When it comes to the development of new projects for renewable energy, one of the most common problems  to solve is funding. Thanks to its rapid and continuous worldwide expansion, crowdfunding can help to reduce and overcome this gap. With a raised capital of 2.1 bln $ in 2012, this new funding system can connect proponents (mostly non-profit organizations and companies operating in the energy field) and sponsors who believe in environmental sustainability and in the transition to renewable energy.

by Dr. Davide Bonzanini & Dr. Andrea Pattrucco


For example, crowdfunding has so far been proven crucial to finance several important project, such as the installation of solar panels on the roofs of schools and non-profit organizations, the replacement of kerosene fuelled systems with clean energy ones in developing countries. It has also contributed to the launch of a few energy cooperatives in Europe.

This article briefly shows the results of a study about crowdfunding for renewable energy. It focuses on business projects with the purpose of collecting money to fund renewable energy plants and to generate economic return for the crowdfunders. We also want to touch on lending and equity-based categories, which turned out to be the most interesting ones from a financial and quantitative point of view (for the amount of collected capital and for the number of published projects).

From December 23rd, 2013 to June 5th, 2014, we have identified 18 specialized platforms, including 5 non-active ones or still in the launch phase, that have posted a total of 84 projects submitted by 52 contractors. Thanks to these projects, about 32 million Euro have been collected by more than 27.000 investors since 2011, for a total of 95.000 kW of installed capacity.

The following table lists all of the portals and their nationality (ISO 3166-1 alpha 3) and date of birth.


The two graphs below show the number of posted projects and the raised capital (in thousands of Euro) from each platform, to help understand the "weight" of the above mentioned platforms.


The underlying operation logic for the lending-based system is centered on the transfer of money that the platform has raised through a crowdfunding campaign to the proponent of the project, who then uses it to finance his/her renewable energy plant.

The energy that is produced is then sold to the national network at a fixed price per kilowatt hour (kWh), which is established on a long term period (up to 20 years). The energy sales generate profit that the proposer will use to pay interest to investors and to return their invested capital. Instead, when investing in an equity-based project, the investor purchases a share in an ad hoc created cooperative to become a de facto co-owner of the plant. Usually these cooperatives pay annual dividends to their members.

A database has been created to include data on each of the projects published on the considered platforms, to create a sample for an empirical analysis. The census showed that 76% of projects were focused on funding for solar technology systems, 17% for wind turbines, 5% for biomass plants and the rest for hydroelectric or mixed (solar and wind) systems. The average interest rate offered to investors amounted to about 6,15%, for an investment term between 2 and 24 years.

It should be noted that on June 5th, 84,5% of the projects was completed successfully, while 13,1% was still in the collecting phase and 2,4% were unsuccessfully completed. Success is defined as the realization of the project itself and not the 100% achievement of the set target. Many projects were in fact fulfilled despite not having collected all the necessary money through a crowdfunding campaign.

The objective of the empirical analysis is to research significant relations existing between the percentage of progress against target (ratio of capital raised and collection objective), which is considered as the key metric of a project’s success, and some variables related to projects, proponents and platforms. From a linear regression analysis on ad hoc created models, it has been found that a project’s success is influenced by a few factors. These include the loan repayment terms, the degree of financial incentive, the offered expected interest rate and the benefits to the community.

In particular, the analysis shows that the percentage of progress against target is greater for projects that return capital to investors in form of pre-amortisation during the years of investment. Instead, it is negatively correlated with both the degree of financial leverage and with the expected interest rate offered. These two negative correlations could mean that investors prefer projects funded not only with debt (from banks or crowdfunding), but also with equity (from companies or crowdfunding) and for low-risk projects.

Finally, the variable related to contribution to community life is also analyzed. This considers if the plant is built on public ground and/or on municipal buildings or community buildings used by people living close to the installation site, such as schools, kindergartens, non-profit organizations etc.. The community contribution variable is positively correlated with the progress on the target, which means that if a project contributes to the benefit of the community, it is more likely to reach the set target. The weight of this last variable proves that the financial side of the project is not the only focus in this kind of investments. Instead, it shows how the social and ecological components also play a key role.


About the authors

Davide Bonzanini
Born in Piacenza (Italy) in 1990, Davide graduated with a Bachelor in Management Engineering with major in Organization from “Politecnico di Milano” in 2012. He will also be graduating soon with a Master of Science in Management Engineering, with major in Finance, from the same University (due October 2014). From September 2013 to February 2014 he spent a semester studying abroad at “Universidad de Malaga” (Malaga, Spain), as part of the Erasmus Programme. Davide has a strong interest in alternative forms of financing, which can be used to benefit the environment. This is what his final dissertation is about, with a special focus on crowdfunding in renewable energy for business oriented projects. 

Andrea Patrucco

Andrea Patrucco is twenty-four years old and he is going to conclude the course of his studies. His passion for maths and technical subjects led him to study Management Engineering at Politecnico di Milano, where he could develop a particular interest in finance that he chose as track of his Master. During his university career, he experienced the world of work thanks to three apprenticeships at an important cement company in Piacenza, Industria Cementi Giovanni Rossi Spa, in the Planning and Control System Function. In 2011 he studied English intensively at Wheelock College in Boston (Massachusetts, USA) and in 2013 he attended the Universiteit of Gent in Belgium for one semester. He is going to discuss his Master thesis about crowdfunding, titled “Empirical analysis of crowdfunding success in the renewable energy field for business oriented projects”, which combines his strong interests in finance and in renewable energy. Now he is working to a workbook of Project Management for Engineering, titled “Techniques and tools for project management”, that will be published in February 2015.

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