Elsevier

Journal of Cleaner Production

Volume 128, 1 August 2016, Pages 142-155
Journal of Cleaner Production

Three is a crowd? Exploring the potential of crowdfunding for renewable energy in the Netherlands

https://doi.org/10.1016/j.jclepro.2015.06.028Get rights and content

Highlights

  • The volume of crowdfunding for renewable energy projects is low, but its dynamic holds potential.

  • There is limited indication of stabilisation of learning across crowdfunding platforms.

  • There is limited support of crowdfunding for renewables from powerful actors.

  • Crowdfunders exhibit a variety of normative, gain and even hedonic motivations.

  • Governmental market support and regulations are shaping crowdfunding as a business model.

Abstract

There is a huge gap between demand and supply of finance for energy transitions, and the financial and economic crisis have had a negative impact in the already meagre funds for transforming the energy system towards renewable sources. In this paper we explore whether crowdfunding for renewable energy, as a novel sociotechnical practice developed in a niche, has the potential to break through and transform both the energy and the financial regimes, utilising the Multi-Level Perspective theory. We empirically investigate crowdfunding platforms linked to renewable electricity projects in the Netherlands. The main conclusion is that the volume of crowdfunding today is low, but the dynamic of these projects holds potential. There is limited indication of learning processes until now, as well as limited support from regime actors, pointing at a low level of niche stabilization and break-through potential, which may however be related to the early stage of development of crowdfunding in the Netherlands. On the other hand, the heterogeneity of crowdfunders is very promising. Platforms dedicated to renewable electricity exclusively, and with an investment based business model seem to be the most successful. We show how governmental market regulation and support mechanisms are shaping crowdfunding as a business model, and discuss the implications for other countries.

Introduction

Sustainability transitions, large scale changes in socio-technical systems for the provision of needs such as energy, food and healthcare, have been advocated the last decades as solutions to environmental and socio-political challenges: energy security, resource scarcity, and climate change (Geels and Schot, 2010). The nature of these transitions is such that large investments would be necessary, even if the level of this transition is confined within one nation state (Jacobsson and Jacobsson, 2012). Since the financial crisis of 2009, both governmental funding as well as bank investments decreased, with a resulting gap between supply and demand of financial resources for renewable energy projects in different national settings (Creutzig et al., 2014, Eleftheriadis and Anagnostopoulou, 2015, Geels, 2013, Luthra et al., 2015, Suzuki, 2015, Yildiz, 2014). At the same time, especially in the energy market, new business models have emerged to fill in this gap, even though at smaller scales. Business models can be defined as ‘the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities’ (Zott and Amit, 2010) (p. 219), and they are a means to market new technologies like renewables (Chesbrough, 2002, Zott et al., 2011).

Many of these models are based on the direct participation of the energy user in energy production: for instance citizens owning shares in solar PV installations (Huijben and Verbong, 2013). More recently, some of these models are based on crowdfunding, defined as “the collective effort by people who network and pool their money together, usually via the internet, in order to invest in and support efforts initiated by other people or organizations” (Ordanini et al., 2011). Crowdfunding is not new – it builds upon previous models, such as cooperatives, or microfinancing; but the recent use of social media has given a tremendous boost to crowdfunding and enabled new forms (Harrison, 2013). Different forms of crowdfunding exist, including donation, lending and reward systems where investors are rewarded with a token.

Our starting point in this paper is that crowdfunding as a business model for renewable energy projects might not only financially shape energy transitions, by, for instance, tapping into financial resources of users, at a time of scarce bank loans after the global financial crisis (Tomczak and Brem, 2013), but can also increase societal support for renewable energy as users and citizens become more actively engaged in energy systems. This can potentially translate in political support. As such, crowdfunding can shape positive feedback loops between technological, market, social and political dimensions of energy system transformation.

Indeed, the growth rates of crowdfunding have been impressive (Tomczak and Brem, 2013). Even though systematic figures are scarce, there is an estimated $2,7 billion raised worldwide, in different types of platforms, with $1,6 billion in North America, $945 million in Europe, and 110 million in the rest of the world.1 In 2014, €12,5 billion was crowdfunded worldwide, with €7,3 billion in North America, €2,5 billion in Europe, and €2,6 billion in Asia.2

The Netherlands offers an interesting case of crowdfunding in many respects. The Netherlands ranks 4th in the world in number of CF platforms (2012 data).3 Structural conditions are very favourable: internet access is among the highest in the world, and there is a very successful online payment system called iDEAL.4 Indicatively, €63 million euros were crowdfunded in the Netherlands in 2014 in more than 2000 projects.5 This represents 3.75 euro per resident, somewhat lower than the United Kingdom, but above average in continental Europe (less than 1 euro per citizen).6

The Netherlands is also an interesting case from the point of view of renewable energy transition. While it has been among the pioneer countries in the discourse around sustainability transitions (Markard et al., 2012), the actual practice in terms of renewable energy is lagging behind other countries, as a result of low levels of governmental support and turbulent public policies (Huijben and Verbong, 2013, Verbong et al., 2008). In 2013, the share of renewables to the total use of electricity was 10%, including hydro, wind, solar, biomass and biogas.7 Recently, the number of projects where citizens joined forces and, through different forms of collective action, together enabled PV and wind implementation has seen substantial growth rates (Doci et al., 2015, Huijben and Verbong, 2013). This suggests that in the Netherlands there is great need for new business models for renewable energy such as crowdfunding, and the country has favourable facilitating conditions in place.

Our paper explores crowdfunding for renewable energy projects in the Netherlands as a novel socio-technical practice developing in a niche, with the aim to evaluate its potential to upscale and transform the energy and financial regimes. Our main research question therefore is:

“To what extent can we see evidence of crowdfunding for renewable energy projects having stabilised as a niche and having the potential to break through the energy and financial regimes?”

Section snippets

Novel socio-technical practices

We position our paper in the sustainability transitions literature, and in particular in relation to one of the field's key frameworks – the Multi-Level Perspective (MLP). The multi-level perspective explains long-term transformations as interactions between socio-technical regimes, broader landscape developments and innovative niches (Geels, 2002). Socio-technical regimes are the incumbent path-dependent structures such as institutions, networks and infrastructures that stabilise the provision

Methodology

Drawing from previous studies (Doci et al., 2015, Geels and Schot, 2007) we study the proxies indicated in Table 1, below. Even though these proxies have been used previously (Doci et al., 2015, Seyfang and Haxeltine, 2012, Seyfang and Longhurst, 2013), there is no benchmarking available for any of these. Instead the assessment of these proxies is generally based on thick description (Creswell, 2009).

Our empirical material is based on an overview of all online crowdfunding platforms in the

Scale

From Table 2 we can see that the total amount of money invested or donated to renewable energy projects through crowdfunding over the last 4 years13 is about €15.6 million, which is only a small fraction of the needed investments for the Dutch electricity system to switch to renewable sources.14

Conclusions and discussion

This paper has reviewed crowdfunding initiatives in the Netherlands as an alternative source of finance in energy transitions. Our research question was: “To what extent can we see evidence of crowdfunding for renewable energy projects having stabilised as a niche and having the potential to break through the energy and financial regimes?” We can now draw the following conclusions (summarised in Table 3).

First, our analysis suggests that crowdfunding is far from routine practice. We have found

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