One hundred and ninety-six perfectly polished solar panels line the roof of the Oakland, Calif., Youth Employment Partnership, a nonprofit job-training program for at-risk youth. The system is projected to save YEP close to $25,000 in electricity costs over 10 years. And it happened in part because of a startup that's trying to change the way solar projects are brought to life.
In the past few decades, the price of solar panels has plummeted. As the technology becomes more affordable, a variety of pathways have opened up for residential and commercial development, ranging from leasing to bank-financed loans. But despite an array of financing options, mid-sized projects—such as the installation of photovoltaic panels on a community center or a school—often face problems raising money to get off the ground.
That's where Mosaic comes in.
Mosaic is an online platform that uses crowdfunding to finance investments in solar projects. It works similar to Kickstarter, with individuals posting project ideas to a central, online hub and soliciting incremental donations to fund them.
"You can go onto the platform, login in a few minutes, browse projects you want to fund and invest as little as $25," Billy Parish, one of Mosaic's founders, explains. "It's really a new experience from an investing perspective and what you're actually doing is participating in a loan to finance a solar project."
Unlike Kickstarter, however, Mosaic pays investors back. Once a project starts generating revenue, investors earn what they put in with interest. The company offers a fixed rate of return to investors of between 4 to 7 percent annually and levies a 1 percent fee on all transactions. The platform's 2,500-plus investors saw returns of approximately $60,000 in October alone.
This is paving the way for an increase in the number and kinds of solar projects that get funded in the United States.
Mosaic has fully funded 19 projects in six states—Arizona, California, Colorado, Florida, New Jersey, and New Mexico—and raised more than $5 million in capital investment for solar power. The company was founded in April 2011 but only began offering a return on investment to the public in January of this year.
Projects funded through Mosaic include the installation of more than than 2,000 solar panels on the roof of a charter school in Denver and 400 solar panels to generate electricity for an affordable-housing complex for seniors in San Bruno, Calif. Investors also funded a solar installation at San Diego's Ronald McDonald House.
Right now, without Mosaic, the most common way to buy a solar system for a residence or business is through a bank-financed loan. Banks have stringent lending requirements, however, and people with low income or bad credit are often shut out from the possibility of receiving a loan. Banks are also more likely to finance commercial-scale projects like a solar farm owned by a utility company than they are to pick up the tab for a mid-sized installation. According to data compiled by truSolar, a working group of solar industry participants formed to establish a standard risk rating, similar to a credit score, for solar projects, only 5 percent of banks finance loans for solar projects. And, based on the findings of Mosaic's project finance team, most banks won't lend to projects worth less than $10 million because the transaction costs are too high relative to the return on investment.
Mosaic is changing this dynamic by sidestepping traditional lenders and helping create a new class of investors.
"For a school or a small business, the cost for a bank to do the underwriting on a loan is so high that it just doesn't pencil out," Parish says. "But Mosaic is a fundamentally different business model. We're all online so we don't have the brick and mortar overhead and we have less costs to cover. We're also regulated differently and all of these things add up so that we can help finance these smaller projects at lower cost."
The company's goal is ambitious: Mosaic wants anyone to be able to invest in solar nationwide. Due to a complex tangle of state-level securities regulations, it hasn't achieved this yet. But it's on its way. Residents of New York and California can invest in solar projects through Mosaic irrespective of credit history or income and accredited investors who meet certain qualifying criteria in other states can also join in.
"They are an incredible company that is really helping to grow the market for solar. They're totally unique and there's really nothing like it," Andrea Luecke, executive director of the Solar Foundation, said. "They're helping meet a need, which is what if you don't own a house or you're a renter, for example, then how do you support solar? Mosaic is providing a new avenue for people who are interested in solar and who can now invest in it without having to buy their own solar panels, which was really the only way to support it before."
It's not just about the bottom line. Mosaic's founders want to drive a transition to a renewable-energy economy and believe the private sector has a major role to play in expanding access to solar and other forms of renewable energy in the United States.
"The government's not going to fund the next wave of infrastructure by itself," Parish said. "They have played a critical role in catalyzing solar and other renewable technologies by supporting research and development and providing incentives. But moving forward we need trillions of dollars of financing to transition to 100 percent clean energy and that's mainly going to come from privately raised capital. That's what Mosaic is doing. Our goal is to make it possible for everyone to participate in that transition and to benefit from it."