Energea Review: Invest in Renewable Energy With Only $100
Energea is a solar energy crowdfunding platform that lets you earn cash while offsetting your carbon footprint. Learn if it can help you make an impact against climate change.
SustainFi November 17, 2021
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Rating: Good (4.0 / 5)
- Investment Type: equity in renewable energy projects
- Minimum Investment: $100
- Target Return: varies by project, from 6-8% for U.S. projects to 14-16% for Brazil projects
- Liquidity: your money is locked up for at least three years
- Open to non-accredited investors
- Investor fees: 1-2% fee on dividends; 20-30% carried interest fee
- Low minimum investment
- Attractive advertised returns
- Open to non-accredited investors
- High returns are not guaranteed
- Must hold your investment for at least 3 years
- Construction risk
- Country and foreign exchange risk in Brazil and Africa
- High fees
What is Energea?
Energea is a clean energy crowdfunding platform that lets you invest in renewable energy starting with only $100. Although in the past, clean energy projects were only available to professional investors, Energea makes them accessible to everyone.
If you invest with Energea, you get equity in solar energy projects. These projects are expensive to build but don’t cost much to operate. So once you’ve helped fund a project, you collect payouts as it sells energy to customers like electric utilities. Electricity is sold under long-term contracts, and the biggest expense is rent to the landowner, technical maintenance, taxes, and admin. It’s like investing in real estate that gets rented out and collecting rent.
Similar to other crowdfunding platforms, you are investing in projects picked by Energea, not in Energea the company. You will own equity shares in a Delaware entity that owns renewable energy projects. As projects start to sell electricity and make money, the cash will be sent back to the entity and then to you.
However, you must hold on to your investment for at least three years. After that, if you want to sell your investment, Energea will try to buy it back according to the terms in the offering documents.
New York-based Energea has $100 million in assets under management from individuals and institutions. According to the company, it realized a historical annual return of 11.5%, though future returns are, as usual, not guaranteed.
What projects can you invest in?
Energea currently offers three renewable energy portfolios with different risk and return profiles. The team screens the projects in each portfolio with the help of third-party experts.
So you are investing in a portfolio, not in individual projects, and Energea may add new projects to portfolios or sell existing projects to improve returns. If you invest today, you will still get the cash from any new projects Energea adds to the portfolio in the future.
Here are the portfolios that were available in November 2021:
Solar in the U.S.A.
This portfolio invests in U.S. solar projects with long-term energy contracts. Its current investments include two projects with a 0.8 MW capacity in Massachusetts and Connecticut. One project is operational, and the other one is under construction. The portfolio targets a 6-8% return, lower than other Energea projects. The U.S. is a more stable place to operate solar projects than the emerging markets, but it offers lower returns.
Community solar in Brazil
The Brazil solar portfolio includes two solar plants with a capacity of 4.8 MW, both under construction. The investment promises a very high return of 14-16%, but Brazil is a much riskier country than the U.S. Investments will also earn money in Brazilian real, exposing you to foreign exchange rate risks.
The African portfolio owns two assets with a 0.9 MW capacity located in Mozambique and South Africa. The estimated return is 10-13%. For this portfolio, Energea has partnered with the Sun Exchange, a South Africa-based renewable energy startup.
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How much can I invest?
If you are an accredited investor, there is no limit to how much you can invest. To be an accredited investor, you must earn at least $200,000 a year for two years ($300,000 for couples) or have a net worth of at least $1 million, excluding your primary residence. If you don’t meet the criteria, you are a non-accredited investor.
Energea’s crowdfunding projects fall under SEC Regulation D 506(b) and Regulation A+. The SEC limits how much non-accredited investors can invest in such projects to the higher of a) 10% of their net worth, or b) 10% of their annual income.
Investing with an IRA
You can also invest through your IRA if you sign up through a service like Rocket Dollar. Energea is one of their partners.
What fees does Energea charge?
Energea charges two types of fees:
- Management fee: 1-2% on dividends charged each month. (If there are no dividends, there are no fees)
- Carried interest fee: 20-30% on returns above a specified benchmark
Many crowdfunding platforms charge fees based on the percentage of the amount an offering raises. So they are incentivized to list as many projects and not care about their success down the line. Not so with Energea – Energea gets paid if the project is successful and pays dividends. So their incentives are aligned with yours.
Is Energea safe?
Like with other crowdfunding investments, returns are not guaranteed, and you can lose your entire investment. Alternative investments like energy projects are not insured by the FDIC or SIPC.
Projects under construction can always experience delays, or higher costs, delaying the time when you start getting paid.
Although U.S. solar projects are safer (and pay much lower returns), solar projects in Brazil and Africa are subject to country risk, too. If construction disputes arise, a weaker rule of law offers less protection to foreign investors.
Once projects are operational, they pay dividends in foreign currencies, like the Brazilian real. Because you invest U.S. dollars, if the Brazilian real drops in value versus the U.S. dollar, your returns will suffer. Besides, utility customers in emerging markets may be less stable and more likely to default than U.S. customers.
Finally, Energea requires that you hold on to your investment for at least three years. After that, they will make all reasonable efforts to buy the stock back from you. If that fails, they will offer the stock to other investors in the Energea community. But there is no 100% guarantee that you will be able to sell your shares.
Energea is one of the very few options to let you make investments to address climate change and earn a return. However, alternative investments, especially in Brazil and Africa, can be highly risky, so don’t invest the cash you can’t afford to lose.
🔔 Looking for other ways to invest with impact? Check out our green crowdfunding guide.