An Applecross Natural Grid

A Capital Partnership Approach

Chris Cook

Applecross 20th February 2014

“21st Century problems cannot be solved with 20th Century solutions”

Market Paradigms

Market 1.0 – decentralised, disconnected, physical

Market 2.0 – centralised, connected, intermediated

- Debt (Banks) and Equity (Joint Stock Company)

- October 2008 – the Market 2.0 paradigm broke

How do we achieve a resilient Market 3.0 ?

Introduction - Resilience

Resilience - the enduring power of a body or bodies for transformation, renewal and recovery through the flux of interactions and flow of events

Resource Resilience – Natural Grid

Financial Resilience – Open Capital

Resource Resilience – Natural Grid

Since 1980 Denmark's GDP rose 78%

Energy use has been stable

Carbon fuel use has declined

How did Denmark achieve this?

Resource Resilience - Natural Grid

Least Energy Cost principle

- not 'least Danish Krone cost' (or least $, € or £ cost)

- minimum carbon fuel input for a given output of electricity, heat or power

- investment in renewables, heat, transport, energy efficiency

Emerging Outcomes of Natural Grid policy

- decentralisation

- skills base of knowledge and knowhow: eg Vestas is the biggest global wind turbine manufacturer......in a country of 6m people

- trend to energy security and energy independence

- not forgetting........reduction in carbon use

Financial Resilience – Open Capital

Prepay – credit returnable in payment for value

Nondominium

- People-based (P2P) Credit – Guarantee Society

- Asset-based Credit – Capital Partnership

Prepay

Tax

Tax Prepay

Tax Prepay – credit returnable in payment of taxes

Tax Return – 'stock' part of tally stick returned to Treasury

Rate of Return - rate over time at which stock is returnable for cancellation

eg Prepay £8 for £10 tax - £2 profit 25% pa rate of return

- not fixed - depends on existence & quantity of flow

21st Century Prepay

Land – credit returnable in payment for land rental or production from land

Energy – credit returnable in payment for energy

Land Partnership

Custodian(Community)Custodian(Community)

InvestorInvestor

OccupierOccupier

RentalPrepay

%

%

ManagerManager

Rental

Land Prepay – the Value Proposition

Community

- sells rentals forward and locks in price

- interest-free loan until prepay unit returned vs rental

Occupier

- prepays rental and locks in price

Land Prepay – the Value Proposition

Investor

- direct 'inflation hedge' investment in land

- Occupiers buy prepay credits from Investors at best price below issue price & return against rental

Manager

- shares in gross rentals or production

- interests aligned with Investor

- no 'Principal/Agency' problem

Land Partnership - Outcomes

Social Contract - relationship-based not transaction-based “4 B's” model - costs transformed to revenue shares

Neutral – removes ego and politics

Collaborative - stakeholder interests aligned

Sustainable - all have interest in minimising cost over time

Energy Partnership

Custodian(Community)Custodian(Community)

InvestorInvestor

ConsumerConsumer

Prepay %

%

ManagerManager

Payment

Energy Prepay – the Value Proposition

Community

- sells energy forward and locks in price

- interest-free loan until prepay unit returned vs supply

Consumer

- prepays for energy and locks in price

Energy Prepay – the Value Proposition

Investor

- direct 'inflation hedge' investment in energy

- Consumers buy credits from Investors at best price below physical energy price & return against supply

Manager

- shares in gross revenues or production

- interests aligned with Investor

- no 'Principal/Agency' problem

Energy Partnership - Outcomes

Social Contract - relationship-based not transaction-based; costs transformed to revenue shares

Neutrality – removes ego and politics

Collaborative - stakeholder interests aligned

Sustainable - all have interest in minimising cost over time

Mega Watts and Negawatts

Mega Watt production of renewable energy sells at the wholesale market 'bid' price

Nega Watt production is made by consumers at the retail market price

But Green Deal has two problems

- compound interest on bank £ loans

- even if £ is saved, no guarantee energy will be saved

Applecross Green Deal

Investor paying £1k for Units in Applecross Energy Pool

- 20 1Mwh prepay Units @ £50 each

- 2000 10 Kwh prepay Units @ 50p each

Fund invests at community level through energy loans eg community CHP/co-generation

Loan repaid via energy bills through buying prepay energy units at market price

Interest-free loan – return to investor in energy

Unless consumers save energy they will not save £

Applecross Green Deal

CustodianApplecross Energy Pool

CustodianApplecross Energy PoolInvestors

Consumers

Manager

£ EnergyLoan Buy units

at market price

£

Prepay

Prepay

Units

£

£

21st Century problems cannot be solved with 20th century solutions.........

…....21st century solutions pre-date modern finance