What to know:
- Plural Energy helps mid-sized renewable energy projects raise funds by tokenizing them.
- The platform is hyper-selective: only 5% of deals make it through its due diligence process
- Down the line, these tokenized securities could be used as collateral in DeFi, and even be traded on decentralized exchanges.
The U.S. renewable energy industry is in an odd position.
Major ventures, such as SunZia – a southwestern wind turbine project anticipated to generate electricity for approximately three million households – receive funding effortlessly due to strong, longstanding partnerships with financial heavyweights. On the other hand, smaller-scale installations like residential solar panels are becoming increasingly affordable over time.
However, as larger energy companies merge and consolidate, it’s becoming more challenging for mid-sized projects to secure funding. These projects, valued under $100 million, are often too costly for individual investors but not attractive enough for major financial institutions to invest in.
In that context, Plural Energy enters the scene. This two-year-old firm specializing in tokenization opens up a pathway for mid-sized renewable energy projects to secure funding from investors via blockchain technology. The objective is twofold: firstly, to broaden the investor base for renewable energy assets, and secondly, to innovate financial products within the energy sector.
Currently, the method used to secure funds for solar energy is not satisfactory at all. It’s unlikely we’ll reach our climate targets with this approach,” Adam Silver, co-founder and CEO of Plural Energy, shared in an interview with CoinDesk. “What we aim to do is create a simple solution for raising capital for climate-friendly assets.
Silver explained that by utilizing tokenization, we can effectively unveil the extraordinary potential hidden within Decentralized Finance (DeFi) systems, and make it accessible for industries yearning for groundbreaking financial advancements.
Pitching to Plural Energy
Through Plural Energy, investors have the opportunity to explore four distinct product offerings. These include:
1. Small-scale asset-backed instruments, such as a project that consolidates 1,000 rooftop solar installations into one unified security, which is then digitally represented through tokenization.
2. Development-stage renewable energy projects form the second category.
3. Operating renewables, which consist of pre-existing renewable energy plants that are seeking additional funding to expand their operations, make up the third category.
The fourth group, as Silver described, encompasses the “unusual aspects,” such as a battery incorporating artificial intelligence (AI) for trading, or a bitcoin mine established by Sangha Renewables on a solar power plant run by an energy company in West Texas. In simpler terms, these are investments that deviate from typical infrastructure patterns but catch everyone’s attention due to their unique nature.
To date, most of these undertakings have centered around solar energy in some capacity, yet Plural has also explored wind-generated schemes and even negotiated a hydroelectric partnership.
As a crypto investor, I’ve come across many promising projects, but only a handful, specifically five deals worth a collective $40 million, have managed to pass Plural’s thorough scrutiny and secure funding through their platform. It’s interesting to note that merely 5% of the proposals evaluated by Plural reach completion, yet this seemingly low success rate hasn’t dampened the interest in the platform. In fact, it currently holds an impressive $150 million, spread across a dozen assets, ready to welcome more investments in the upcoming months.
Silver stated, “When a renewable energy firm approaches us, we subject it to our thorough broker-dealer evaluation as well as asset verification process. We ensure that it’s an investment asset that each of us would confidently put our own money into.
Broker-dealers have an obligation to prevent investors from being defrauded, but they’re not required to ensure that investments are profitable. However, the Plural team is committed to showcasing only deals that they feel certain about, as stated by Silver.
Initially, the pioneering venture backed by Plural required a duration of six months to progress from concept to completion, including the phase where we agreed to tokenize and ultimately launched a functional tokenized security offering. However, we’ve managed to significantly reduce this timeline, with the new process now being accomplished in just six weeks.
According to Spencer Marr, president of Sangha Renewables, Plural’s business model and technologies enable access to investment opportunities in the most logical investor pool, simplify the fundraising process, and ensure transparency for all involved parties, as reported by CoinDesk.
Investing through Plural Energy
After receiving approval, issuers on the Plural platform are free to decide on the types of financial instruments they wish to make available – such as common stock, convertible notes with interest, or unsecured convertible notes. Each of these financial tools is assigned a unique token behind the scenes. Subsequently, investors have the freedom to select their preferred security type and acquire the corresponding tokens accordingly.
Each arrangement has its own distinct prerequisites. For instance, one venture allowed retail investors to invest as little as $500 in a collection of solar projects. Conversely, the bitcoin mine operated by Sangha is exclusive to accredited investors, requiring an initial investment of at least $50,000.
Through Plural, a registered transfer agent, ownership documents, often referred to as capitalization tables or ‘cap tables’, for projects funded via its platform are managed. Each tokenized security within this system possesses its own on-chain cap table, which is then compared with a Know-Your-Customer (KYC) database to produce an SEC-compliant cap table.
Silver stated that the sole method to alter ownership within the project is by modifying the ownership of the tokens. This means that the initial actions and transactions occur on the blockchain, and are subsequently recorded in an off-chain database.
The underlying code for Plural’s Transfer Agent protocol is openly available, and the company intends to make public its standard operating procedures for the transfer agent as well. “We don’t want a regulatory barrier created by holding a transfer agent license,” Silver stated. “This shouldn’t hinder people from accessing tokenization.
Originally established on Base, Plural is now broadening its horizons to include other EVM-compatible platforms such as Avalanche and Arbitrum. It provides a diverse range of payment methods, encompassing MetaMask, credit cards, ACH transactions, and wire transfers. Although primarily targeted towards U.S. investors, Plural is cognizant of international investors who are keen on investing in the platform’s assets.
Silver stated, “Our initial agreement involved Canadians and Europeans, but having them doesn’t automatically mean it’s satisfactory. We have the chance to significantly improve and refine the investment experience for international investors. This could potentially ease their regulatory hurdles in the U.S. and also reduce their tax obligations.
Green energy tokens in DeFi
Instead of only giving Plural the ability to reach a wider range of investors, blockchain technology also empowers advancements in the platform’s payment infrastructure.
The eight-member team is working on streamlining payment conditions with smart contracts, particularly in managing how a project distributes its earnings. For instance, they’re considering waterfall distribution models where 98% of dividends go to investors until a certain threshold is reached, and then the remaining 2% are divided equally between the investors and the issuer.
Silver stated that with smart contracts, the hassle of managing and computing everything is eliminated entirely. Now, our issuers only need to make a single payment into Plural, after which the smart contracts automatically handle all distribution tasks based on established business guidelines.
Through Plural’s intelligent contracts, the trading of these tokenized securities is meticulously monitored. This means that if an investor holds onto the token for the initial 10 days of a month before selling it to another investor during the remaining 20 days, the original investor will be entitled to one-third of the dividend, while the subsequent investor will receive the remaining two-thirds. This helps us get closer to real-time finance and eliminates the need for administrative tasks, as Silver explained.
Using Plural-issued tokens in the wider crypto economy, including DeFi, could become a reality. This might allow investors to use their tokenized assets as collateral, similar to how ETH, stablecoins, and other cryptocurrencies are currently used. As Silver explained, “It makes the product more versatile if you can borrow against it.
Tokenized assets on the Plural platform could potentially become tradeable on decentralized exchanges, thereby increasing their market accessibility. It’s a significant challenge, but I believe that finding ways to incorporate liquidity principles within Plural could prove game-changing, and we might see this development in the near future.
In due course, Plural’s assets might give rise to offshoots, and the income derived from these spin-offs could be separated from the digital security that represents them, much like how the DeFi protocol Pendle operates.
Silver expressed the belief that someday, it may be quicker to transfer funds between cash and clean energy assets compared to the speed at which money moves between checking and savings accounts.
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2025-01-10 18:23