Heat PartnershipsA Green Deal that might actually work                  Chris Cook        I.M.E., London, 29th August 2012
Solutions Capital Partnership (Nondominium)   Neutral framework agreement for sharing of risk and reward   Capital Part...
Capital Partnership            Consumers            Custodian             CustodianInvestors            Managers
Capital Partnership Custodian  Custody of data and accounts  Mutual Guarantee Energy Consumers – exchange value for th...
Prepay 1.0 - Stock Stock  Original form of equity – not shares in Joint Stock Company  Prepay/credit instrument issued ...
Prepay 2.0 – Stock reinvented In the late 1990s Enron began to use Prepay Commodities sold at a discount for dollars & d...
Green Deal - Issues Problem Compound interest - bank rates of interest mean many projects are not viable Behaviour (Jevon...
Green Deal 2.0 - Heat Pool and Heat Loans Investors buy Mmbtu units of Heat Stock at a discount to the  market price Dis...
How it Works   Stock                 Consumers                  $      or Stock      energy                         Return...
Hyde Farm Energy Partnership                Consumers                (Association)                Custodian               ...
Hyde Farm Partnership – Financing Phase Short term, medium/high risk investment Capital Partnership framework uses trans...
Hyde Farm Partnership – Funding Phase Long term, low risk direct investment in energy Capital Partnership framework uses...
Danish Policy – Energy Economics Energy Investment  Danish policy after 1973 oil shock exposed energy insecurity  Ident...
Synergetic Economic Behaviour Energy middlemen transition to energy service provision Minimises need for finance capital...
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Community Heat Partnerships

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Community Heat Partnerships

  1. 1. Heat PartnershipsA Green Deal that might actually work Chris Cook I.M.E., London, 29th August 2012
  2. 2. Solutions Capital Partnership (Nondominium)  Neutral framework agreement for sharing of risk and reward  Capital Partnership does not own anything, employ anyone, or contract with anyone but its members do  Agnostic as to legal form (eg Limited Liability Partnership; Company Limited by Guarantee) Prepay (Stock)  Undated credit instrument returnable in exchange for value  Created, issued, exchanged and returned within Capital Partnership framework agreement
  3. 3. Capital Partnership Consumers Custodian CustodianInvestors Managers
  4. 4. Capital Partnership Custodian  Custody of data and accounts  Mutual Guarantee Energy Consumers – exchange value for the use of energy Energy Managers  Operate system, manage risk, provide quality control Energy Investors  Buy Units of stock returnable in exchange for energy  Custodian issues energy stock on instruction of Managers  Managers supervise issue, exchange & return
  5. 5. Prepay 1.0 - Stock Stock  Original form of equity – not shares in Joint Stock Company  Prepay/credit instrument issued at a discount to market price  Returnable in payment for energy supplied  Prepayment for supply  UndatedReturn  Discount gives absolute return: eg $10s worth of gas for $8 now  Rate of Return is variable – literally the rate over time at which stock may be returned to the issuer or sold  No interest (money for the use of money)
  6. 6. Prepay 2.0 – Stock reinvented In the late 1990s Enron began to use Prepay Commodities sold at a discount for dollars & delivered later Example: oil market price $100: 1m barrels sold for $90 now and delivery in 6 months Enron used Prepay to defraud creditors and investors Since 2005 investment banks and producers have used prepay to defraud the oil market
  7. 7. Green Deal - Issues Problem Compound interest - bank rates of interest mean many projects are not viable Behaviour (Jevons Paradox) – even if £ is saved there is no guarantee that energy will be saved Solution Direct peer to asset investment in energy Return on energy investment but no compound interest – money paid for the use of energy Unless Exergy is saved £ will not be saved – saving Exergy is saving money
  8. 8. Green Deal 2.0 - Heat Pool and Heat Loans Investors buy Mmbtu units of Heat Stock at a discount to the market price Discount generates a return to energy investors NB - $ billions now invested in energy even without a return Heat Pool energy fund is thereby created in £ Heat Pool fund invests £ in heat production and heat saving projects through heat loans denominated in Mmbtu Projects buy back units of heat stock at the market price through utility bill
  9. 9. How it Works Stock Consumers $ or Stock energy Returned Stock Custodian CustodianInvestors Stock $ Stock Proportional Shares Managers, Producers
  10. 10. Hyde Farm Energy Partnership Consumers (Association) Custodian Custodian Lambeth Council Lambeth Council Investors Managers (Association) (Consortium)
  11. 11. Hyde Farm Partnership – Financing Phase Short term, medium/high risk investment Capital Partnership framework uses transitional LLP vehicle and a mix of grant, debt and partnership equity investment City of Glasgow currently has five municipal LLPs Debt repaid, grants recyclable, and equity investors exit to Funding Phase Investors
  12. 12. Hyde Farm Partnership – Funding Phase Long term, low risk direct investment in energy Capital Partnership framework uses Company Limited by Guarantee framework and energy stock investment Optimal form of investment in terms of risk profile, liquidity and sheer simplicity Optimal form of funding in terms of cost
  13. 13. Danish Policy – Energy Economics Energy Investment  Danish policy after 1973 oil shock exposed energy insecurity  Identify desired outcome eg heat, electricity, transport  Identify solution with least carbon fuel input  ie what happens in the system for each KwH of electricity or Mmbtu of heat produced?  Energy return against energy invested – least energy cost solution  Participants obliged to comply with policy against their financial interests
  14. 14. Synergetic Economic Behaviour Energy middlemen transition to energy service provision Minimises need for finance capital – replaced by human capital Least energy cost, rather than least £ cost Market tends to stability Common interest in minimising energy use Financing and funding costs minimised since no payment is made to rent-seekers Big Trade of the 21st Century Value of intellect (IP; skills) exchanged for value of carbon energy saved (ie optimisation of Exergy)

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