Towards Energy Independence

A Green Deal for Sardinia

Chris Cook

La Terza Via 14th June 2013

“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 Energy 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

- skills base of knowledge and knowhow: eg Vestas is the biggest global wind turbine manufacturer......in a country of 6m people

- trend to energy security and energy independence

- not forgetting........reduction in carbon use

Financial Resilience – Open Capital

Market 2.0 – centralised, intermediated market paradigm

- proprietary finance capital and 'for profit' transactions

- Debt (Banks) and Equity (Joint Stock Company)

- October 2008 – the Market 2.0 paradigm broke

What Market 3.0 will replace it?

Financial Resilience – Open Capital

Market 3.0

- networked, decentralised and dis-intermediated market paradigm

- transition from intermediation to service provision

- Reason? Market risk is distributed to 'end users' & so finance capital is limited to operating costs

Financial Resilience – Open Capital

Financial Instrument – Prepay Instrument

- not the Next Big Thing...but the Last Big Thing

Financial Framework – Nondominium Agreement

- Maths: +1, -1 and 0 : Physics +ve, -ve and neutral

- Economics there is Public or Private; Debt or Equity

- There is no zero: La Terza Via

Financial Resilience – Open Capital

Prepay – Credit unit returnable in payment for value

Nondominium

- People-based (P2P) Credit – Clearing Union

- Asset-based Credit – Capital Partnership

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

21st Century Prepay

Land – returnable in payment for rental or produce

Energy - returnable in payment for energy

Rate of Return

- literally the rate at which prepay Units may be returned to the issuer against use

- not fixed - depends on existence & quantity of flow

Energy Loans

ProducerProducerInvestors

Consumers

Manager

Energy £ or Units Returned

Prepay

Units

Units

Units Prepay

Energy Loans – the Value Proposition

Producer

- sells energy forward and locks in price

- interest-free loan until prepay unit returned vs supply

Consumer

- prepays for energy and locks in price

Energy Loans – the Value Proposition

Investor

- direct 'inflation hedge' investment in energy

- 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

Sardinia Energy Production

Non renewable - Carbon Fuelled

- major use of coal

- potential for Algerian gas (GALSI)

- Sardinia exports electricity & metals (eg aluminium)

Renewables

- solar – 300 days sun per year

- wind – good resources

- hydro

- anaerobic digestion & biomass

Prepay - Issues

Costs - producer who sells future revenues using Prepay will have a problem if costs rise

Liquidity – producer will not accept another producer's prepay units

Misappropriation – producer may conceal and 'skim' revenues or production so that rate of return is lower

Power Partnership

CustodianCustodian

InvestorInvestor

SupplierSupplier

EnergyPrepay

%

%

ManagerManager

Fuel

Aluminium Partnership

CustodianCustodian

InvestorInvestor

Energy(Sardinia)Energy

(Sardinia)

AluminiumPrepay

%

%

ManagerManager

Energy

Bauxite(Sardinia)Bauxite(Sardinia)

Bauxite %

Capital Partnership - Outcomes

Neutrality – removes ego and politics

Collaborative - stakeholder interests aligned

Social - relationship-based not transaction-based; costs transformed to revenue shares

Sustainable - all have interest in minimising cost over time

Solution 2 – Clearing Union

Producers accept each other's prepay units and settle balances within 'Guarantee Society' agreement

Producers, Investors and Consumers all pay a guarantee charge and share costs

Manager allocates guarantee limits, manages platform, ensures transparency, handles defaults

Clearing Union

Producer Consumer

Prepay or €

Supply

Pool GuaranteeGuarantee

Fee Fee

Manager(Sardex?)

FeeService

Sardinia Green Deal

Carbon Levy

- levy on non-renewable carbon fuel creates Pool

- Pool distributed as energy dividend to all Sardinians

Energy Loans

- Mega Watts - renewable infrastructure: Sardinia Supergrid; wind, solar, hydro

- Nega Watts energy efficiency: least energy cost heating, cooling, transport, spatial infrastructure

21st Century problems cannot be solved with 20th century solutions.........

…....21st century solutions pre-date modern finance