platform as helping expand the fledgling renewable energy market by moving beyond large, top-down energy projects and empowering communities to build solar capacity on their own.
"There are millions of people marching in the streets for economic, social, and climate justice, but what do you do at the end of the march? Do you write your congresswoman and tell them to support a Green New Deal? Good luck getting anything passed in Congress. Do you write a letter to the director of a Fortune 500 company to stop polluting? Quarterly profits make that impossible," he noted. "Instead you can come to Raise Green and directly invest in a project that otherwise wouldn't be funded."
A lack of capital isn't the only barrier to the kind of renewable energy revolution that many believe is necessary to stop climate change. There's also the hard work of setting up a viable energy business when best practices are either unavailable or cost-prohibitive to access.
Raise Green on Tuesday announced a new initiative to provide upstart solar projects with the knowledge, know-how, and intellectual property to hit the ground running. Called the Originator Engine, the software was developed in partnership with IBM to aggregate and "templatize" thousands of documents and contracts necessary to do business.
When combined with Raise Green's investing platform, the goal is that communities across the country will make the leap into solar power, one rooftop, backyard, or parking lot at a time.
'Click button, get project.'
Crowdfunding platforms such as Raise Green are a relatively new phenomenon. The Jobs Act of 2012 made them legal, but the necessary regulatory approvals weren't made until 2016. Since then, a whole range of platforms representing different assets have emerged online. Moroney believes that small project finance is the next wave of retail investing.
"The closest analog is something like Rocket Mortgage. Thirty years ago, the thought of getting a mortgage online would be impossible. Now it's like 'click button, get mortgage,'" he said. " It's the same thing with these small project finance companies. They're complex, but if you can put them in a standardized work-flow, then you can imagine 'click button, get project.'"
This innovation comes as private investment in clean energy technology continues to decline from its peak nearly a decade ago. Between 2011 and 2016, venture capital investment in "cleantech" declined 30 percent from $7.5 billion to $5.24 billion, according to the Brookings Institution.
There have been a handful of other efforts to bring crowdfunding to renewable energy, but Raise Green is the first of its kind for small community solar projects that also serve areas with low investment.
"There have been other attempts at crowdfunding projects, but none that have achieved what Raise Green has done, in terms of the SEC approval for this kind of broad public offering," said Dan Gross, a professor of clean energy finance at Yale University who has mentored Moroney and Hochstrasser. "Where that's sort of revolutionary is that it democratizes who can own an economic interest in these projects."
This way, rather than putting money into environmental, social, and corporate (ESG) funds, which are controlled by fund managers, investors can target smaller dollar investments in individual projects.
"You may care a lot about your community, but your fund manager is focused on opportunities in California or Texas or elsewhere," Gross said. "Through this, I have the opportunity to invest in something that is building-specific. You give the individual investor much more discretion over where their capital is used."
Gross sees this approach as complementary to ESG investing, which is "very hard for your average retail investor to get exposure to." The minimum check size that someone would need to invest in a private equity fund committed to sustainability, he added, would dwarf the average annual income of the overwhelming majority of Americans.
Raise Green is setting the bar lower — not to mention capitalizing on ongoing calls to divest from fossil fuels — to build a new pool of investors who want to align their money with their values.
"Crowdfunding appears to us as a great way to unlock a massive amount of capital that is standing on the sidelines and itching to get into this green energy space," said Phil Coupe, co-founder of ReVision Energy, a New England-based solar installer that plans to partner with Raise Green.
"It enables us to welcome in a whole bunch of smaller investors who have gotten in touch with us over the years," he said.
On Monday, for instance, an investor from New Hampshire reached out to Coupe about investment opportunities in solar. The goal, he said, is to connect people like this with the types of projects that usually fall below the vision of institutional investors or venture capitalists.
"The Raise Green portal will hopefully be an ideal way to bring this person into the community of folks who want to see a lot more clean energy and a modest return on investment along the way," he said.
Contracts, contracts, contracts
Companies like ReVision are still ultimately working at a larger scale than the types of community projects that Raise Green is looking to make possible. That's where the new Originator Engine comes in. In a way, the portal aims to give solar projects the same resources that a franchisee would get in opening a store.
"If you wanted to start a gas station or a McDonald's in your neighborhood, it's relatively quick and easy to become your own entrepreneur doing that," Moroney said. "But solar and low-income housing and co-ops and these types of businesses, those are the gas stations and fast-food joints of the 21st century."
Right now, those prospective projects face a process rife with unfamiliar legal documents and contracts.
"If you've never developed a project before in your life, it's incredibly intimidating and unrealistically expensive to develop those things from scratch," Gross said. "You need contracts that govern the sale of power. You need contracts that govern the operations of the project, so who's going to do the maintenance and help with the monitoring of that solar installation. You need contracts governing the installation of the project."
By going through the process of building its own solar project, Raise Green learned this process while also obtaining the necessary legal documents and contracts. Now it's offering them in template-form to cut down on the costs and labor of doing it for the first time.
"Most of the time when you purchase legal work, it's yours," Moroney said. "So it's really up to the project owner if they want to make it a template or not."
So far, 50 people have reached out to Raise Green organically about getting help starting their solar projects. The goal is to bring on 10 projects before the end of 2020, 100 by the end of 2021, and eventually funnel thousands of projects per year through the platform.
Currently, without additional support, solar projects can take upwards of a decade to get off the ground. With the threat of climate change looming, Moroney said, that can't be an option.
"The truth is, we don't have time for that," he said. "We need 10,000 to be built in the next 10 years."