German solar-as-a-service provider Ecoligo has raised €10 million to expand its operations and develop its digital platform for retail investors.
- Ecoligo enables retail investors to back solar-as-a-service projects in emerging markets across South America, Africa and Asia.
- The adoption of renewable energy systems is currently limited by market barriers including high upfront costs, capital constraints and technological uncertainty.
- Business model innovation and the mobilisation of alternative sources of capital will be crucial in driving the global energy transition.
Berlin-based Ecoligo has closed a €10 million funding round from FRV-X, the venture division of sustainable energy solutions developer Fotowatio Renewable Ventures.
It will use the latest investment to strengthen its presence in existing markets, which include 11 countries across South America, Africa and Asia, and to further the development and expansion of its digital impact investing platform.
Ecoligo claims both cost and carbon savings
The company sets up solar-as-a-service projects in emerging markets, financed by retail investors. It claims that it has already implemented 169 projects with a combined output of 82.4 MWp, financed by 3,983 retail investors to the tune of €26 million.
Ecoligo adds that these projects have saved its 134 business customers approximately €248 million in total, and that the developments it has agreed so far will contribute to CO2 savings of over 1 million tonnes.
Chief executive Martin Baart said: “With FRV-X we have found the perfect partner to enable even more companies in emerging markets to access clean energy. Through the alliance, we will not only be able to grow even more, but offer more people the opportunity to contribute to the global energy transition through private investment.”
Driving the energy transition with business model innovation
Ecoligo’s solar projects operate under an energy-as-a-service model. Its installations are tailored to the needs of individual businesses, which pay a monthly fee for the energy they consume as well as maintenance and performance monitoring. A variety of pricing models are available, with contracts spanning between three and 20 years.
Energy-as-a-service models allow customers to avoid the upfront capital investment of installing renewable energy systems, with the providing company maintaining its ownership of the technology itself.
As their revenue depends on system performance, the provider is incentivised to eliminate downtime and install the best available solution for each customer.
Such models can help to address market barriers to the adoption of renewable energy, such as high upfront costs, capital constraints, information barriers and uncertainty about a technology’s performance. Service providers, meanwhile, gain access to a recurring revenue stream that enhances the stability and future capabilities of their business.
As population growth, urbanisation and the rapid emergence of new businesses in developing markets contributes to an increase in energy demand, there is a clear need to accelerate the adoption of renewable options. In many of these areas, however, access to electricity is limited and millions of people continue to rely on petrol or diesel generators as their primary source of power.
By lowering the most common barriers to energy transition investment, solar-as-a-service models could provide a crucial solution.
Leveraging retail investment in sustainable solutions
Ecoligo’s online platform allows retail investors to support its solar projects with a minimum contribution of just €100. The system is free of traditional investment fees, and offers investors a range of different options including partnership with institutional lenders and the ability to filter projects by country, industry, loan tenor, interest rate or long-term sustainable impact.
This approach provides retail investors with full transparency, enabling them to make decisions that align with their values while also gaining their desired financial returns.
Pay-outs are made on an annual basis, comprising both direct loan repayments and added interest. According to the company, 100% of its repayments to date have been made in full and on time.
The retail investment sector has grown rapidly in recent years, with a 2022 report from S&P Global (NYSE:SPGI) finding that retail ownership had increased across all market caps and sectors since 2020. Its analysis found that the energy industry was leading the way, with an average growth in retail investment of 7.2%.
According to Standard Chartered (LON:STAN), 40% of retail investors are prioritising their decisions based on climate change and carbon emissions. If retail investment in key growth markets was made clearer and more accessible, it estimates that around $8.2 trillion could be mobilised towards sustainable development.
Traditional investment vehicles, meanwhile, are facing increasing backlash for their lack of transparency around sustainability claims. The diverse interpretation of the criteria used to classify sustainable investment opportunities has contributed to investor concern and increased regulatory scrutiny.
With almost a third of the investors surveyed by Oxford Risk in 2022 reporting that their wealth managers did not address their responsible investing preferences, the demand for transparent investment opportunities such as is offered by Ecoligo seems set to rise.
Retail investment in innovative service businesses could accelerate the global energy transition
By leveraging the growth of retail investment and transparently disclosing the sustainable impact it supports, Ecoligo appears to be well-positioned to continue the expansion of its business.
In addition to its supply-side support, the firm’s service-based model will increase its attraction on the demand-side by providing low-cost renewable energy while removing the risks of upfront capital expenditure and technological uncertainty.
As such, Ecoligo serves as a prime example of how business model innovation and emerging financial mechanisms can help to accelerate the global energy transition.