The document proposes the Caspian Energy Grid, which would create a resilient energy economy for Iran through renewable energy sources and regional cooperation. It suggests establishing an energy grid connecting Iran to neighbors, using the most efficient technologies. A key aspect is an "Energy Clearing Union" using energy credits that would allow direct trading between producers and consumers. This financial network could help fund expansion of the physical grid in a sustainable manner. The proposal argues this approach would strengthen Iran's energy security while transitioning to a low-carbon economy through regional partnerships.

1. Caspian Energy Grid
Iran - Towards a Resilience Economy
Mehdi Moslehi & Chris Cook

2. Resilience: Beyond the Resistance Economy
"It is not the strongest of the species that survives, nor the most intelligent. It
is the one that's most adaptable to change.” Charles Darwin
Resilience is the ability to adapt to change
Resistance Economy protects Iran from dollar system crisis as in 2008
Lack of dollar access prevents Iran from financing and funding new energy
infrastructure
Alternative pathways are the Euro to the West & the Silk Road to the East
- Euro & China debt-based systems are supported by Iran's oil
- Iran's use of EU and China technology & services reduces resilience
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3. Resilience: Beyond the Resistance Economy
Petro Scotland proposes a new strategic organising principle for Iran's energy
policy – Least Carbon Fuel Cost
This is the principle that Iran should minimise the use of carbon fuel for any
given output of electricity, heat/cooling & power
Application of this principle extends Resistance Economy to Resilience
Economy and from Dollar Economy to Energy Economy
The Least Carbon Fuel Cost principle has been successfully demonstrated in
action by Denmark for 40 years
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4. Oil Market Outlook
• In Tehran in 2012 – when the oil price was over $110/barrel - our prediction
based on our market analysis was that the oil price would fall to $45 to $50/bbl
• Our prediction today based on the same analysis:
– Short Term – market is over supplied and in the absence of coordinated
production cuts the oil market price will fall and test new lows during the
second half of 2016
– Medium Term - Producers will cut production as in 2008 & the oil price will
clear & rebound
– Long Term – Oil Price not exceed $50/barrel again for more than a short time
• Why? Because above $50/barrel
– High cost production enters the market eg US shale oil
– Renewable energy substitutes for oil products (Dubai solar energy is now <
$23/bbl equivalent)
– Investment in energy efficiency (Nega Barrels) becomes extremely profitable
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5. Oil Producers – the Squeeze
Oil Producers are squeezed between
- Immovable Object – Oil Price Cap
- Irresistible Force – rising Exploration & Production (E&P) costs
IOC Options:
- Consolidate (does not solve the problem)
- Switch to Gas (eg Shell)
- Vertical Integration (eg BP & also major traders)
NOC Vertical Integration (eg Saudi Motiva refinery) carries
- political (eg nationalisation), environmental, industrial relations risks
Petro Scotland Energy Swap (Oil for Products) solution enables Iran to
secure oil demand (& product supply) while Refiner secures oil supply
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6. Transition through Gas
Natural Gas is the bridging fuel to a Low Carbon Economy and Iran has the greatest global
natural gas reserves
Shipping natural gas internationally whether via pipeline or LNG is extremely inefficient,
costly and potentially risky
Electricity is at the end of the Energy Value Chain “From Well to Wall.”
While the oil price fell 74% pa, and the gas price fell by 42% pa, the wholesale electricity price
fell by only 2 to 3% pa and the retail price fell by even less.
Cheapest energy of all is energy saved – “Nega Watts” - every Kilo Watt Hour of domestic
electricity saves 5 to 10 times as much energy in production, generation & distribution
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7. Power Generation Technology
Power Generation & Electricity Transmission efficiency has improved
dramatically in the last two years
Combined Cycle Gas Turbines (CCGT) generation is now 60% efficient
High Voltage Direct Current (HVDC) links are much more efficient than
Alternating Current (AC) links over long distances
HVDC is particularly suited to marine links eg Caspian Sea
Examples: UK North Sea BritNed, NorNed links; numerous China links.
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8. Caspian Energy Grid – a Natural Grid
Iran’s Grid – current domestic supply remains mainly carbon fuelled
Iran has considerable scope to increase the efficiency of natural gas use and
to take advantage of Iranian solar and wind resources
In this way, Iran may transform from a centralised National Grid to a
distributed and resilient Natural Grid
Caspian Energy Grid will also address the crucial environmental combination
of Iran's Water & Electricity
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9. Energy Swaps
Energy Swap
An Energy Swap is an exchange of an energy flow for another flow
Location Swap
A flow of energy into one location is exchanged for a flow of energy out of
another. eg the Caspian Oil Swap
Category Swap
A flow of energy of one type is exchanged for a flow of energy or value of
another type eg Iran gas for Armenian power
Hybrid Swap
A combination of Location & Category Swap eg international Oil for Product
Swap Iranian oil exchanged for Scottish oil products
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10. Technology Swaps – Energy as a Service
Pumping-as-a-Service – from 1778 the great Scottish engineer &
inventor James Watt supplied new & efficient steam powered water
pumps to Tin mines in exchange for 33% of their coal savings.
Turbines-as-a-Service – Mitsubishi/Siemens/GE provide 60% efficient
CCGT generators to replace 35% efficient generators and receive an
agreed %age of gas savings
Solar-as-a-Service – a young rural Iranian farmer with no capital may
share the electricity production of solar PV installed on his land by a
solar energy service provider.
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11. Energy Credits
An Energy Credit is a Promise issued by an energy producer in exchange for
value received and which he will accept in payment for energy production
An Energy Credit is not
Debt Contract - the holder may not demand money
Forward (Derivative) Contract– the holder may not demand delivery
Equity Share – the holder has no asset ownership or dividend
An Energy Credit holder may simply use the credit to pay for energy supplied
by the Promissor or by another energy producer who will accept it
Investors & Consumers trust producers to supply energy for which they may
pay using Energy Credits – this requires a “Trust Framework”.
Petro Scotland has developed an “Energy Clearing Union” Trust Framework
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12. Energy Financing and Funding
Financing
- short term medium risk development investment
- Energy Loans - energy credits sold at a discount reflecting
development risk
Funding
- long term low risk investment in completed project
- Energy Loans – low risk investment in existing energy flow
- Technology/Energy Swap – technology supplier receives an
agreed proportion of energy credits
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13. Funding the Grid
Cost Sharing - Capital Partnership
Producers & Consumers allocate an agreed % age of Grid energy flow to:
- Technology (eg HVDC ) Costs - Technology/Energy Swap
- Operating (People) Costs
Risk Sharing - Clearing Union
Grid Investment through Prepay Energy Credits - “Energy Loans”
Energy Credits issued by one producer are accepted in payment by another
Producers, Consumers, Investors share risk by mutual guarantee (P & I Club)
Administration, Accounting & Risk Management by Service Provider/Grid
Operator
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14. Outcome - Smart Market
Caspian Energy Grid – Physical Network
'Smart' Grid optimising energy production and use
Clearing Union – Financial Network
Caspian Energy Clearing Union connects producers directly to consumers
through Energy Swaps and Energy Credits
Smart Market
Most efficiently produced power is always despatched first – Smart Market
Example
Rural Iranian producer of solar electricity exchanges energy credits for
Danish goods & services directly from Danish energy consumers
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15. Energy Credits - Examples
Renewable Energy
Wind Turbine owner sells 100,000 electricity credits each returnable in
payment for 10 kWh of production
Credits are returned in payment for electricity supply when the wind blows
Gas/Power
Gas fuelled generator sells 100,000 electricity credits each returnable in
payment for 10 kWh of production
Problem: If the generator's gas purchase price rises he may make a loss
Solution: Generator agrees a Gas/Power Swap and the gas supplier receives
an entitlement to electricity credits
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16. Marketing the Grid - Producers
Education Programme
Wherever the sun shines and the wind blows in Iran the Caspian Energy Grid
will enable Iranians to access this renewable energy.
The value of local renewable electricity production will drive sustainable
local economic development throughout Iran.
This education programme will demonstrate how Iranians may become
“Energy Producers” with no capital requirement.
The benefits to local and rural economies will qualify the programme for
development funding from institutions such as the World Bank.
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17. Strategy – Organic International Expansion
Caspian Energy Grid integrates physical and financial energy networks
Caspian Energy Grid avoids single points of failure and through flexible
power routing increases system Resilience
Iran currently exports physical electricity to seven nations & energy swaps
enable electricity to be supplied beyond these neighbours in all directions
Marine links via the Black Sea connect Caspian Grid to European Grid and
Persian Gulf links access Arab nations
Outcome - Eurasian Energy Grid and Eurasian Clearing Union (Network of
Networks) will extend North to Russia, West to Europe & East to China
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18. Petro Scotland – Our Innovation
Petro Scotland has worked with research teams in two different Scottish
Universities and the pre-eminent London University
Petro Scotland's unique innovation is not the physical Caspian Energy Grid
but is the legal framework, financial instruments & algorithms which fund it
Petro Scotland proposes an Energy Clearing Union agreement within which
energy swaps take place & energy credits are issued, exchanged & returned
Petro Scotland's energy market solution resolves the most crucial question
faced today by Iran and international partners
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19. Next Steps – Starting Now
Step 1/ Foundation
Sign Interim Agreement to create the Caspian Energy Grid initiative as a
start-up project.
Step 2/ Concept Research & Development
Create Outline Caspian Energy Grid Proposal
Milestone: Report to feed into World Energy Council meeting October 2016
Step 3/ Pre-Planning
Create a programme of Proof of Concept projects across themes, with
diverse Public/Private participation
Milestone: Formal Launch of Caspian Energy Grid at major regional event
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