The American renewable energy industry is in a strange position.
Large-scale projects, such as SunZia, the southwest wind turbine 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 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 pay for, but also too modest for financial heavyweights to take an interest in them.
That’s 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 goal of dramatically expanding the number of people who can invest in renewable energy assets. and at the same time develop 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] make an easy button for raising capital for good climate assets.”
“By leveraging tokenization, we can basically unlock all the magic that happens in DeFi ecosystems and bring it to an industry that desperately needs financial innovation,” Silver added.
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 that bundles 1,000 rooftop solar installations into a single security, which is then tokenized. The second category is renewables in the development stage and the third is renewables in operation (e.g. pre-existing solar plants looking to raise additional funds to expand).
The fourth category, Silver said, is “weird stuff,” like a battery that uses artificial intelligence (AI) to trade, or the bitcoin (BTC) mine Sangha Renewables is building at a West Texas solar plant operated by an energy company. . “Things that are a little out of the ordinary for traditional infrastructure investors, but are really interesting to everyone else,” Silver said.
So far, most of these projects have involved solar energy in one form or another, but Plural has also looked at initiatives based on wind energy and even a hydropower deal.
However, these projects did not pass Plural’s due diligence. To date, a total of five deals, representing $40 million, have been given the green light to raise funds through the platform. Only 5% of the deals considered by Plural reach the goal, but that has not discouraged demand for the platform, which currently has around $150 million, across a dozen assets, to incorporate in the coming months.
“When a renewable energy company comes to us, we put them through our broker-dealer due diligence process, and then we also do asset due diligence,” Silver said. “We’re making sure it’s like an asset that any of us feel comfortable investing in personally.”
While stockbrokers must ensure that investors are not scammed, they are not necessarily responsible for ensuring that something is a good investment. However, the Plural team insists on presenting only deals it trusts, Silver said.
Plural’s first green-lit project took six months to complete the end-to-end process, from accepting tokenization with Plural to a live tokenized security offering. That period has now been reduced to six weeks.
Plural’s business model and technologies “open the capital markets to the most sensible group of investors, streamline the fundraising process and provide transparency to all parties,” Spencer Marr, president of Sangha Renewables, told CoinDesk.
Investing through plural energy
Once they get the go-ahead, Plural issuers can choose what 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 on the back-end. Investors can then choose what type of security they want and receive the appropriate tokens.
But each agreement has its own unique 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 the Sangha bitcoin mine, the deal is only open to accredited investors, with a minimum investment of $50,000.
Plural is a registered transfer agent, meaning it maintains ownership documents, known as capitalization tables, for projects financed through its platform. Under Plural’s system, each tokenized security gets its own on-chain cap table, whose data 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] is by changing who owns which token. So the original source of action and movement is on-chain, and then it’s recorded in that off-chain database,” Silver said.
The code behind Plural’s transfer agent protocol is already open source, he added, and the company plans to publish its standard operating procedures for transfer agents as well. “We shouldn’t have a regulatory moat by having a transfer agent license,” Silver said. “That shouldn’t hinder people’s access to tokenization.”
Initially built on Base but now expanding to other EVM-compatible networks like Avalanche and Arbitrum, Plural offers a variety of payment options, including MetaMask, credit cards, ACH payments, and bank transfers. While the company primarily focuses on U.S. investors, Silver said Plural was aware that international investors wanted exposure to the platform’s assets.
“Our first deal had Canadians and Europeans, but just because we had them doesn’t mean it was good enough,” Silver said. “We have the opportunity to offer a much cleaner and better investment experience for international investors, which can perhaps simplify their regulatory burden in the US and then also their tax burden.”
Green Energy Tokens in DeFi
Blockchain technology not only allows Plural to access a broader range of investors; It also allows for innovations 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 divides its profits. For example, waterfall distribution schedules can have the project forward 98% of dividends to investors up to a threshold, and then evenly split the remainder between the investor and issuer.
“With smart contracts, the headache of managing and calculating all that goes away completely,” Silver said. “Now our issuers make a one-time payment in Plural and then smart contracts automate all distributions according to business rules.”
Even better, Plural’s smart contracts track the trading of these tokenized securities, meaning that if an investor holds the token for the first 10 days of a month and then sells it to someone else for the remaining 20 days, the first investor will receive a third. of the dividend, while the second will receive two thirds. “We can approach that funding in real time and just eliminate all that administration,” Silver said.
That opens up the possibility of Plural-issued tokens being used in the broader crypto economy, especially decentralized finance (DeFi). Investors could eventually post their tokenized securities as collateral in the same way that on-chain market participants already use ether (ETH), stablecoins, and several other cryptocurrencies. “It’s just a more usable product if you can borrow against it,” Silver said.
The assets tokenized by Plural could also end up trading on decentralized exchanges, which would help them generate liquidity. “I don’t think it’s going to be easy, but I do think figuring out how to take those liquidity principles and bring them to Plural is huge and could come, hopefully, soon.”
In the future, Plural assets could even end up generating their own derivatives, and even split the interest generated from the tokenized security in the same way that the DeFi protocol Pendle does.
“Whether it’s my children, my grandchildren or, hopefully, me, I truly believe that we will reach a point where it will be faster to move from cash to clean energy assets than it will be to move from checking accounts to savings accounts,” he said Silver.
