The U.S. renewable energy industry finds itself in a strange position.
Large-scale projects, like SunZia, the southwest wind project expected to provide enough electricity to power three million homes, are financed relatively easily thanks to long-established relationships with financial giants. Meanwhile, small-scale installations such as rooftop solar panels are becoming increasingly cheaper to implement.
But consolidation in the energy sector is making it increasingly difficult for mid-sized projects to get the financing they need. These companies, typically worth less than $100 million, are too expensive for ordinary people to afford, but too small for financial heavyweights to be interested.
This is where Plural Energy comes in. The two-year-old tokenization company allows mid-sized renewable energy projects to raise funds from on-chain investors, with the dual aim of significantly increasing the number of people who can invest in renewable energy assets. while also developing new types of financial products for the energy sector.
“Right now, the process of raising capital for solar energy is simply unacceptable. We will never meet our climate goals,” Adam Silver, co-founder and CEO of Plural Energy, told CoinDesk in an interview. “[We want] to create a simple button to raise capital for climate-friendly assets.
“By leveraging tokenization, we can essentially unlock all the magic happening in DeFi ecosystems and bring it to an industry that desperately needs financial innovation,” added Silver.
Launch towards plural energy
Investors can access four types of products through Plural Energy. The first is small-scale asset-backed instruments, such as a project consolidating 1,000 rooftop solar installations into a single security, which is then tokenized. The second category is renewables in the development phase, and the third is operating renewables (e.g. pre-existing solar power plants looking to raise additional funds to expand).
The fourth category, Silver said, is “weird stuff,” like a battery that uses artificial intelligence (AI) for commerce, or the Bitcoin (BTC) mine being built by Sangha Renewables on a solar power plant of West Texas operated by an energy company. . “Things that are a little out of the ordinary for traditional infrastructure investors, but really cool for everyone,” Silver said.
So far, the majority of these projects have involved solar power in one form or another, but Plural has also looked at wind-based initiatives and even a hydropower deal.
Yet these projects did not get past Plural’s due diligence. To date, a total of five deals, worth $40 million, have been given the green light to raise funds through the platform. Only 5% of Plural’s planned deals come to fruition, but that hasn’t deterred demand for the platform, which currently has about $150 million, spread across a dozen assets, to onboard in the coming months. come.
“When a renewable energy company approaches us, we put them through our broker-dealer due diligence process, and then we also perform due diligence on the assets,” Silver said. “We are making sure that this is an asset that each of us would feel comfortable investing in personally.”
While brokers are responsible for making sure investors aren’t getting scammed, they aren’t necessarily responsible for making sure something is a good investment. Still, the Plural team insists on only presenting deals it has confidence in, Silver said.
The very first project lit by Plural took six months to complete the process from start to finish, from tokenization agreement with Plural to a live tokenized security offering. This deadline has now been reduced to six weeks.
Plural’s business model and technologies “open the capital markets to the most sensible pool of investors, streamline the fundraising process and provide transparency to all parties,” said Spencer Marr, president of Sangha Renewables, at CoinDesk.
Investing through plural energy
Once they receive the green light, Plural issuers can choose the types of securities they want to offer, such as common stock, interest-bearing convertible notes, or unsecured convertible notes. Each of these security instruments receives a unique token in the back-end. Investors can then choose the type of security they want and receive the appropriate tokens.
But each transaction has its own requirements. For example, one project gave retail investors the opportunity to invest as little as $500 in a portfolio of solar projects. However, in the case of Sangha Bitcoin Mine, the deal is only open to accredited investors, with a minimum investment of $50,000.
Plural is a registered transfer agent, which means it maintains ownership documents, called cap tables, of projects financed through its platform. In the Plural system, each tokenized security gets its own on-chain cap table, the data from which is then cross-referenced with a Know-Your-Customer (KYC) database to generate an SEC-compliant cap table.
“The only way to change who owns what [in the project] it’s by changing who owns which token. So the original source of the action and movement is on-chain, and then it gets recorded in this off-chain database,” Silver said.
The code behind Plural’s transfer agent protocol is already open source, he added, and the company also plans to release its transfer agent standard operating procedures. “We shouldn’t have a regulatory gap in having a transfer agent license,” Silver said. “This should not prevent people from accessing tokenization.”
Originally built on Base but now expanding to other EVM-enabled networks like Avalanche and Arbitrum, Plural offers a variety of payment options including MetaMask, credit cards, ACH payments, and wire transfers. Although the company focuses primarily on U.S. investors, Silver said Plural is attentive to international investors seeking exposure to the platform’s assets.
“Our first deal was for Canadians and Europeans, but just because we got them doesn’t mean it’s enough,” Silver said. “We have an opportunity to provide international investors with a much cleaner, higher quality investment experience that could perhaps simplify their regulatory burden in the United States and then their tax burden.”
Green Energy Tokens in DeFi
Blockchain technology not only allows Plural to access a wider range of investors; it also allows innovation in terms of the platform’s payment systems.
One area the eight-person team is focusing on is using smart contracts to simplify payment terms, or how a given project distributes its revenue. For example, waterfall distribution schedules can allow the project to transfer 98% of dividends to investors up to a certain threshold, then split the rest equally between the investor and the issuer.
“With smart contracts, the headache of administering and calculating all of this completely disappears,” Silver said. “Now our issuers make a single payment in Plural, then smart contracts automate all distributions according to business rules.”
Better yet, Plural’s smart contracts track the trading of these tokenized securities, meaning if an investor holds the token for the first 10 days of a month and then sells it to someone else for the next 20 days remaining, the first investor will receive a third. of the dividend, while the second will receive two-thirds. “We’re able to get closer to that finance in real time and just remove all that administration,” Silver said.
This opens up the possibility of using tokens issued by Plural in the broader crypto economy, particularly in decentralized finance (DeFi). Investors could potentially deposit their tokenized securities as collateral in the same way that on-chain market participants already use ether (ETH), stablecoins, and various other cryptocurrencies. “It’s just a more usable product if you can borrow,” Silver said.
Assets tokenized by Plural could also end up being traded on decentralized exchanges, which would help provide them with liquidity. “I don’t think it’s going to be easy, but I think figuring out how to take these liquidity principles and integrate them into Plural is huge and could happen hopefully soon.”
Ultimately, Plural’s assets could even end up spawning their own derivatives, and even splitting the interest generated by the tokenized security in a similar way to the DeFi Pendle protocol.
“Either my kids or my grandkids or me, I hope so, I really think we’ll get to a point where it’s going to be quicker to move from cash to clean energy assets than between checks and savings accounts,” Silver said.
