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
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. 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
Undated
Return
Discount gives absolute return: eg $10's 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. Prepay 2.0 – Stock reinvented
In the late 1990's 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. Green Deal - Issues
Problem
Compound interest - bank rates of interest mean many
projects are not viable
Behaviour (Jevon's 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. 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. How it Works
Stock Consumers
$ or Stock energy
Returned
Stock Custodian
Custodian
Investors
Stock
$
Stock Proportional Shares
Managers, Producers
10. Hyde Farm Energy Partnership
Consumers
(Association)
Custodian
Custodian
Lambeth Council
Lambeth Council
Investors Managers
(Association) (Consortium)
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. 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. 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. 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)
