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  • 1. Funding the Natural GridGreen Deals which actually workChris CookCHP Conference 30th May 2013
  • 2. “21stCentury problems cannot besolved with 20thCentury solutions”
  • 3. Denmark – and the Natural GridSince 1980 – Danish GDP increased by 78%;energy use stable; carbon fuel use declinedOver-riding criterion - what happens in the system ifthe consumer uses one more KwH or Mmbtu?Least energy cost - not least $, £ or € cost whichgave the Dash for Gas & now the Roll for CoalOutcomes - decentralised production, storage,distribution and use of energyNatural Grid – not National Grid
  • 4. DenmarkCommunity-based– 60% district heating of which 80% is CHPmainly urban– Heat storage, solar heat, ground & airsource heating– But UK very different institutionally fromDenmark– 86% of wind turbines are co-ops mainlydebt financed with municipal guarantees– Municipal heat infrastructure
  • 5. Funding the Natural GridFinancing – short term, high risk, people-basedFunding – long term, low risk, asset-basedConventional Financing and Funding- either Public=State or Private=for profit- Public sector - cant or wont afford it- Private sector - terminal shortage of bank creditSo how do we finance and fund the Natural Grid?- its not a case of either/or; +1 or -1; +ve or -ve- there is, and has always been, Open Capital
  • 6. Open CapitalCapital Partnership – neutral co-operative of co-operatives framework for productive assetsPrepay – forward sale at a discount of production oruse value
  • 7. Capital PartnershipCustodianCustodianInvestorInvestorUserUser% %UseManagerManagerValue
  • 8. Capital Partnership - OutcomesNeutral – removes ego and politicsCollaborative - stakeholder interests aligned in co-operative of co-operatives: no principal/agent problemSocial – shared surplus/ not for loss - relationship-basednot transaction-basedSustainable - everyone has an interest in minimising costsover time
  • 9. PrepayTaxation
  • 10. Pre 1700 - Tax PrepayStock – part of a tally stick, used either as a receipt(memorandum tally) or as an IOU (loan tally)Issued by the Exchequer to tax-payers at a discount inexchange for value receivedTax Prepay – undated credit returnable in payment of taxesTax Return – stock returned to ExchequerRate of Return - rate over time at which stock is returnablefor cancellationPrepay £8 for £10 tax gave £2 profit. £10 tax pa = 25% p.a.rate of return: £5 tax pa = 12.5% pa rate of return etc
  • 11. Back to the Future - 21stCentury PrepayRental Prepay – units returnable in payment for rentalsEnergy Prepay - units returnable in payment for energyissued and exchanged for value by producersRate of Return - literally the rate at which prepay Unitsmay be returned to the issuer against useRate of Return - not fixed, but depends on theexistence and quantity of the flow
  • 12. Natural Grid Policies & ProjectsLinear EdenReal Green DealMany other policies eg Ultra Light Rail, Fuel Pool
  • 13. 1942 – J F Pownalls Grand Contour Canal
  • 14. North South Canal – a Linear Eden?Amenity Value- people dont want to live next door to the M99; to HS2or to Runway Three......….but they will pay a lot of money to live by waterLand Rental Value- capturing a small part of increased land rental valuewill fund the canal- a linear – non-statutory - development corporation- funding through land rental Prepay eg 50 yearsrentals sold to investors at a discount
  • 15. A Real Green Deal - Energy LoansEnergy investors invest in Energy Pool fundReturn in energyEnergy Loans made to properties and projectsLoans repaid by buying back Units from the Pool at theenergy market retail priceEfficient - no compound interestEffective – unless energy borrower saves energy he willnot save £
  • 16. Real Green DealCustodianCustodianInvestorsConsumersDeveloper/ManagersEnergy loan£ or UnitsReturnedPrepayUnitsUnitsUnitsPrepay
  • 17. Natural Grid – and the Transition TradeTwo Big Trades of the 21stCenturyResolution Trade – older generation long of Land andshort of Care for themselves and the Land- so exchange value of care for value of land useTransition Trade – need for a low carbon economy- so exchange intellectual value (skills, knowhow andIP) for the value of carbon fuels savedTransition to a low carbon economy through energyprepay; energy accounting; and energy co-operation