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Monetising sunshine

Sep 12 2019 10:24
Glenneis Kriel

The Sun Exchange's innovation drew a lot of international attention, opening various avenues for investment funding, bringing the company’s total value to over $5m today.

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In 2014, after realising the futility of solar power investments in a country where the sun rarely shines, Abe Cambridge left his home country, England, to work as a solar financial adviser in Cape Town. Here he was struck by the absence of solar panels in the city.

“I could not understand why there was such a poor adoption of solar technology in a country where you had to wear sunglasses most of the time, electricity prices were increased by 10% to 14% each year and solar energy produced up to four times lower carbon emissions than coal,” he says.

The reasons became more apparent as he became familiar with SA’s energy environment: “In the absence of subsidies, government incentives and funding solutions, there wasn’t much motivation for people to adopt this capital-intensive technology. Also, electricity is traditionally seen as a running cost, not an operation you wanted to diversify into.”

He came up with a solution while sending money to England via cryptocurrency: Instead of businesses carrying the costs of solar power installations, outsiders could buy solar panels down to the level of a single solar cell, which could be micro-leased to businesses at a rate which reduces their energy costs.

The decentralised payment network of bitcoin could be used for transactions as it allows small payments with practically zero transaction costs.

“Cryptocurrency is a great vehicle to move money, as it involves lower costs and is much faster than working through banks. It only becomes risky due to volatility when you hold it for speculation,” Cambridge says. “The peer-to-peer cryptocurrency technology was invented for applications like this. This is the perfect use.”

Cambridge then launched the fintech company The Sun Exchange. At the time, he was working full time as an energy adviser and further developed the idea in his spare time, with assistance from the Microsoft Bizspark programme in Salt River. In November 2015, he raised $25 000 through crowdfunding, reaching 150% of his target in 25 days. This he used to build the prototype of www.thesunexchange.com. By March 2016, he launched The Sun Exchange’s first pilot project – a 15kW solar energy system in Stellenbosch.

The innovation drew a lot of international attention, opening various avenues for investment funding, bringing the company’s total value to over $5m today.

“I carefully selected investors to ensure we share the same values. The whole idea behind The Sun Exchange is to connect the world with the sun and to enable sustainable development. We, for example, won’t get involved in solar projects associated with factory farming or petroleum production,” he explains.

The solution is appealing on multiple levels, says Cambridge; it yields a 10% to 14% internal rate of return, and represents a way to invest in environmentally friendly solutions with social and economic impacts.

Schools represent the majority of the ten solar projects The Sun Exchange has enabled so far.

For the energy consumer it eliminates the need to buy a whole solar power system, choose a service provider, or to oversee installation and maintenance.

“There also isn’t the risk that you might move before reaping the full benefit of the installation,” he says.

The minimum unit cost per energy cell is R50. Participants buy cells for projects by credit card, bank transfer or with bitcoin and receive their monthly payments in either rand or bitcoin.

“About 90% of our platform users don’t cash out their bitcoin but use the returns to expand their portfolio by buying more cells for other projects,” he says.

The solar energy consumers are charged on their kWh usage at a discount to the grid, which amounts to about 15% to 50% of the Eskom rate, depending on size and location. The first users found The Sun Exchange with the launch of the crowdfunding process, with word of mouth doing the rest. The company now has nearly 8 000 registered platform users on its database from 139 countries.

The future

Cambridge initially handled all the administration and payments via spreadsheets in Excel, but over time recruited staff to develop an operating platform. “Developing a scalable user-friendly operating system was one of my biggest challenges because of the novelty of the concept. It took almost three years to get the platform to where it is today. On our platform users can see in real-time how projects are performing and, once registered, they can buy into new projects with a mere click of a button,” he says.

Staff recruitment was another challenge. “I was so flooded with work while developing the business on my own that it was hard to identify the talent needed to grow the business, never mind finding the right fit.”

Today the company employs 14 people. Cambridge is focusing on expanding the footprint of the company into the rest of Africa. To achieve this, he is raising funds by listing The Sun Exchange on Uprise.Africa, allowing people to buy shares in the company.

A recent partnership with the UN Framework Convention on Climate Change will also result in platform users not only making money from leasing they solar cells, but also from selling their carbon offsets.

This article originally appeared in the 12 September edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

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