Say you have a Unit redeemable for 10 Kilo Watt Hours in electricity. That will be accepted in settlement of electricity supplied by any supplier member of the Pool.
If they didn't issue it themselves they will present it to whoever did and be credited with 10 Kilo Watt Hours, or be paid in cash at the physical market price.
JakeS:
Suppose that I have an apple unit that I bought a while ago, and I want to get my apple now. What do I do?
This Unit does not entitle you to delivery of the apple, but is prepayment for an apple.
You buy the apple from the supplier, if he has any, and present your Unit in payment, if you wish. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Or if you've bought an energy unit, you could still be sitting in the dark?
How is this a benefit?
Having a Zimbabwean Pound today can only buy you an apple if there are apples available.
Tomorrow the apples will probably still be available but now it may take ten Zims to buy one.
An apple Unit on the other hand, would still be redeemable for the apple, but maybe not that much else.
I suspect that a Unit issued by a credible operator and redeemable in 10 Kilo Watt Hours, or maybe a Unit redeemable for an hour of Zimtel talk time; or a Unit redeemable in Zim land rental value, would remain fairly constant against apples too, even though the fiat Zim is fucked. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Someone I knew who was in the top team at Orange a few years ago told me that the Egyptian Central Bank forced their local operation to cease issuing their highest value phone cards because they were being increasingly used as currency, since they held their value better than the official currency at the time. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Electricity is an infrastructure business.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
There's still no reason why Unitisation could not be used as a complementary funding mechanism to conventional debt and equity.
Indeed, as a "one time" conversion, unitisation within a partnership framework could release enormous value.
And the result would be an enterprise model that works, and keeps on working, for the benefit of all stakeholders, and not distorted for the benefit of unproductive rentiers. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
And this is especially the case with electricity kWh, which can almost not be stored, and whose timeliness value is extremely high? In the long run, we're all dead. John Maynard Keynes
I believe that this redeemability connects the physical and the financial in a way that allows a new approach to investment, and indeed, offers a basis for a regional and even global reserve currency. Units redeemable in carbon energy could be a transitional - globally fungible - currency.
It is only through basing exchanges on an energy standard, (ie energy accounting), I think, that we can make the transition to renewables.
An economy founded on money-as-debt and with value extracting intermediaries operating "For profit" is the cause of the problem, not the solution. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The value difference between the two is so volatile as to completely negate the usefulness of the units. They would become pure speculative plays on the immediate balance of the electricity grid, and that function will pollute any other that you might want it to play. In the long run, we're all dead. John Maynard Keynes
So the plan is to create local energy pools at the micro level (private wire obviously as with Woking), and I have a twin turbine municipal scheme on the stocks, with almost all the permissions done.
At the macro level, an Energy Pool could work for (say) the North Sea (where a cross border legal framework exists) or the Caspian Sea, where it does not, as far as I know.
Retail customer prices do not in fact change much - and Units are primarily a retail product on the one hand, but when aggregated become wholesale financing on the other. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The current European electricity network carries alternating current over distances that are measured in the order of a thousand km. And a future European supergrid will carry direct current even farther. While at the same time load-balancing continuously. In other words, the electric grid is not local, and electricity is not storeable. Oil exchanges, which is where I believe you have most of your experience, deals with a commodity that is both local and storeable.
This is not hair-splitting. Even if your scheme works for oil, apples or grain, there is no way, short of direct divine intervention, that a distribution scheme adapted to local, storeable goods will perform satisfactorily for non-local, non-storeable goods.
It is the profit motive that leads to the negative outcome in the former case, and the nature of the State as an organisation, combined with the defects of representative democracy, in the latter.
IMHO the optimal enterprise model for an infrastructure utility is neither Public = State, nor Private = For rentier Profit but a networked cooperative of cooperatives. ie a partnership framework for Peer to Peer interaction between producer and consumer.
I set out my conclusions here in 2001 and a blueprint for a Market 3.0
This analysis is now being picked up by influential thinkers such as Michel Bauwens, and others. If you can refute it, I would be interested to read your critique, and your alternative view of the next generation of markets.
I identified and developed in 1998/9 - through a Dot Com I founded - what was essentially a new utility function. ie generic transaction registration. It took years to realise that the problem was that there was no adequate enterprise model for such a utility, or indeed, for any utility.
Many years, and much analysis and development later, I believe that not only could a partnership-based utility model be created but it is, I submit, in the interests of States and Shareholders alike for public and private utilities to use such a model.
And btw, Jake, I spent years working on the emerging electricity and gas markets while at IPE, and remember discussing clearing in Oslo with Nordpool when they were still recording transactions on a white board.
I think I know what works, what doesn't work, and more to the point I now have a pretty shrewd idea WHY it doesn't work, market by market.
And if you require a rationale for unitising electricity you might try reading someone who has essentially done it just to show that it's possible. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Units redeemable in underlying value do not concern securing supply. They secure price, and have no effect on supply.
They are a means of payment complementary to fiat currency - and a genuine store of value, which is why they will be hugely successful in a way that commodity ETFs (ETCs) can never be.
Unitisation is pretty trivial - supermarkets and airlines which issue reward points and air miles are issuing Units.
It's not Rocket Science. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Money is redeemable for anything, from anyone. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
I would propose as a starting point membership by energy users and consumers alike of an International Energy Trade Association (defined by use of a transaction registry) and then to build an Energy Pool, Guarantee Society upon that foundation, and apply unitisation within the resulting framework.
I think that you would be hard pressed to find people not prepared to accept a Unit redeemable in energy if such a framework of trust existed.
Note that I see Units redeemable in energy as a global reserve currency. Units redeemable in land rental value would probably comprise most of the value circulating locally. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
And a market structure that works for storable goods can work for un-storable services, though it does not have to.
I think I will have to make a diary of how I understand Chris so far. My present position is that there is something very appealing with decentralising credit creation, though I do not really see how Chris system would work on a larger scale. Then again the steam engines were quite a mystery scientifically until thermodynamics, and the theories surrounding them where inconsistent and had severe problems. But that did not stop the engines from working. A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
