Funding the Natural Grid A Capital Partnership Approach Chris Cook All Energy Show 21 st May 2014
All energy show 2014 introducing the natural grid
Dec 22, 2014
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Funding the Natural Grid
A Capital Partnership Approach
Chris Cook
All Energy Show 21st May 2014
“21st Century problems cannot be solved with 20th Century solutions”
Introduction - Resilience
Resilience - the enduring power of a body or bodies for transformation, renewal and recovery through the flux of interactions and flow of events
Resource Resilience – Natural Grid
Financial Resilience – Open Capital
Resource Resilience – Natural Grid
Since 1980 Denmark's GDP rose 78%
Energy use has been stable
Carbon fuel use has declined
How did Denmark achieve this?
Resource Resilience - Natural Grid
Least Carbon Fuel Cost principle
- not 'least Danish Krone cost' (or least $, € or £ cost)
- minimum carbon fuel input for a given output of electricity, heat or power
- investment in renewables, heat, transport, energy efficiency
Emerging Outcomes of Natural Grid policy
- decentralisation
- knowledge & knowhow base: Vestas the biggest global wind turbine company in country of 6m people
- trend to energy security and energy independence
- not forgetting........reduction in carbon use
Linlithgow Natural Grid (LNG)
Aim: enable Linlithgow to be independent in energy
Means: application of least carbon fuel cost principle
Enlisted Mainstreaming Innovation for academic input
CARES funded study carried out by Dr Mohammed Imbabi of Aberdeen University
Objective 1 – map energy use in Linlithgow Cross
Objective 2 – identify & prioritise viable least carbon fuel cost interventions leading to energy descent
Q. How can we fund Linlithgow Natural Grid?
Systemic Funding Problem
Denmark's fiscally robust local government guaranteed Co-op renewable finance & fund heat infrastructure
UK renewables – kill Big 6 profitable production
UK energy savings – kill Big 6 customer consumption
If Big 6 won't & local government can't, how can renewables &energy savings be funded?
Financial Resilience – Open Capital
Prepay – credit returnable in payment for value
Capital Partnership – production sharing agreement
Prepay
Tax
Tax Prepay
Tax Prepay – credit returnable in payment of taxes
Tax Return – 'stock' part of tally stick returned to Treasury
Rate of Return - rate over time at which stock is returnable for cancellation
eg Prepay £8 for £10 tax - £2 profit 25% pa rate of return
- not fixed - depends on existence & quantity of flow
Energy Partnership
Custodian(Community)Custodian(Community)
InvestorInvestor
ConsumerConsumer
Prepay %
%
ManagerManager
Payment
Energy Partnership - Outcomes
Social Contract - relationship-based not transaction-based; costs transformed to revenue shares
Neutrality – removes ego and politics
Collaborative - stakeholder interests aligned
Sustainable - all have interest in minimising cost over time
Energy Prepay – the Value Proposition
Community
- sells value of future energy production or savings
- interest-free energy loan until credit cancelled by return vs supply or repurchase from energy savings
Consumer
- prepays for energy and locks in price
Energy Prepay – the Value Proposition
Investor
- energy loan investment directly “Peer to Asset”
- Consumers buy credits from Investors at best price below physical energy price & return against supply
Manager
- shares in gross revenues or production
- interests aligned with Investor
- no 'Principal/Agency' problem
Comparison of Western Isle community income 3 x 3 Mw Wind Turbines
Community Owned Farm
£110k pa/Mw community profit
£ £330k pa per turbine
£1m pa to Community
Adjacent Private Wind Farm
– £6k pa /Mw community benefit
= £18k pa per turbine
= £54k pa to Community
Mega Watts
Whoever owns renewable energy sells at wholesale bid price (4p/Kwh) & buys back at retail price (13p/Kwh)
Private wire or local use wherever possible
Negawatts
Energy savings made by consumers at retail price
Well to Wheel savings: litre of diesel fuel saved might save 3 litres of crude oil
Conventional funding (Green Deal) has two problems
- compound interest on bank £ loans
- even if £ is saved, no guarantee energy will be saved
Linlithgow Energy Pool
Investor pay £1k for credits in Linlithgow Energy Pool
- 20 x 1Mwh prepay Units @ £50 each
- 2000 x 10 Kwh prepay Units @ 50p each
Fund invests at community level through energy loans eg community CHP/co-generation
Loan repaid via energy bills through buying prepay energy units at market price
Interest-free loan – return to investor in energy
Unless consumers save energy they will not save £
Linlithgow Energy Pool
CustodianEnergy Pool
CustodianEnergy PoolInvestors
Consumers
Manager
£ EnergyLoan Buy units
at market price
£
Prepay
Prepay
Units
£
£
21st Century problems cannot be solved with 20th century solutions.........
…....21st century solutions pre-date modern finance
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