The US renewable energy industry is in a strange position.

Large-scale projects, such as SunZia, the southwest wind project expected to provide enough electricity to power three million homes, are financed with relative ease thanks to long-standing relationships with financial giants. Meanwhile, small installations like solar panels on one’s roof are becoming cheaper to implement every day.

But the consolidation of the energy sector makes it increasingly difficult for medium-sized projects to get the financing they need. These ventures, typically worth less than $100 million, are too expensive for ordinary people to pay for, yet too modest for financial heavyweights to take an interest in them.

This is where Plural Energy comes in. The two-year-old tokenization company enables medium-sized renewable energy projects to raise funds from on-chain investors with the dual purpose of dramatically expanding the number of people who can invest in renewable energy assets while developing new forms of financial products for the energy sector.

“Right now, the process of raising capital for solar is just unacceptable. We’re never going to meet our climate goals,” Adam Silver, co-founder and CEO of Plural Energy, told CoinDesk in an interview.[We want] to make an easy button for raising capital for good climate assets.”

“By taking advantage of tokenization, we can essentially unlock all the magic that happens in DeFi ecosystems and bring it to an industry that is in desperate need of financial innovation,” Silver added.

Pitching for plural energy

Investors can access four types of products through Plural Energy. The first is small-asset instruments, like a project that aggregates 1,000 rooftop solar systems into a single security, which is then tokenized. The second category is renewable energy in the development phase, and the third is operating renewable energy (for example, already existing solar installations seeking to raise additional funds to expand).

The fourth category, Silver said, are the “weird things,” like a battery that uses artificial intelligence (AI) to trade or the bitcoin (BTC) mine being built by Sangha Renewables at a West Texas solar farm that operated by an energy company. “Things that are a little out of the ordinary for traditional infrastructure investors, but are really cool for everybody else,” Silver said.

So far, the majority of these projects have involved solar energy in one form or another, but Plural has also explored wind-based initiatives and even a hydropower deal.

Still, these projects didn’t get past Plural’s due diligence. To date, a total of five deals representing $40 million have been greenlit to raise funds through the platform. Only 5% of deals considered by Plural reach the finish line, but that hasn’t deterred demand for the platform, which currently has about $150 million across a dozen assets to bring on board in the coming months.

“When a renewable energy company comes to us, we put it through our broker-dealer due diligence process, and then we also do active due diligence,” Silver said. “We’re making sure it’s like an asset that really any of us would feel comfortable investing in personally.”

While broker-dealers must ensure that investors are not defrauded, they are not necessarily responsible for ensuring that something is a good investment. Still, the Plural team insists on only presenting deals it trusts, Silver said.

The first-ever green project from Plural took six months to complete the process from start to finish, from consent to tokenization with Plural to a live tokenized security offering. That timeline is now down to six weeks.

Plural’s business model and technologies “open the capital markets to the most sensible pool of investors, streamline the fundraising process and provide transparency to all parties,” Spencer Marr, president of Sangha Renewables, told CoinDesk.

Investment through plural energy

Once they get the nod, issuers on Plural can choose which types of securities they want to offer – like common stocks, convertible bonds with interest or unsecured convertible securities. Each of these security instruments receives a unique token in the back-end. Investors can then choose what kind of security they want and receive the appropriate tokens for it.

But each deal comes with its own unique requirements. For example, one project allowed retail investors to invest as little as $500 in a portfolio of solar projects. In the case of Sangha’s bitcoin mine, however, the deal is only open to accredited investors with a minimum investment of $50,000.

Plural is a registered transfer agent, meaning it maintains the ownership documents, known as cap tables, for the projects funded through its platform. Under Plural’s system, each tokenized security gets its own on-chain cap table, from which the data is then cross-referenced with a Know-Your-Customer (KYC) database to generate an SEC-compliant cap table.

“The only way you can change who owns what [in the project] is changing who owns which token. So the original source of action and movement is on-chain, and then it’s recorded in the off-chain database,” Silver said.

The code behind Plural’s transfer agent protocol is already open source, he added, and the company also plans to publish its transfer agent standard operating procedures. “We shouldn’t have a regulatory moat by having a transfer agent license,” Silver said. “It shouldn’t stand in the way of people accessing tokenization.”

Originally built on Base, but now expanded to other EVM-compatible networks such as Avalanche and Arbitrum, Plural offers a variety of payment options, including MetaMask, credit cards, ACH payments and bank transfers. While the company is mainly focused on US investors, Silver said Plural was aware of international investors who want exposure to the platform’s assets.

“Our first deal had Canadians and Europeans, but just because we had them doesn’t mean it’s good enough,” Silver said. “We have an opportunity to create a much cleaner and better investment experience for international investors who may be able to simplify their regulatory burden in the United States and then also their tax burden.”

Green energy tokens in DeFi

Blockchain technology not only allows Plural to access a wider range of investors; it also enables 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 shares its revenue. For example, waterfall distribution plans may see the project pass on 98% of the proceeds to investors up to a threshold and then distribute the remainder evenly between investor and issuer.

“With smart contracts, the headache of managing and calculating all of this just completely disappears,” Silver said. “Now our issuers make a single payment to 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 proceeds, while the other gets two-thirds. “We’re able to get closer to that real-time funding and just remove all that administration,” Silver said.

It opens the possibility for plural-issued tokens to be used in the wider crypto-economy, particularly in decentralized finance (DeFi). Investors can ultimately pledge their tokenized securities as collateral in the same way that on-chain market participants already use ether (ETH), stablecoins, and various other cryptocurrencies. “It’s just a more useful product if you can borrow against it,” Silver said.

Assets tokenized by Plural may also end up being traded on decentralized exchanges, which would help bring them liquidity. “I don’t think it’s going to be easy, but I think figuring out how to take these liquidity principles and bring them into the majority is huge, and maybe that will come, hopefully soon.”

Down the line, Plural’s assets may even end up creating their own derivatives, even splitting the interest generated from the tokenized security in the same way that the DeFi protocol Pendle does.

“Either my kids or my grandkids or hopefully me — I really think we’re going to get to a point where it’s faster to move between cash and clean energy assets than it is to move between checking and savings accounts,” Silver said.