Crowd-funding: The Road to Energy Decentralization and Energy-

Poverty Eradication
Tirza Frederica

Energy production and distribution are the bedrock of sustainable economic

development especially for an archipelago like Indonesia. Currently around 12.6 million
households out of 254 million Indonesian populations, who live in remote areas, have
limited access to public electricity and the government is struggling to provide electricity
for them.i Energy development in these areas has already focused at decentralized
renewable energy system that is available in the region. But, to promote the growth of
sustainable electricity generation and eco-friendly living, the country has to start a rapid
development of renewable energy, notably solar power, as the alternative energy for
generating electricity in rural areas. Indonesia has enormous solar energy potential of
4.8 KWh/m2 or 112.000 GWp. Unfortunately, only 10 MWp of the total amount are
utilized. Indonesian government has also made a roadmap for solar energy utilization
which targets 0.87 GW or 50 MWp/year of installed solar power plants in 2025.ii

Renewable energy development is mainly constrained on funding side.

Production cost of renewable energy is still relatively expensive thus not competitive
and not affordable by the community.iii The high initial costs happened due to imported
technology and maintenance costs. Financing institutions also consider renewable
energy investment to be high risk, so loan interest rates are high. More efforts need to
be made in terms of removing financial barriers to promote renewable energy
investments.iv

With the aforementioned complex problems, the public certainly cannot depend
on large public utilities to give them clean and affordable energy. Thus, initiatives
involving citizen participation in cutting down traditional energy sources and embracing
new alternatives like solar power are the way forward.

Despite its new emergence in the modern era, crowdsourcing is actually not a
new concept. Jeff Howe, who coined the term crowdsourcing in an article appearing
in Wiredv defines it as ...the act of taking a job traditionally performed by a designated
agent (usually an employee) and outsourcing it to an undefined, generally large group
of people in the form of an open call.

There are various forms of crowdsourcing and one of them is crowd-funding. In

this essay, crowd-funding, both with loan and peer-to-peer model will be reviewed as
the primary choices of solution to tackle energy crisis in Indonesian rural areas. These
models can be applied or adapted in Indonesia, enabling local communities to
participate in funding renewable energy sources. Green energy projects resonate well
with crowd-funders where energy and environment campaigns were ranked fifth in
terms of the total numbers of campaigns and the total amount of money raised in 2012
through crowd-funding schemes. This area is predicted to have strong growth in the
future.vi

Loan Model

Solar Mosaic is a type of micro-financing initiative example that enables citizens

to take part in larger community solar projects; makes it possible for small, non-
accredited investors to earn interest financing clean energy projects. Solar Mosaic
initially started the process whereby citizens invest directly in solar projects and they
collect repayments with interest. In 2013, Mosaic launched an online platform to let
individuals invest as little as US$25 in specific solar projects while earning a 4.5%
annual return on their money.vii Mosaic provided capital to developers at a 5.5%
interest rate, took a 1% fee, and investors could expect a full return of their investment
in nine years.viii Mosaic sold out its first public projects in less than 24 hours, with over
400 investors putting in $300,000+ and an average investment of $700.ix

Mosaic is now building a portal for solar developers to submit project

information electronically in an efficient manner that will make the loan process much
simpler, faster and more transparent for borrowers and improve project quality for
investors.

Today, with NGO, businesses and microfinance networks like Mosaic are reaching
into villages around the world, an infrastructure exists to deploy solar systems using
this funding model. Just replacing kerosene a fire hazard and contributor to
pulmonary disease with solar would yield enormous health benefits, reduce
greenhouse gases, improve quality of life and expand economic and educational
opportunities.
Peer-to-Peer Model

This second crowd-funding model is based on Gridmates - the first web platform that is
aimed to eliminate energy poverty by crowd-funding energyx. The site has two main
schemes: Firstly, Smart-Giving where users could give electricity to someone, pick a
dollar amount, find out how much impact it will have in terms of days of energy, and
then donate via PayPal. The wonderful thing about this energy donation system is one
amount has a great impact. For example, by donating US$10 to low income family, they
will have three days of energy, equals to 83 kWh, which will help them to restore their
lives. (Figure 1)

Figure 1. Screenshot of Smart-Giving Page at Gridmates Website

Gridmates also creates the Solar scheme that allows people who have solar
panels to give part of the money they save, producing their own energy and give it to
someone in need. Users can put in a zip code, give Gridmates the capacity and size of
the solar panels. The organization asks for people to give anywhere from 2 to 5% of
energy they produced. (Figure 2)
 Figure 2. Screenshot of Solar Page at Gridmates Website

Non-profits can use this system to raise funds. In turn, Gridmates charges a
small fee for the organizations that use the service. This project is still very young and
the biggest challenge is to educate the community that crowd-sourced energy is a
different way to support their neighbors in need.

As the solar industry advances and the number of residential solar owners
increase, excess energy will become an issue. Fortunately, there are storage solutions
out on the market: more people go off-the-grid and more people will use their savings
to provide energy for people in need.

Benefits and Challenges

There is empirical evidence that, in some cases, crowd-funding is not simply a

model to get funding for a business, but also about building public involvement,
support and long-lasting tiesxi, building legitimacy and exploring new communication
channels with clientsxii, community buildingxiii, experimenting with novel ownership
structures modelxiv, identifying potential demand for a proposed product and creating
public interest in new products in the early stages of developmentxv. In addition,
through crowd-funding, the network of potential clients and/or funders can be
expanded, both geographicallyxvi, as well as socially.

Many have detailed potential pitfalls of crowd-funding. The first problem is the
inherent volatile nature of funding projects; unproven services have no guarantee of
success. Another problem is the possible illiquidity and non-existences of a secondary
market, which results in crowd-funding investors being unable to resell or exchange
their investment.xvii The other major concern legislators and securities law are
concerned with is the possibility of fraud through internet-based transaction. The
biggest levers remain government policies. To solve it, just get back to the
crowdsourcing ethos: let everyone participate in the solution and they will get more
engaged. It helps them to think about energy in a completely new way and it will help
them understand how our energy system works.

Crowd-funding holds promise for the developing world, where financing for
renewable energy is hard to come by. There is something very uplifting about crowd-
funding. And renewable energy is one of the most-supported things on the planet.
Combine the two and allow people to go solar in steps and in cooperation with others
for a common good, which is what renewable energy is all about. If we are also offered
nice returns on investment or an opportunity to eradicate energy poverty, as Solar
Mosaic or Gridmates is offering, whats not to love?

i
Agus Sugiono, Anindhita, Laode M.A. Wahid, and Adiarso (Eds.), Indonesia Energy Outlook 2016, BPPT, Jakarta,
2016
ii th
Kementerian ESDM Indonesia, Matahari untuk PLTS di Indonesia, ESDM (Online), accessed 30 March 2017
from <http://www3.esdm.go.id/berita/56-artikel/5797-matahari-untuk-plts-di-indonesia-.html>
iii th
Angel, Investing Hydro and Solar Power in Indonesia, Emerhub (Online), December 2016, accessed 15 March
2017 from < http://emerhub.com/indonesia/investing-hydro-solar-power-indonesia/>
iv th
Vera Andria, The state of Indonesia's renewable energy, UNDP in Indonesia (Online), July 2015, accessed 18
March 2017 accessed from
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renewable-energy.html>
v
Jeff Howe, Crowdsourcing: Why the power of crowd is driving the future of business, Crown Business, New York,
2008.
vi
Linda See, Florian Kraxner, Sabine Fuss, Ian McCallum, Steffen Fritz, Christoph Perger, Christian Schill, Kentaro
Aoki, Sylvain Leduc, Ian McCallum, Nicklas Forsell, The Potential of Crowdsourcing for the Renewable Energy
Sector, Handbook of Clean Energy Systems, Volume 5 (2015), John Wiley and Sons, New York, 2015.
vii
Todd Woody, "Startup Launches Online Platform To Let Individuals Invest In Solar Projects", Forbes, January 2013
viii
Andrew Herndon, "Solar Mosaic's Crowdfunding Beats Treasuries With 4.5% Return", Bloomberg, January
2013
ix
Lisa Hymas, "Solar crowdfunding project Mosaic sells out in under 24 hours", Grist, January 2013

x
The Hellenic Initiative, THI Annual Report 2016, The Hellenic Initiative, New York, 2016, pp.63
xi
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xii
O.M. Lehner, Crowdfunding social ventures: a model and research agenda. Ventur. Cap. 15, 289e311 (2013).
xiii
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Crowdfunding Platforms, 2009.
xiv
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xv
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http://dx.doi.org/10.1016/j.jbusvent.2013.06.005.
xvi
A. Agrawal, C. Catalini, A. Goldfarb, The Geography of Crowdfunding, 2011
xvii
Shekhar Darke, To Be or Not to Be A Funding Portal: Why Crowdfunding Platforms Will Become Broker-Dealers,
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