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Politics of energy and the cost of carbon future
- 1. Politics of Energy and Cost of Carbon Sheffield University Chris Cook 28 September 2010
- 2. An Arab joke: “My father rode a camel”
- 3. “I drive a Hummer ....”
- 4. “My son flies a Falcon”
- 5. “But my grandson will ride a camel.”
- 6. Producers waste carbon energy on a cosmic scale because they value it incorrectly
- 7. Gas is too cheap to meter....
- 8. Nigeria's flared gas could power Brazil
- 9. Saudi Arabia uses 1.5 million barrels of oil a day on desalination alone
- 10. In Tehran, obsolete cars, minimal public transport and gasoline at 10 cents/litre...
- 11. ....means air quality so bad...
- 12. ....that even the crows are leaving
- 13. Energy subsidies by producers and developing nations cost trillions of dollars
- 14. Investment in the global transition to renewable energy requires trillions of dollars
- 15. The question is how to make the connection?
- 17. .....any amount of solar energy
- 18. The real prize is the cheapest energy of all...NegaWatts...of energy savings
- 19. “You can't solve 21st Century problems with 20th Century solutions”...Dr Narsi Ghorban
- 20. There are conventionally two types of ownership - Public or Private... 09/03/10 20
- 21. ...and there are two ways of raising finance: Credit and Investment 09/03/10 21
- 22. Investment through a Limited Company... 09/03/10 22
- 23. ....a 19th Century legal dinosaur... 09/03/10 23
- 24. ...is what makes the Private Sector Private 09/03/10 24
- 25. Credit is typically issued by banks and secured by legal claims 09/03/10 25
- 26. ...giving two conflicting claims over the same productive asset 09/03/10 26
- 27. But there’s a new furry animal out there.... 09/03/10 27
- 28. ...the 21st Century Limited Liability Partnership (LLP) 09/03/10 28
- 29. A UK LLP is a corporate body with limited liability.... 09/03/10 29
- 31. As far as the UK Tax Man is concerned it is a Partnership 09/03/10 31
- 32. It’s an Open Corporate where partnership working is possible.... 09/03/10 32
- 33. ... even without a written agreement 09/03/10 33
- 34. It enables Direct “Peer to Peer” (P2P) Credit and Investment 09/03/10 34
- 35. LLPs are now in pervasive use for purposes never intended... 09/03/10 35
- 36. ...even in the Public Sector, where Glasgow has five municipal LLPs 09/03/10 36
- 37. Introducing the Capital Partnership AssetsAssets Investors Payment % % Custodian Use Managers Users
- 38. Capital Partnership – direct Peer to Peer investment in productive assets 09/03/10 38
- 39. Hilton Capital Partnership ( > £1bn) Capital Partnership LLP 10 UK Hotels Gross Revenues Hilton Group Capital User Consortium LLP Capital Provider Bank Property Developer Hotel Specialist %% %%%
- 40. Productive assets are held by a “Custodian”.. AssetsAssets CustodianCustodian Ownership
- 41. …Investors put in Financial Capital in money, or “money’s worth”… AssetsAssets Investors Custodian Ownership Financial Capital
- 42. …Managers provide Human Capital of time, expertise and experience.... AssetsAssets Investors Custodian Ownership Human Capital Financial Capital Managers
- 43. ..Users pay for the use of Capital AssetsAssets Investors Payment % % Custodian Use Managers Users
- 44. Generic Capital Partnership Framework AssetsAssets Investors Payment % % Custodian Use Managers Users
- 45. Capital Partnership reinvents Equity
- 46. Equity Shares - % age shares in revenues or production 09/03/10 46
- 47. Units – redeemable in payment for energy production eg Kilo Watt Hours, natural gas
- 48. Units have a value in exchange
- 49. Asset-based on value provided by issuer...
- 50. ….rather than deficit-based upon a claim over value issued by a Bank
- 51. Let’s have a look at an Energy Pool for a wind turbine
- 52. Two Phases – Development ('Financing') and Operation ('Funding')
- 53. Development phase: firstly, a Custodian AssetsAssets CustodianCustodian Ownership
- 54. Suppliers provide money’s worth AssetsAssets Suppliers Custodian Ownership Capital Equipment
- 55. They may invest equipment & materials if they are willing and able
- 56. ...but must invest agreed profit margin, thereby giving a stake in the outcome
- 57. Investors provide risk capital for costs suppliers cannot or will not invest AssetsAssets Investors Custodian Ownership Risk Capital
- 58. Managers provide Human Capital of time, expertise and experience AssetsAssets Investors Custodian Ownership Human Capital Financial Capital Managers
- 59. ...and the turbine is installed
- 60. Sounds great, but where does the money for the costs come from? 09/03/10 60
- 61. Simple: the turbine creates a Pool of future production 09/03/10 61
- 62. ...and from this Pool we sell Units to investors redeemable in payment for electricity... 09/03/10 62
- 63. … at a discount to the market price 09/03/10 63
- 65. Managers receive an Equity Share AssetsAssets Payment x% Custodian Electricity Managers Consumers
- 66. Operation Phase AssetsAssets Investors Payment 100-x% x% Custodian Electricity Managers Consumers
- 67. The Pool may now sell Units to consumers and risk averse investors 09/03/10 67
- 68. Units - the Value Proposition 09/03/10 68
- 69. Investors - a direct investment in energy with no return... 09/03/10 69
- 70. ....similar to an investment in gold... 09/03/10 70
- 71. ...except that while gold may be pretty... 09/03/10 71
- 72. ....it’s not useful in the way that electricity is 09/03/10 72
- 73. Consumers have the ability to lock in the price of future consumption 09/03/10 73
- 74. Middlemen extracting profit become service providers sharing surplus 09/03/10 74
- 75. What about Liquidity? Investors selling Units may not find Investor buyers.... 09/03/10 75
- 76. No Problem! Consumers will buy if the Unit price falls below electricity market price... 09/03/10 76
- 77. ...because they would profit by buying Units and redeeming them against consumption 09/03/10 77
- 78. Energy Pool Mega Watts (Custodian) Mega Watts (Custodian) Unit Investors Consumers Equity Shares Managers, Communities electricity£ or Units Redeemed £ Units Units
- 79. Interest-free financing through monetising renewable energy... 09/03/10 79
- 80. ...by issuing - for value now - a Unit that will cost nothing to redeem 09/03/10 80
- 81. Energy Pooling and Unitisation has further potential beyond funding new renewables 09/03/10 81
- 82. Existing energy production may be unitised and refinanced interest-free..... 09/03/10 82
- 83. …releasing funds for further investment 09/03/10 83
- 84. Nega Watt energy savings - the cheapest energy of all – may be simply financed… 09/03/10 84
- 85. …energy loans in KwH may be repaid via utility bills out of energy saved 09/03/10 85
- 86. A £5k interest-free energy loan is 100 Units of 1 Mega Watt Hours sold for £50/MWh.... 09/03/10 86
- 87. ....or 10,000 Units of 10 Kilo Watt Hours each sold for 50p 09/03/10 87
- 88. A reduced bill is paid to the power supplier for energy actually used..... 09/03/10 88
- 89. ...while Units are bought from the Pool to repay the energy loan 09/03/10 89
- 90. A Carbon Levy on fuel may fund Energy Pool investment in renewable Mega Watts 09/03/10 90
- 91. …and investment in energy saving Nega Watts 09/03/10 91
- 92. Unitisation enables an energy dividend from a valuable carbon investment 09/03/10 92
- 93. The outcome is that those with above average carbon use ...
- 94. ….make a net transfer to those with below average carbon use
- 95. A Capital Partnership is not an Organisation 09/03/10 95
- 96. It does not own anything, do anything, employ anyone, or contract with anyone 09/03/10 96
- 97. It is simply a framework for cross border energy investment
- 98. It transcends borders through interactive consensual contrats de société... 09/03/10 98
- 99. ...rather than national or international institutions and hierarchies
- 100. There are no adversarial contractual relationships – contrats de mandat 09/03/10 100
- 101. Capital Partnership requires no legislation Master Partnership Master Partnership Financial Capital (Money, IP etc) Financial Capital (Money, IP etc) UsersUsers Human Capital (Developers, Operators) Custodians (National) Custodians (National) % % € 09/03/10 101
- 102. Unitising energy enables a Carbon currency based upon the intrinsic value of energy…
- 103. ..rather than a market in value-less Units of CO2 emissions, imposed by governments
- 104. Gas is homogeneous and Units would be regionally and globally acceptable in exchange 03/04/10 104
- 105. Electricity Units – redeemable in payment for Kilo Watt Hours –are regionally acceptable
- 106. Other Units – redeemable in payment for carbon fuels - may be nationally acceptable
- 107. All may be priced against a Unit of measure – an Energy Standard....
- 108. ...a fixed Unit of energy
- 109. Outcome: producer nations can massively increase domestic energy prices....
- 110. ...without subsidy, inflation or fuel riots...
- 111. ...through an Energy Dividend of Units
- 112. Populations may choose to waste energy and use valuable Units to pay for it
- 113. ...or conserve energy and exchange Units for accommodation, food or goods
- 114. “Reality is defined by the questions you put to it”... J A Wheeler
- 115. Can we price Dollars in energy: rather than pricing energy in Dollars?
- 116. What would an energy economy look like? 09/03/10 116