Community renewables projects w. Raise Green ☀️
Plus why shouldn't throw that banana peel out the window or leave it near the trail
Greetings,
This week I had the pleasure of speaking to Franz Hochstrasser, CEO and co-founder of Raise Green. Raise Green is pioneering sustainable finance and clean energy with its crowdfunding platform for community renewables projects. Franz talks about democratizing clean energy investments, differences with public market vehicles, and building software to allow anyone to lead a renewables project.
On a personal note, I spent this past week hiking in the White Mountains (🔥 pic below). I ate a banana during a mountain biking excursion and threw the peel off the trail without thinking twice about it. It later dawned on me that perhaps I shouldn’t have done that. I share why below 🍌
Brendan
Community renewables projects with Raise Green founder Franz Hochstrasser 🎙️
Before we dive into the conversation, please note that Raise Green is an intermediary regulated by FINRA and the SEC. The information below does not constitute legal, financial, or accounting advice. Raise Green does not make recommendations regarding the appropriateness of a particular investment opportunity for any particular investor. Raise Green is not an investment advisor. Investors must make their own investment decisions, either alone or with their personal advisors.
You have extensive government experience in both energy and climate. Can you talk a bit about your background?
I grew up in California, went to high school in Iowa, went back to California for college, then back to Iowa for the Obama campaign in 2008. Being a field organizer in 2008 was my favorite job because it was such an inspiring time. After that, I didn’t really know what would happen, but it was like being strapped to a rocket. I wound up moving to DC to work on the inaugural committee and eventually found my way into a job in the administration starting at the Department of Agriculture. At the USDA, I worked on the Recovery Act and got money out the door on all the clean energy and agriculture-related projects that went through the USDA. Following that, I worked on the 2012 re-elect campaign in Iowa, which led to me getting called up to the White House to work on the Council on Environmental Quality during the president’s climate action plan. This was the first climate action plan that any US president put forward. There was significant stakeholder engagement around that, some policymaking, and many rules because most of it was done through executive orders and not legislation.
I almost ran out of steam around 2014, but then I got a call from the State Department. They offered me a spot on the office of the special envoy’s team to help out on what ultimately became the Paris Agreement. I couldn’t say no to that.
What led you to start Raise Green?
When Trump got elected, I went back to graduate school at the Yale School of the Environment. I had these two strong impressions coming out of government: individual agency on climate change was lacking—it felt like individual people couldn’t make much of a difference—and we needed more finance flowing into reduced carbon emissions and clean energy. The combination of those two things led me through graduate classes. At Yale, I met some awesome folks, one of which, Matt Moroney, became my co-founder at Raise Green. We kicked around a lot of ideas and arrived at bringing together individual investors that want to put anywhere from $100 to $100,000 to make the world a better place along with giving community leaders the tools, detailed documents, and step-by-step instructions for how to create and finance clean energy projects at the community scale.
What are some of the projects you’ve financed to date via Raise Green?
In total, we have fully financed four deals over the last two and a half years. The first two of those were proof-of-concept projects under the name New Haven Community Solar (NHCS). There is third-party ownership of solar panels, which means NHCS owns the panels. NHCS sells electricity at a discount to the off-taker, a housing and homeless services non-profit called Columbus house. The projects were financed by 126 crowd investors that put up the money through our platform to make the upfront payment. Those investors are now being paid back through dividend payments, the first of which we actually issued intentionally on Earth Day 2020. Those are the two projects, the second one we still believe is the smallest tax-equity partnership flip in the country's history—it’s on an 11kW array. The reason that isn’t done frequently is that the transaction costs are so high. We intended to buy those documents and then make them available through templatization to anyone who wants to follow that lead. The other project we financed on Raise Green is with the National Energy Improvement Fund (NEIF). If you’re going to tackle climate change at the household level, the cheapest kilowatt is the one you don’t use. We started with efficiency and resiliency upgrades through the NEIF selling climate action investment notes. We’ve raised close to $200,000 across two different offerings.
Can you explain the mechanism that allows you to offer discount energy?
The patchwork of US energy policy makes it nearly impossible to answer that question universally across the country. In NHCS’s case, because the solar projects are in Connecticut and under United Illuminating territory, there is a state policy to hit 40% clean energy by 2035. That causes a scenario where you have renewable energy credits, a payment made through the utility company for every megawatt-hour of clean energy generated. The credits supplement the price and make it easier for the developer to afford to give a discount. The laws in Connecticut also allow for third-party ownership, so the solar array on the homeless shelter's rooftop is owned by NHCS, which sells the generation of electricity to the off-taker (Columbus House). Columbus House still pays its transmission and distribution bill, but we give them a discount on their generation, which reduces their utility bill. In reality, they are getting two bills, one of which is from NHCS and the other is from the utility, which is also discounted because they’re using less. The result is cheap, reliable energy for Columbus House.
Outside of Connecticut, are there other renewables-friendly states?
Absolutely. It’s trending towards more and more states where that happens because public utility commissions and legislatures are getting smart about this, recognizing that they can decarbonize the grid by passing progressive climate policy and also save businesses and households money. Right now, there are about 30 states where you can do solar productively. Then there are a few laggards that actually charge you to feed solar generation into the grid rather than paying you for it.
Why would an investor choose a Raise Green project over a public market vehicle?
There are a lot of publicly-traded companies that deal with renewables, many of which exclusively do renewable energy projects. I think those stocks are doing quite well and have not a fully negative beta but interact with the market differently than some of the traditional industries. I wouldn’t say that there is anything wrong or bad about those. I think they are useful and bring large scale capital into the market. The difference is, in those cases, you are investing in a company. If you’re buying stock in Brookfield Energy Partners or Hannon Armstrong, you own corporate equity. If you buy into a Raise Green project, say a solar project, for example, you are buying ownership in a project-specific, local company. There are network advantages that issuers on Raise Green have if they’re raising capital for their solar project because they can raise funds directly from accredited and non-accredited investors. You can also do that in the public market, but it’s extraordinarily burdensome from the standpoint of a small startup trying to building one or two solar arrays at the community scale. Fundamentally, it’s a different value proposition, but we need both without question.
(Re-emphasizing the disclaimer above: this is not investment advice)
Raise Green recently launched the beta version of its Originator Engine. Can you talk a bit about that tool?
The Originator Engine is a software-as-a-service tool. The idea is similar to looking at getting a mortgage in the early 90s. Back then, you would have to go to multiple lenders and figure out the difference in the proposals yourself. Now, you can go online to numerous places and get a bunch of mortgage quotes compared because it does it for you through automation. Raise Green’s approach to project finance is let’s templatize the process of creating your project documents and make it straight forward for someone who wants to become a community leader and actually finance a clean energy project in their backyard or down the street. We give them all the tools that enterprise-grade developers in these public companies have, including investment-grade financial models, templatized legal documents, and information that walks them through the step-by-step process to create, finance, and build their clean energy project. That’s what the software is growing into. It’s currently in beta form, and we encourage you to check it out. We intend to continue its development to make it more user-friendly and expect to launch a full product in 2021.
Who is the target individual or group to start a clean energy project on Raise Green?
There are hundreds of community leaders across the country that want to tackle climate change, either working in non-profit models, donating to non-profits, or working in the burgeoning clean energy industry. But there is still this knowledge gap of how we go through this process of creating these projects, and that’s what we’re trying to get at. We want to give both energy and financial literacy through the experience but come out with something tangible that delivers essential services through electricity or savings from reduced usage in an efficiency project. The other component is that disadvantaged, low-income communities have largely been excluded from ownership of clean energy assets. I hate to say it, but the energy industry is largely pale, stale, and male, and they hold the keys to the kingdom. If we can share these trade secrets and give these tools to whoever wants to use them, we are hopeful that people who’ve been historically disadvantaged can use some of those to rectify that.
How do you consider social impact when vetting a project for your platform?
We have what we call the RAISE model – revenue, ambition, impact, social, environment. We use that as a qualitative screen as the first look at a project. Because these are investment opportunities that we’re bringing to the platform, we need to make sure we feel comfortable that the project will return principal and return on investment to the investors. It wouldn’t make sense for us to list a negative IRR project.
We target a 5% IRR for the baseline of the crowd will go for. For ambition, we are looking for teams or individuals that actually deliver a project and make a difference by doing that. It’s not an easy task, but it can also enable anyone to create their own green job. Believe it or not, there is actually an antithesis to Raise Green called Crude Funders, where you can buy a piece of an oil well, and those aren’t the projects that we want. We want to make sure the project we’re offering our investors has demonstrable social and environmental impacts that reduce carbon emissions through clean energy generation or avoided cost while creating economic opportunity for the poorest and most vulnerable. By democratizing the investment process by putting $50 or $100 into clean energy infrastructure, we feel that’s our way of reaching out and demonstrating that. We do have some analytics of how we measure that. The project's location is important, the team leading it, and the planned scope of what’s being offered and developed.
Interested in impact investing? Check out Raise Green’s investment opportunities on its website, including the current NEIF offering. Interested in starting a clean energy project in your community? Look no further than the Originator Engine!
Climate tweet of the week 🤦
I threw a banana peel off the side of a trail. Don’t be like me 🍌
You’ve probably tossed an apple core or banana out a car window or left it in nature just like I did. But here’s why we should all stop doing that:
Fruit doesn’t decompose as quickly as you think: Without proper composting, non-native fruit matter will take as long as multiple years to decompose fully. At a minimum, food littering can be displeasing to pass by and encourage more littering of all kinds. It can also contribute to the next point.
Attracting animals to heavily trafficked areas can lead to accidental death: This is more so with roadside littering. If animals get used to eating human food waste, they can become unnaturally comfortable around humans. More exposure to humans increases the likelihood of accidental deaths. An example from the National Park Service:
“In Grand Canyon National Park, elk are a common sight along the roads. Naturally, they should be scared of people, and should run away if a person leaves their car and approaches the elk. Unfortunately, this happens very frequently, and the elk have become habituated to people and cars. Every year, many elk are killed in collisions with cars because they have lost their fear of roads.”
Introducing non-native plant matter to an environment is not without consequence: If you toss food waste in a place where it doesn’t naturally grow, you could cause non-native plant growth. This can potentially disrupt delicate ecosystems. While probably not the case with your average banana peel, it’s a good practice to get into nonetheless.
Thanks for reading 🙏 If you have any feedback or want me to research a particular topic, please leave a comment below or send me a note. Also, if you’re not a subscriber yet, you know what to do 👇