Sardinia energy economy


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Sardinia energy economy

  1. 1. Towards Energy IndependenceA Green Deal for SardiniaChris CookLa Terza Via 14th June 2013
  2. 2. “21stCentury problems cannot be solvedwith 20thCentury solutions”
  3. 3. Introduction - ResilienceResilience - the enduring power of a body or bodies fortransformation, renewal and recovery through the flux ofinteractions and flow of eventsResource Resilience – Natural GridFinancial Resilience – Open Capital
  4. 4. Resource Resilience – Natural GridSince 1980 Denmarks GDP rose 78%Energy use has been stableCarbon fuel use has declinedHow did Denmark achieve this?
  5. 5. Resource Resilience - Natural GridLeast Energy Cost principle- not least Danish Krone cost (or least $, € or £ cost)- minimum carbon fuel input for a given output ofelectricity, heat or power- investment in renewables, heat, transport, energyefficiency
  6. 6. Emerging Outcomes of Natural Grid policy- decentralisation- skills base of knowledge and knowhow: eg Vestas isthe biggest global wind turbine acountry of 6m people- trend to energy security and energy independence- not forgetting........reduction in carbon use
  7. 7. Financial Resilience – Open CapitalMarket 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 brokeWhat Market 3.0 will replace it?
  8. 8. Financial Resilience – Open CapitalMarket 3.0- networked, decentralised and dis-intermediated marketparadigm- transition from intermediation to service provision- Reason? Market risk is distributed to end users & sofinance capital is limited to operating costs
  9. 9. Financial Resilience – Open CapitalFinancial Instrument – Prepay Instrument- not the Next Big Thing...but the Last Big ThingFinancial 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
  10. 10. Financial Resilience – Open CapitalPrepay – Credit unit returnable in payment for valueNondominium- People-based (P2P) Credit – Clearing Union- Asset-based Credit – Capital Partnership
  11. 11. PrepayTax
  12. 12. Tax PrepayTax Prepay – credit returnable in payment of taxesTax Return – stock part of tally stick returned to TreasuryRate of Return - rate over time at which stock is returnablefor cancellationeg Prepay £8 for £10 tax - £2 profit 25% pa rate of return
  13. 13. 21stCentury PrepayLand – returnable in payment for rental or produceEnergy - returnable in payment for energyRate of Return- literally the rate at which prepay Units may bereturned to the issuer against use- not fixed - depends on existence & quantity of flow
  14. 14. Energy LoansProducerProducerInvestorsConsumersManagerEnergy£ or UnitsReturnedPrepayUnitsUnitsUnitsPrepay
  15. 15. Energy Loans – the Value PropositionProducer- sells energy forward and locks in price- interest-free loan until prepay unit returned vs supplyConsumer- prepays for energy and locks in price
  16. 16. Energy Loans – the Value PropositionInvestor- direct inflation hedge investment in energy- Consumers buy credits from Investors at best pricebelow physical energy price & return against supplyManager- shares in gross revenues or production- interests aligned with Investor- no Principal/Agency problem
  17. 17. Sardinia Energy ProductionNon 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
  18. 18. Prepay - IssuesCosts - producer who sells future revenues usingPrepay will have a problem if costs riseLiquidity – producer will not accept another producersprepay unitsMisappropriation – producer may conceal and skimrevenues or production so that rate of return is lower
  19. 19. Power PartnershipCustodianCustodianInvestorInvestorSupplierSupplierEnergyPrepay%%ManagerManagerFuel
  20. 20. Aluminium PartnershipCustodianCustodianInvestorInvestorEnergy(Sardinia)Energy(Sardinia)AluminiumPrepay%%ManagerManagerEnergyBauxite(Sardinia)Bauxite(Sardinia)Bauxite %
  21. 21. Capital Partnership - OutcomesNeutrality – removes ego and politicsCollaborative - stakeholder interests alignedSocial - relationship-based not transaction-based; coststransformed to revenue sharesSustainable - all have interest in minimising cost over time
  22. 22. Solution 2 – Clearing UnionProducers accept each others prepay units and settlebalances within Guarantee Society agreementProducers, Investors and Consumers all pay aguarantee charge and share costsManager allocates guarantee limits, manages platform,ensures transparency, handles defaults
  23. 23. Clearing UnionProducer ConsumerPrepayor €SupplyPool GuaranteeGuaranteeFee FeeManager(Sardex?)FeeService
  24. 24. Sardinia Green DealCarbon Levy- levy on non-renewable carbon fuel creates Pool- Pool distributed as energy dividend to all SardiniansEnergy Loans- Mega Watts - renewable infrastructure: SardiniaSupergrid; wind, solar, hydro- Nega Watts energy efficiency: least energy costheating, cooling, transport, spatial infrastructure
  25. 25. 21stCentury problems cannot be solved with 20thcentury solutions.........
  26. 26. …....21stcentury solutions pre-date modern finance