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Published on July 15th, 2013 | by Guest Contributor


From Thomas Edison & J.P. Morgan To Solar Power & You

This article was first published on Medium.
By Billy Parish, Co-founder of Mosaic

The first person whose home blazed with electric light was J.P. Morgan. The financier also owned the first business lit with incandescent bulbs. In the latter case, Thomas Edison himself was on hand to flip the switch.

Edison needed funders like Morgan, and later the Vanderbilt Family, because he was launching an endeavor that required huge capital expenditures. He was establishing the groundwork for the electrification of a planet, and to accomplish his goals he needed big finance.

Fast forward to the present: J.P. Morgan Chase is now the world’s second largest financial company, General Electric is the world’s third largest company of any kind, and the U.S. electric grid is the largest machine ever built.

Our energy system and our financial system have always run in tandem. The two grew up together and they have played off of each other to become history’s largest and, arguably, most centralized industries.

With that in mind, let’s turn to a question that many people are asking these days: how do we get off of fossil fuels? How do we reinvent our energy system so that it doesn’t completely wreck our planet?

Plenty of modern-day Edisons are already on the job. Twenty-five year old Danielle Fong is revolutionizing how we store energy. Elon Musk has built an electric sedan that Consumer Reports recently called “the best car we’ve ever tested.” Tony Fadell, who designed the first 18 generations of the iPod, is now running Nest, a company that aims to save the world by reimagining the thermostat and home electronics.

crowdfunding solarBut if we look back to the beginning, we see that energy innovations are only half of the solution we need. If we want a new energy system, we’re going to need to build a new financial system too. Who will be the modern-day Morgans to our modern-day Edisons?

One answer is: You.

And me.

And everyone we know.

Here’s the story….

The Big Shift

Think of the challenge of transitioning to clean energy as a massive capital misallocation problem. We’ve spent a lot of money building a global system of fossil-fuel power plants, electric grids, mountaintop exploding bombs, ten story tall shovels, 5,000 foot deep wells, hydraulic fracturing rigs, arctic icebreakers, and…the list goes on. Shifting the world onto a clean energy path means shifting massive amounts of money towards investments in a whole new energy infrastructure.

The key word here is “investment.” In recent years, costs for technologies such as solar and wind power have plummeted, while the costs associated with all of our fossil fuels have either remained flat or risen. Many experts agree that the task of building a clean energy economy has become one of the best business opportunities of the century.

So why aren’t financiers flooding the clean energy space with capital? Actually, they are. Global investments in new clean energy generation capacity rose 600% between 2004 and 2011. And this year will be the third in a row in which worldwide investments in creating new clean energy capacity exceed investments in fossil fuel energy capacity.

The trouble is: it’s still not nearly enough. To sustain a safe climate, we need to be investing in new clean energy generation capacity at somewhere between three and six times current rates.

We’ll never make that leap with a business-as-usual financial system. In fact, our current financial system is biased against investing in clean energy. That is, it is much better at creating more fossil fuel energy than more clean energy. The “playing field,” as pundits like to put it, is not level. As a result, clean energy developers face a chronic shortage of capital to build their projects.

This shouldn’t be surprising. After all, our largest investment institutions have spent their entire histories learning how to effectively finance huge, centralized energy projects. Our banks have not yet developed—and may never develop—the processes necessary to invest in a new energy paradigm that favors many small, distributed components. Likewise, our financial regulations and legal structures have evolved to facilitate massive pipelines and power plants, not solar panels and home energy upgrades.

To put it simply, our financial system is shaped exactly like the energy system we’re trying to leave behind. So why not create a new financial architecture that mirrors the agile, decentralized, small-is-beautiful energy future we so desperately need?

Signs of Progress

Outside the energy sector, the concept of decentralized finance has already brought about major upheavals in established industries. New web platforms are democratizing investment, destroying old monopolies and creating new approaches to finance that are good for both lenders and borrowers.

Take, for example, recent developments in the art world. Not long ago, artists often had to look to foundations or wealthy patrons to raise funds for new projects. But in a few short years crowdfunding has emerged as a major new facilitator of creativity. Last year, Kickstarter announced that it had channeled more funding to creative projects than the National Endowment for the Arts. Thanks to the web, we have moved from a world in which funding for the arts flows from the top down to a world in which it flows in many directions simultaneously.

Or, for a more radical example, look at the rise of peer-to-peer lending. The consumer credit industry used to be dominated by huge banks and credit card companies. It wasn’t until 2008 that Lending Club facilitated its first $5,000 peer-to-peer loan. Now Lending Club and Prosper have serviced more than $2 billion in loans. These companies are cutting out the middlemen in financial transactions, making it easier and cheaper for borrowers to secure small loans, and profitable for individuals to lend money to other people.

The revolutions underway in financing for the arts and consumer lending point the way to a revolution in financing for clean energy. One difference is that energy is a much larger industry. Democratizing clean energy investment will make it possible for people to directly participate in an immense wealth-generation opportunity—an opportunity to rebuild the infrastructure at the very center of modern life.

Modern-Day Morgans

A vision of distributed finance for distributed energy is already becoming reality. Across the country, communities are finding ingenious ways to finance and build their own local energy projects. Some forward-thinking states and utilities, realizing that it’s better to be ahead of the future than behind it, are starting to pitch in with new laws and policies, too.

My company, Mosaic, is aiming to leverage the power of the web to flood clean energy with a new source of capital. Recently, we went live with our largest project to date—a 487 kW solar array on top of the Wildwoods Convention Center in Wildwood, New Jersey. Investors can put as little as $25 into the project and earn a projected annual rate of return of 4.5% — better than Treasuries, better than most bonds, and on par with the S&P 500 over the past decade.

Each dot in the image above represents one of the 823 people who have so far invested in solar power for the Wildwoods Convention Center. None of these people are industrial titans. The investors in the image above come from every walk of life and from every kind of place.

And yet all of Mosaic’s investors do have something in common with J.P. Morgan. They’re enabling a new energy revolution, just as Morgan enabled the old. By the simple act of investing, they’re helping to secure a better future for our kids, our communities, and the planet. Now, we can all be clean energy barons.

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  • JamesWimberley

    “..the U.S. electric grid is the largest machine ever built.” Since there is as yet no connection between its three regions, and won’t be before 2016, you can’t talk of a single machine.

  • Steeple

    There are Trillions of $ sitting around looking for good projects. There’s no shortage of funding; just not enough opportunities to invest in, at least yet. Investors would much rather have an interesting and promising opportunity vs. leaving capital in Treasuries for 30 years at 2.5%.

  • Ivor O’Connor

    Not sure how accurate this article is when it states things like “Fast forward to the present: J.P. Morgan Chase is now the world’s second largest financial company, General Electric is the world’s third largest company of any kind, and the U.S. electric grid is the largest machine ever built.”

    Search for the terms “largest financial company”, “world’s third largest company”, and “largest machine ever built” may not put any of those terms in the top 5 or top 10 or even on the map. Such claims without references make me think very little of the rest of the article.

    • Bob_Wallace

      Here’s a page that shows rankings of the world’s largest companies by three different magazines.

      On one of them GE is third, on another GE is ninth and GE isn’t even in top ten on the other.

      The article talks a bit about how the different rankings were derived.

      “The Fortune Global 500 list is based on revenues.”

      “The FT Global 500 ranking is based on market value. Market value, or market capitalization….”

      “Finally, the Forbes Global 2000 uses four metrics—sales, profit, assets and market value….”

      So, I’d guess it’s which yardstick you grab….

  • Matt

    While Mosaic is great for people in the 2-3 states it cover, or if you have millions (accredited investor). We need those tools in every state. But the current structure requires a large up front fee to start in each new state and then cost each year. So I guess we need to boot strap up. Run a kick start funding campaign to start a Mosaic like company in each of the other states.

    • Omega Centauri

      Keep trying. Being in California, I didn’t have any trouble getting started. So far I’ve put money into three different projects -in three different states (not one in California yet). What does it take to be an accredited investor? All I remember doing is signing a form saying I wouldn’t be putting more than ten percent of my wealth into any given project. And with a twenty-five dollar minimum, just about anyone should be able to clear that hurdle.

      Now, Mosiac won’t ever be the whole picture, it covers institutional rooftops (and carports). We will also need robust investment in residential, and commercial roofs, and especially utility scale generation and storage. So it is only covering one of several areas of needed investment. But, its a good start. And that investment should help the industry to climb down the cost curve, making these other sectors more attractive to other investors.

      • Matt

        Short version of accredited investor: Take net worth not counting home, if greater than one million dollars; then accredited. May have to leave out IRA/401K/pension plan also, but not sure on that. At any rate not a small investor.

        California is one of the 2-3 states supported by Mosaic, I think the other is New Jersey and/or New York. But this could have changed, it isn’t clear on their website. Or maybe you have to start the process of joining before you can see that. I did notice projects in AZ and CO now so maybe they have added some states.

        Hey “guest contributor” jump in and give correct information please.

        • Zachary Shahan

          I’ll email the folks who passed it on to me. Thanks. :D

        • Lisa Curtis

          Hi Matt,

          It’s Lisa Curtis from Mosaic here. We’re working as hard as we can to open up our investments to more people in more states but getting through all of the different securities regulations in each state is just a very slow process. Currently any resident of California or New York, regardless of income can invest along with accredited investors (more here

          Thanks for signing up and we’ll let you know when we have investments available in your state. We appreciate your patience.

          • Matt

            Lisa, again I really like Mosaic. You are only hearing my frustration at the rate of change. To really have the impact implied above, we need the ability for everyone in the US (world) who wants to, to be able to take part. But with the cost to expand to each state (country) that will be a slow process. I’m on the board of a non-profit program/school in Ohio. To get them in a program like this in the next 10 years, I likely need to start a Mosaic like company for Ohio myself. Which as you know would be no small task.

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