In the U.S., our energy system and our financial system have always run in tandem.
The first business lit with incandescent bulbs was J.P. Morgan’s original financial company, located at 23 Wall Street. None other than Thomas Edison himself was on hand to flip the switch. Fast-forward to the present and it’s no coincidence that a few major interests dominate both the financial and the energy industries. The sheer scale of our energy system—billion dollar coal plants, globe-spanning supply chains—requires massive banks. The profits from our energy system, in turn, help make our biggest banks even bigger.
Obviously, this situation isn’t working out so well for most of us. Our pension funds might provide for our personal futures, but they’re harming the futures of our children, our communities, and our planet. Our places of worship and universities channel their endowments to investments that no religious leader or ethics professor would ever recommend. Meanwhile, because our financing institutions are structured to make loans to a few large energy projects, there’s a major financing shortfall for the many smaller, distributed energy projects we really need.
The point is: if we want a new, clean energy system, we’re going to have to build a new financial system.
The divestment movement is one amazing step in the right direction. But after divestment comes the equally challenging work of reinvestment. Our major financial institutions are going to continue to favor big loans for big energy projects. Opening up new pathways of investment for things like wind, solar, or energy efficiency—investments that we can move our money into as we get out of fossil fuels—is a major challenge of our time.
The graphic below shows how one model is faring. At Mosaic, we’re currently in the process of raising funds for the largest solar project loan we’ve ever offered. So far, 823 investors from 42 states have put over $1M to finance a project that will produce enough solar energy to power 50 American homes every year.
Mosaic is just one of the many new investment models we’ll need to get to a brighter future. But the graphic below does give some sense of what the new energy-finance system might look like. Call it distributed finance for distributed energy. Or, call it people power.
Michael Parks is a Blog Editor at Mosaic, a solar financing marketplace, and a Masters graduate of the Yale School of Forestry and Environmental Studies. He believes giving people a way to invest in solar power is the best way to get them to vote for it.