Bridging the Gap: The “Missing Middle” in Solar Energy
Written by
Jason Grissino
At a recent Climate Week San Francisco event, “Financing the missing middle,” a crucial topic in the solar industry, was discussed. But what exactly is the “Missing Middle” of solar, and why is it so important?
The Solar Spectrum:
Imagine a spectrum of solar assets. On one end, you have residential rooftop solar installations; on the other, sprawling mega-farms in the Mojave Desert. While both ends of the spectrum have room for innovation and deployment, the industry has left the space between in the dust.
Residential rooftop solar has a relatively straightforward financing process. Consumer credit scores enable quick underwriting, and legal agreements are executed more like signing up for a service than a one-off deal. Increasingly, more financing solutions are available for this segment.
Infrastructure investors, however, gravitate towards the other end of the spectrum. As one industry expert said:
“Deal teams aren’t even forming for projects less than $100M right now.”
The reason? Speed, transaction costs, and know-how. Mega infrastructure deals are complex and unique, requiring millions in legal fees, numerous bankers, in-person negotiations, and more. These costs exist equally, whether you’re raising money for a $1B project or a $5M one.
The “Missing Middle”:
Between these two extremes lies the “Missing Middle,” which includes everything from your old high school rooftop to a 50-acre solar farm a few towns over. These projects are vital in reducing emissions and transitioning to a green grid, but they face a severe problem. There are far too few of them and far too few funding options. Hundreds of developers and landowners want to build but are being turned away or sucked into extremely high-cost financing.
The Need for Localized Energy:
Mega projects are built in the desert, far from where the energy is consumed, causing exasperated stress on America’s aging and inadequate power transmission lines. Mega projects far from load lead to high energy price volatility and higher energy loss during transport. With no near- or long-term solution, we must look to the “Missing Middle” to address this issue.
The Potential of the “Missing Middle”:
The “Missing Middle” is where we find hope. We can fill this chasm by opening up investment from sources beyond traditional players. We use Blockchain technology to tokenize and securitize projects, automate complicated fund flows, templatize agreements and models, and create an investment and asset management platform. This approach can fund the projects that need it and bring investment opportunities to a whole new group of people. Real World Asset or RWA Tokenization is the frontier of the financial world, growing exponentially in the coming years, bringing high-speed, trusted, low-cost financing and transactions to many asset classes.
Plural is bringing it to renewable energy.
The middle of the renewable industry is filled with amazing assets offering high return potential. Meanwhile, interest in investing in clean energy is at an all-time high.By lowering transaction costs and allowing anyone to invest in these assets, Plural is bridging the gap and filling the “Missing Middle.” Financing the “Missing Middle” is crucial for the solar industry’s growth, the transition to a green grid, and the fight against climate change.
