HI Community Reinvestment Corporation, HI Alliance of Nonprofit Organizations, Blue Planet Foundation & Camp Mokuleia are proposing to create a Nonprofit Energy Financing Program with a crowd-funding platform. This public – private funding alternative will enable nonprofits to install solar systems in a financing structure that will monetize tax credits while enabling the nonprofit to own its system in as little as six years, maximizing the potential long-term savings for the organization.

Please describe your innovation?

The Nonprofit Energy Financing Program will combine capital from Tax Credit Investors, grants, and crowd-funders into a financing structure that will provide decent returns for the Tax Credit Investors and the return of investment to the Crowd-funders, while providing an affordable financial model for the nonprofit organization. Crowd-Funders will be a critical piece of the financing structure with their “investments” coming either from the nonprofit’s “community of stakeholders” and/or socially minded individuals who would like to create a more sustainable Hawaii. While initially, the Crowd-funder(s) will not be able to earn a return (in the form of interest or dividend) on their investment, they will get their initial investment back. Further, we expect to be able to offer a return on investment for Crowd-funders in late 2012 or early 2013 when the Securities and Exchange Commission revises its policies based on current Crowd-funding legislation.

What is the problem or situation that your innovation seeks to address?

Nonprofits are particularly vulnerable to the rising costs of electricity. Further aggravating the situation is the nonprofit’s inability to take advantage of energy tax credits, making the purchase of solar systems even more unaffordable. As such, there are currently a handful of Investors who are financing nonprofit PV installations, through a Power Purchase Agreement (PPA) with a substantial (“Venture Capital” type) return on investment. The proposed Financing Program will leverage innovative funding sources to underwrite energy efficiency/renewable energy installations and provide below market financing, enabling nonprofits to enjoy immediate energy savings. In year 6, the initial financing structure will collapse and the nonprofit will own its energy system, with a low-cost loan for a margin of the initial project cost. By Year 10, the nonprofit will own the system outright, which will provide them the opportunity to enjoy substantial energy savings over the long-term.

What effort have you made to test out your new idea?

Extensive discussions with potential program partners, including tax credit investors, energy contractors and other nonprofits to vet the financing structure. Also, initial discussions with the state to provide the seed capital underlying the financial structure, have been positive. This funding source will enable us to leverage public capital to mitigate tax credit investor risks, which will in turn, lower the cost of capital to the nonprofit. We will be incorporating a crowd-funding platform similar to Solar Mosaic (www.solarmosaic.com). Similar, yet different, our Financing program will leverage funds from a variety of sources and create a long-term sustainable financing model while expediting energy installations to convert our nonprofit segment to clean energy. With the proposed financing model, we will be able to circumvent SEC investment regs and implement/launch our crowd-funding platform. Solar Mosaic is an example of a similar model that works, which provides a high level of confidence that it can be duplicated and incorporated into our Financing Program.

What is particularly noteworthy or novel about your innovation?

Utilizing our crowd-funding model, nonprofits can engage their “community of supporters and stakeholders” to invest in their solar installations and get their money back. In the current “nonprofit” giving model, a supporter gives a donation. With this model, the supporter will provide an “investment” which he will receive back over time. In addition to receiving his investment back, the other ongoing benefits/impacts of this financing structure is noteworthy. The nonprofit will save thousands of dollars in its electric bill; the state will decrease its dependence on fossil fuels and we will all enjoy reductions in CO2 emissions. Particularly noteworthy is that instead of consuming capital, this financing structure will recycle and reinvest capital, which will enable long-term sustainability. Of addition interest is, this model can be scaled and replicated for AOAO (multi-family property owners and even for-profit businesses that currently does not have the capital required to invest in its own conversion to clean energy.

What impact do you expect your innovation will have on the problem or situation described in the previous question?

We conservatively estimate that there are approximately $125.0 million in energy efficiency/renewable energy projects for the nonprofit segment statewide. The need is urgent and there is ample demand for this type of financing program. The hard dollar impact to the nonprofits will be tangible, as will the environmental impacts for the state and our communities. Additionally, instead of relying on the typical nonprofit model to finance the purchase of a large fixed asset - - also known as a “Capital Campaign,” this financing model will enable the nonprofit to install energy retrofits with either no capital campaign requirement, or a small call to their membership/constituents to provide an investment (which will be returned to them) of approximately 20 to 30% of the total project cost. With this model, we will be relying on the financial power of the “masses” and further alleviate the reliance on typical nonprofit funders (Foundations, Government, etc.)

What other community partners will you need if your innovation is to scale beyond your organization?

Partnering and collaborating is at HCRC’s core as it was created in the spirit of collaboration over 21 years ago by a public-private partnership of the Federal Reserve Bank of San Francisco, City & County of Honolulu, and local financial institutions. This project is a collaboration of the Blue Planet Foundation, Hawaii Alliance for Nonprofit Organizations and Camp Mokuleia. Other natural partners would include the state of Hawaii, Energy Contractors, Tax Credit Investors, KANU, Hawaii Energy, KIUC, and our community of potential crowd-funders.

Why are your organization, partners, and key personnel suited to take on this project?

HCRC has been financing community development for over 21 years. It possesses the technical skills needed to underwrite this financing program. It also has an infrastructure in place required to support this financing structure. HCRC is also the administrator for the State’s GreenSun Hawaii program, an energy financing program. We will leverage this existing program to expand on the proposed financing program. Blue Planet Foundation is committed to ending the use of fossil fuels in Hawaii. It works towards developing programs that provides effective energy solutions, while providing educational outreach and advancing public policy. Blue Planet possesses the energy related expertise and relationships within the energy industry needed to launch and implement the program. HANO unites and strengthens the nonprofit sector as a collective force. As an advocate for nonprofits statewide, HANO will have the ability to reach out to its members in a manner that they understand and with an organization that they trust.