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One U.K. startup is taking a radical step in renewable energy: crowdsourcing the funds to build its infrastructure from its future customers.
Ripple Energy appears to be taking advantage of the growing public interest in alternative energy as it approaches its goal of raising just under $1 million. Hitting the target would mean beating the odds, since well over half of crowdfunding campaigns end in failure.
As of May 14, the company raised over £600,000 out of its £750,000 goal.
“People are impatient, they want it to happen now,” says Sarah Merrick, the founder of the company in an interview with Karma Network.
Ripple’s crowdfunding campaign seeks to sell a 23% stake in the company. The campaign aims to sell equity in the company itself, and Ripple expects to be able to launch its first wind farm project for consumer ownership later in 2019.
Ripple, led by 41-year old Merrick, says the company will sell affordable wind-generated electricity to households while building its own generator.
Environmentalists have praised London-based Ripple’s effort to produce clean power and reduce carbon emissions. But the company is going up against the U.K.’s Big Six, including British Gas and E.ON, with a funding model that has failed more often than succeeded.
“There’s nothing negative in crowdfunding, it’s just that not all of them are winners,” Matt Chester, energy analyst for Chester Energy and Policy in Washington, D.C.told Karma Network. He believes that even the 20%-to-40% success rates claimed by crowdsourcing platforms are inflated.
‘Tapping Into the Zeitgeist’
Merrick credits the investor interest to public demand for cleaner energy and a faster shift away from carbon-based fuel. In the U.K., that movement has resulted in as much or more electricity being produced by renewable energy like solar and wind as generated by coal, oil and gas.
“We’re getting a fantastic response from the public,” she said.
Merrick and other company executives have met with government officials and she foresees no major regulatory hurdles. As far as things that keep her up at night as the company launches, she says, “Cash flow is key for us.”
Some investors may find the Ripple model confusing or be concerned that it is still in the planning stage.
It hasn’t sold a watt of power yet and has only four employees, including Merrick. Its website states, “We’re launching our first wind farm soon.”
The ownership model is not quite as straightforward as a statement on the site that declares, “We will enable you to own part of an onshore wind farm to supply your home with clean, low cost electricity.” In fact, Merrick told Karma that the company won’t supply energy directly to customers, but through partners.
Ownership would come in the form of membership in a Community Benefit Society, a collective that operates under U.K. government guidelines. Once they join and become customers, Ripple will connect them to a supplier that will provide electricity from a wind farm.
Funders will receive a stake in the company, not the planned wind farm, which is declared on the crowdfunding page. Still, a video says that Ripple will enable every U.K. household to collectively own wind farms, and there’s text saying its goal is to enable people to own large-scale wind farms.
Still, the timing is right for the company’s offering, according to Emma Pinchbeck, deputy chief executive for RenewableUK, a not-for-profit trade association that promotes renewable energy.
“Ripple is tapping into the zeitgeist by meeting a double demand from consumers who want to do the right thing for climate change while keeping their electricity bills low by investing in onshore wind,” Pinchbeck wrote in an emailed statement.
“Climate change is a huge risk, a huge concern,” Merrick said. “People want to act on climate change and we want to give them a really easy way to reduce their carbon footprint.”
The U.K. public’s interest in renewable energy is growing, Merrick said, fanned by recent events like David Attenborough’s BBC documentary on climate change, U.K. protests by Extinction Rebellion and 16-year-old Swedish activist Greta Thunberg .
“Climate change hasn’t been on people’s lips as much as it is at the moment,” Merrick said.
Merrick says the campaign proceeds will pay to develop its platform, the interface where the public logs in, joins the company and buys electricity. The cash will also fund a marketing campaign and technical staff.
For social impact investors who are also committed to investing in profitable businesses, this approach may not cut it.
Phil MacDonald, acting managing director for Sandbag Climate Campaign, a U.K. think tank, said that he’s not familiar with Ripple, noting the model of cooperative ownership and crowdfunding in pursuit of green energy sounded interesting.
Chester said that even if the plans don’t work out, the company will have succeeded in creating a buzz. And that’s why some companies take a shot in the first place, he said.
“It feels good to invest in renewables, and the wider social impact is valuable to a lot of people,” Chester said. “People may be willing to take the risk because if it fails, it was for something positive.”
Ripple’s first wind farm will serve about 800 homes, Merrick said. Merrick told S&P Global she hopes to have 700,000 customers and 22 wind farms in four countries by 2024.
“In terms of our offer, we’ve got a lot of data that suggests this will be popular,” Merrick says. “But until we get out there we don’t have it confirmed.”
Ron Day is an award-winning financial journalist who has covered companies and markets for nearly 20 years at Bloomberg News. He has also covered business news at daily newspapers in New Jersey and a weekly in Oak Park, Illinois.