Mosaic the Gennext Solar Energy Funding Model: Interview with the President Billy Parish

Solar Energy is surely the next gen way to go green and save money. There is a lot going on worldwide on this front. A lot of solar projects are being taken up globally. Mosaic is one such platform which brings the investors and the builders together to achieve this objective. Mosaic provides an online marketplace, where the investors who are interested in investing in solar energy can fund projects and collect a profit. With the minimum investment amount being just $25, Mosaic is enabling the most people to benefit from the clean energy economy. Thousands of people from across the United States have already invested millions of dollars to finance solar projects. I got an overview about Mosaic from the President Billy Parish himself.

As answered to Sneha Shah of Greenworldinvestor.com

1. Sneha Shah: What is the mission, vision and objectives of Mosaic?

Billy Parish: Mosaic’s mission is to create the #1 investment platform for the clean energy economy. Our objectives are to finance as many clean energy projects as possible and to make those investments available to individuals and institutions everywhere.

2. Sneha Shah: How does Mosaic differentiate itself from the other solar focused investment funds?

Billy Parish: Mosaic is the first online marketplace to offer solar investments to the public (including non-accredited investors in California and New York), and the minimum investment is just $25. Our job is to structure the best solar on the market and offer them on an easy to use online platform.

3. Sneha Shah:  How do you choose between investors? Are there any conditions for selecting the investors?

Billy Parish: We are an online marketplace that seeks to serve as many investors as possible. Our platform is open to all investors that qualify under SEC regulations.

 4. Sneha Shah:  How do you assign investors to specific projects?

Billy Parish: We do not assign investors to specific projects. Individuals can browse solar projects on our website and choose which ones they want to invest in.

 5. Sneha Shah:  Is there any minimum amount that needs to be invested?

Billy Parish: $25.

 6. Sneha Shah:  What happens if any project does not give the expected returns?

Billy Parish: We haven’t been in that scenario yet, given the rigorous risk assessment that our project team carries out before we offer a solar project to the public (more on this in question 10). To-date we’ve made 100% on-time payments to our investors at the listed expected yield for each project.

We also work with third party partners to thoroughly evaluate the credit history of potential Borrowers. Once we approve a Loan, the Borrower must sign a Loan and Security Agreement that has strong covenants (lender protections) in the event of Borrower default. Moreover, the Loan and Security Agreement gives Mosaic the right to take control of the solar project and all of its associated revenue if the Borrower defaults.

 7. Sneha Shah:  Is Mosaic first of its kind, and where does its future lie?

Billy Parish: Mosaic is the first company in the US to offer solar investments to the public with a return. The financing market for solar projects in the U.S. is estimated to be $50+ billion over the next five years, according to GTM research. Yet few banks have developed capabilities in solar financing and many have too much overhead to effectively manage loans to small commercial projects or portfolios of residential projects. That’s where we step in as an online marketplace that brings liquidity to the solar market and serves as an attractive investment opportunity for retail investors. We have already seen massive take up by the public as nearly all of the projects posted on Mosaic’s marketplace have sold out within a week of being posted.

We’re tracking growth similar to other online investment platforms that have had great success. For example, Lending Club, which had $5M in loans originated 5 years ago, now has $1.7B with $140M new loans per month and projected continued growth at 100% annually. Online marketplaces for solar loans actually have a distinct advantage because solar loans are backed by a revenue producing asset, and counter-parties are paying for an essential service (electricity).

8. Sneha Shah: Is there a lock in period for the funds collected?

Billy Parish: Our loan terms range from 1-12 years. Each of our investment products have different tenors that are posted on the “Browse Investments” page on our website.

9. Sneha Shah: What are the current projects and total corpus of Mosaic?

Billy Parish: We’ve had 14 projects fully funded on our platform, totaling over $3M invested.

10. Sneha Shah: How do you choose projects to invest in, again any criteria?

Billy Parish: Mosaic’s project team (which has over 50 years combined experience in solar project finance and over $1B in combined transaction volume) carefully vets and structures each project to minimize risk. Mosaic has strong underwriting requirements, and we follow rigorous procedures to make sure that we select only high-quality solar projects. Our underwriting process is very similar to the process used by banks in that we work with third party attorneys, engineering specialists, and insurance professionals to review and evaluate each project. Furthermore, we are working with Standard and Poor’s, Dupont and others to standardize the way solar risk is evaluated through the truSolar initiative.

11. Sneha Shah: What is the kind of growth rate being seen by Mosaic?

Billy Parish: Mosaic has over 2,000 investors and is growing at 24% a month.

12. Sneha Shah: What are the prospects of going international?

Billy Parish: We would like to expand internationally and are working towards that goal.

13. Sneha Shah: Which states is Mosaic present in?

Billy Parish: Mosaic has had projects in California, Arizona, Florida and New Jersey and Colorado.

14. Sneha Shah: What are the kind of subsidies and tax advantages that Mosaic gets and passes on to the investors?

Billy Parish: For most solar projects, government and utility subsidies are a critical component of both initial financing and investor returns. In the U.S., the most important government subsidy has been the investment tax credit, which entitles a solar equipment owner to a tax credit equal to 30% of qualified solar installation costs. There are some restrictions as to how the tax credit can be applied for individuals as opposed to entities. For individuals, tax credits may only be used to offset passive income, consisting of income from rental activity or a business in which the taxpayer does not materially participate. Entities however, are permitted to offset all taxable income. To take full advantage of the tax credit, a solar investor must have tax liability that is at least equal to the credit amount, which makes solar projects only attractive to investors that are generating the right type of taxable income. Solar investors can capture the tax credit by acquiring direct ownership interests in solar projects or by investing in a fund that owns solar projects, referred to as a “tax equity fund.”

In 2009, through the adoption of Section 1603 of the American Reinvestment and Recovery Act, Congress created a program under which the owner of a solar installation could receive a 30% cash grant in lieu of an investment tax credit. The Section 1603 incentive provided a much-needed stimulus to the solar industry, reducing the market’s dependence on investors with tax liabilities that could be offset by the investment tax credit. Although the Section 1603 program expired on December 31, 2011, a project may still be eligible for a Section 1603 grant if the developer either commenced construction by December 31, 2011 or took advantage of a “safe harbor” under the program by incurring 5% of the total eligible project costs by the December 31, 2011 deadline. Many developers have safe-harbored significant amounts of project assets to preserve the incentives associated with the Section 1603 program well into 2013.

Some incentive programs such as a production-based incentive, feed-in-tariff or solar renewable energy credit (SREC) contract, provide an additional revenue stream for a Project Owner. Production-based and feed-in-tariff contracts guarantee the Project Owner payments for the energy produced, typically at a rate with an annual escalator over a fixed term. SREC contracts pay Project Owners a fixed amount for one megawatt equivalent of energy production, typically at a fixed rate over a fixed term. These incentives structures have been important in helping Project Owners obtain financing to cover the upfront cost of installation, or use the debt proceeds as working capital towards the development of new projects.

15. Sneha Shah: Any other information that you might want to share with our readers.

Billy Parish: Mosaic is a transparent marketplace, where people don’t need to choose between making strong returns and making a positive social and environmental impact. I think Carol Browner, Former Administrator of the Environmental Protection Agency, described what we do really well when she said, “Mosaic brings the clean energy investment world to everyone’s laptop and smartphone, putting you in control of your investment decisions and providing access to an emerging and exciting clean energy market. Mosaic gives people the power to vote with their money to address climate change by investing in clean energy and earning competitive returns.”

About Billy Parish

Billy dropped out of Yale in 2002 to co-found and grow the Energy Action Coalition into the largest youth organization in the world focused on clean energy and climate solutions. Billy developed a proposal to create a Clean Energy Corps to produce 5 million green jobs, which shaped the American Recovery and Reinvestment Act (ARRA), the largest green investment in U.S. history. He has been honored as a Rolling Stone magazine “Climate Hero,” an Utne Reader “50 Visionaries Who Are Changing Your World” and was elected as a Fellow by Ashoka, the global association of the world’s leading social entrepreneurs. Billy is co-author of Making Good: Finding Meaning, Money & Community in a Changing World (Rodale/Penguin 2012).