Fintech and renewable energy – a perfect couple?
Fintech has already impacted our financial sector and our means of payment. Amongst other things mobile banking, crowdfunding, and online trading are all direct consequences of financial tech inventions. These inventions have helped make life less complex by making our financial transactions more user-friendly. Now it is time for fintech to dominate the world of green and renewable energy.
What is fintech?
Fintech – Financial Technology – describes new technological inventions designed to improve and adapt automation processes within our financial systems. Hence, its primary objective is to support businesses and consumers in the management of their financial operations. The term is used for various applications ranging from software and algorithms to mobile applications, automated trading and even artificial intelligence use cases.
Likely the most prominent case for fintech is cryptocurrencies like Bitcoin. Instead of private centralized databases, decentralized public databases are used for financial information like account details or financial transactions.
How do fintech and renewable energy match?
We have blogged about a revolution of the energy sector through blockchain, where SolarCoins were a central topic. This cryptocurrency is awarded to anyone submitting smart-readings and production data of their solar photovoltaic installations, no matter the size.
Similarly, another one of our blog posts discussed the validation of your powers green credentials. Surprise surprise, the Energy Web is also using blockchain as the foundation for their renewable energy certificates.
Therefore, this post’s focus is not on blockchain technology, but rather other fintech applications that will positively influence the energy transition.
Greentech through fintech – the driving force behind the energy transition
Crowdfunding, another prominent example of fintech, is already shaping investment forms within the solar PV industry. An increasing amount of solar community projects are installed and financed through crowdfunding.
Often, communities agree to switch from fossil electricity sources to renewable ones. A few obstacles can accompany this transition. For example, photovoltaic installations require an initial investment that is repaid over the lifetime of a PV plant and space. Not everyone has the money to attach solar modules nor the area available. In precisely these sort of situations, crowdfunding projects come in handy.
The UK provides a prominent example of crowdfunding in the energy market. In 2013 the former UK Minister of State for Energy and Climate Change (2010-2015 stated that crowdfunding is “an incredibly powerful funding model with the capacity to help deliver my ambition for a far more decentralized energy system.”
Solar PV is only one example of community-financed renewable energy projects. Many individuals also invest in wind energy projects. Hydropower projects or even biomass projects benefit from a significant amount of community investments.
Plenty of other fintech innovations boost the energy transition such as green bonds, increases in energy efficiency via machine learning, mobile payment solutions, and mobile micro-loans. At first glance, it might not feel like fintech, but by looking more closely, we can see that it is!
What the IEA has to say about fintech and renewable energy
The IEA had a webinar called: “Modernizing energy efficiency through digitalization: Webinar 7 – Opportunities for Fintech to Scale up Finance for Clean Energy”, in June of 2020. If you have some spare time, check it out!
One of the main areas discussed is the opportunity that fintech offers to innovate energy efficiency finance. The key takeaways are that through fintech, the availability, access, and validation of data is enabled, aggregation for investors and projects achieved, and behaviours automatically tracked and integrated into ESG (Environmental, Social, and Corporate Governance). Consequently, energy efficiency is increased and optimized.
The future of clean energy through financial technology
Not only does fintech offer solutions to invest in renewable projects, but it also provides solutions that break down production, financial analysis and portfolio performance. Additionally, the traceability of power is possible and energy efficiency will improve. All of these aspects are essential if an energy transition should happen, and it does!
As we all know, the financial sector is a driving force behind renewable energies’ deployment and the shift towards a greener future. So too is technology and innovations. Why not combine the two and make it happen more quickly and effectively? Fintech will be at the centre of the energy transition.