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European Tribune Sponsors Wind Turbine [Update with Poll]

by Frank Schnittger Tue Nov 11th, 2008 at 09:20:53 AM EST

NB In view of comments below I affirm that this Diary does not solicit money or any service. It is purely for the purposes of information and discussion. No intellectual property was harmed in the writing of this diary.

This started out as a comment inspired by What Happens If Wind Energy Gets Successful in the U.S.A.?

This is probably a really stupid comment, but would it be an idea for ET to sponsor a wind-turbine - somewhere where feed in tarifs are available - and where start-up capital requirements are minimal.  Most of us here aren't exactly rich, but we do need to provide for our futures/pensions etc. and so a Chris Cook style cooperative whereby we jointly sponsor and fund a turbine would have a definable long term return.  I have to invest for my pension anyway - and would much rather do it for something positive rather than in speculative shares or "financial products".  How about an alternative sustainable energy investment fund?

To which ChrisCook:

A little thought as to legal structure is necessary (mustn't be in breach of financial services law) but I don't think that's much of a problem with a partnership framework agreement, actually...

and (in his usual understated way) THE Twank:

Me likey!  Where do I sign up?
responded enthusiastically.

Frank Schnittger:

I'm happy to post a short lead in piece, but I would need Chris, Jerome and Crazy Horse to provide the major legal, financial and technical inputs.

So how about it guys.  Could this be a realistic,  doable and reasonably secure project for people who don't have the funds (and the inclination) to engage in speculative investment or to enrich the coffers of ravenous high overhead financial institutions but are prepared to put their meager savings into a responsible project offering a small but reasonable return? If banks no longer have the capital to fund such projects, can we help fill the vacuum?

I'm prepared to put a not inconsiderable (for me) amount into such a project to get it off the ground.  If it works, we can always add a second turbine...

So how about it Jerome, Chris and Crazy Horse?  You're the experts.  As you know I get impatient when we just talk.  Is this a project we could all get our teeth into and actually deliver in a reasonable space of time?  I am instructed by: THE Twank:

Well get 'em out of bed, fer Christ's sake!  :)


Perhaps this has all been thought of and discussed before, but where would the world be without naive enthusiasm? This project could harness the wealth of expertise, if not actual wealth in cash, in this community. It would give us a focus and a tangible presence in the real world. I look forward to a future meet-up taking places in the shadow of a Vespa. We could create enough hot air to keep it going on a calm day!

Poll
I would be interested in investing in an ET wind turbine to the tune of c.
. €100 21%
. €500 31%
. €1,000 15%
. €10,000 26%
. €20,000 5%

Votes: 19
Results | Other Polls
Display:
Oh MAN, I could tell you stories.  I LOVE IT when stuff actually happens.

BRAVO!!

The good news ... it's only a life sentence. You eventually leave this planet of idiots.

by THE Twank (yatta blah blah @ blah.com) on Tue Nov 11th, 2008 at 09:29:11 AM EST
so cannot post the link, but dig for diaries on that topic by me over on dKos in the summer of 2005. The first major hurdle is that it may be illegal under securities law to solicit funds for this over the internet.

beyond that, note that my financing experience applies to much larger projects than what you have in mind.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Nov 11th, 2008 at 11:15:54 AM EST
http://www.dailykos.com/storyonly/2005/7/13/11131/3919

A loose group was created following that (including nb41 who had a potential project in upstate NY), but one of the lawyers that had volunteered to help out on securities rules disappeared, and other things ended up keeping me busy.

What you need to know:
1 turbine = 2MW = 3MEUR
Debt used to be able to fund 90% of that, but it might be less now in today's environment (and I don't even know if that 90% figure is correct for small projects) - which means finding at least 300,000 EUR.

In some countries, you have tax deductions and other mechanisms to lower the capital needed, but we're still talking real money for individuals.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Nov 11th, 2008 at 12:15:18 PM EST
[ Parent ]
OK I've finally gotten to read your 2005 diary and now realise you had almost exactly the same idea over 3 years ago.  With the much greater DKOS readership you also got  c. $500K in preliminary pledges or expressions of interest.  Impressive.

Obviously we need to learn from that project and why it didn't happen - lack of legal expertise - seems to have been the reason.  So obviously we would have to target any ET project to a country where we do have the required expertise/potential partners.

Otherwise I'm surprised that our ideas are so similar - no I hadn't seen your diary until now!  When you get the chance perhaps you could update us on what has changed since 2005 and where you think the most promising partners/jurisdictions might be.

So far we seem to be at c. 40K here with only a few people responding to date.  I will add a poll to the diary to allow people do declare expressions of interest anonymously.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 04:31:23 PM EST
[ Parent ]

 The project in upstate New York is completed - Steel Winds in Lackawanna - a square mile of steel slag was poured into Lake Erie over the last century and now it's got turbines on it. They are Clipper Liberty 2.5mw units and they had gearbox problems but I saw them happily spinning a few weeks ago.

http://www.steelwinds.com/steelwinds/

by SacredCowTipper (sct@strandedwind.org) on Fri Nov 14th, 2008 at 11:32:01 AM EST
[ Parent ]
In view of Jerome's comment, I will stipulate that I do not consider this diary any form of solicitation.  I will also note that I am currently paying institutions to keep my money for me, as I have not had any confidence in the financial markets since November, 2006. My goals are to have income from the money and to be protected from inflation.  Neither goal is currently being satisfied.  My only accomplishment has been to avoid a 30% or greater loss on my savings over the last year.

Were such a project available, I would be most interested in having something that generates kilowatt hours valued in dollars, as that is what I will need to spend.  Everything depends on the particulars.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Nov 11th, 2008 at 11:48:19 AM EST
I will stipulate that I do not consider this diary any form of solicitation.

Just as a CYA, maybe Frank should update his diary to to state that this diary does not constitute a solicitation.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Tue Nov 11th, 2008 at 12:49:24 PM EST
[ Parent ]
Done

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 01:50:50 PM EST
[ Parent ]
An early decision would have to be on the likely location of such a project, given different tax incentives, feed in tariffs, planning laws etc. which apply in different jurisdictions.  Also given that most of us presumably won't want to get involved in the management and maintenance of such a project, we would have to identify a suitable partner to do this for us - ideally someone with all the expertise and experience but perhaps experiencing difficulty raising cash in the current climate -  and thus amenable to partnering with us for a small part of a farm or larger project they are planning. I suspect this is more likely to be within an EU country - and thus you could be talking Euros rather than $.  Would that be a problem for you?

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 01:33:01 PM EST
[ Parent ]
It would not be a deal killer, but it could limit the amount I would want to invest, as I would have concerns about being able to convert income into dollars during times, such as most of the preceeding year, when exchange rates were so unfavorable.  If the vehicle allowed me to reinvest returns and sell them at times of my own choosing, that would probably suffice.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Nov 11th, 2008 at 02:32:55 PM EST
[ Parent ]
Uh? Surely the exchange rate was extremely favourable.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Tue Nov 11th, 2008 at 03:00:01 PM EST
[ Parent ]
Not if I were buying euros at $1.65/euro and now needing to sell euros at $1.25/euro.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Nov 11th, 2008 at 03:15:28 PM EST
[ Parent ]
I think we need to think of this as a long term -c. 20 year investment with relatively small pay-outs whilst we are servicing the 80% debt and a lot more when that is paid off (presuming higher maintenance costs don't make up the difference).  So it is more akin to a pension rather than a current income investment - or perhaps there are ways of smoothing the income.  

Either way, you have to take a long view on likely currency re-alignments.  Ideally there would be two turbines - one in US and one in EU - to balance out risks - which might be possible if the first turbine is a success.  But failing that you have to accept that long terms income will be based on the currency zone the turbine is located in.  The best way of keeping the currency risk acceptable is to keep your investment small enough to make any potential currency loss bearable.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 04:12:33 PM EST
[ Parent ]
Alternatively, we could partner with Booman or DKos and create a joint venture whereby we finance two projects -one in the US and one in the EU and thus provide everyone with some currency hedging.  Need to keep things simple though!

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 04:42:48 PM EST
[ Parent ]
Diversifying your portfolio is usually a good thing.  The point of such an investment, according to what I understand of CC's proposals, is that the return would be denominated in energy units, not a specific currency. But the value of the energy produced at any given time would be expressed in the currency paid for a kilowatt.  If energy becomes much cheaper over time, this could be a bad thing, but otherwise one risk would be currency fluctuations.

For someone who has retired, it is desirable that the investment be one that produced income within a reasonable amount of time.  However it may be very desirable to be able to defer taking that income for years at a time and to be able to take it when the exchange rates are opportune.  Of course it could also be used to finance repeated ET meet-ups.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Nov 11th, 2008 at 04:54:53 PM EST
[ Parent ]
... reasoning behind my next comment down, regarding wanting a Eurozone project paying in Euros.

Of course it could also be used to finance repeated ET meet-ups.

A worry is that by the time I get back to having a full time income, the US$ won't go far enough in the EU to let me get full advantage of it.

My saving for my retirement is using more than half of my income to pay college loans and other debts ... as a punt, I like the prospects of the €/US$ over the next decade or two.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Nov 11th, 2008 at 07:59:13 PM EST
[ Parent ]
I tend to agree and you certainly are in a better position than I to know.  I am just concerned that the fluctuations in exchange rates can be unpredictable, at least by me.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Nov 11th, 2008 at 08:16:04 PM EST
[ Parent ]
Yes, but I would be taking a punt with the money, so if it has to ride a couple of years before I can get to where I can spend it, that's OK.

There may be a way to set it up so that some people go in for the security and some people go in for the punt ... but there's no way to avoid taking a bet on exchange rates for some ET followers whether its in the Eurozone or the UK or the US.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Nov 11th, 2008 at 10:29:28 PM EST
[ Parent ]
... the Eurozone to income in dollars, but OTOH I have bugger all to invest, so don't mind me.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Nov 11th, 2008 at 03:54:12 PM EST
[ Parent ]
Well, it would be good but as Jérôme said it would probably need some fund-raising.

Anyway, while understanding that this post should not be construed as fund-raising, let's say you could count me in for at least 10k€ should it start soon -which is unlikely.

Should it start later (like in "my apartment has been sold" or "it has generated a few months of rental revenue"), I guess you could count me in for quite a bit more than that, if the expected revenues are reasonable (I am willing to waste money for good causes, but there is a limit to the amount).

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue Nov 11th, 2008 at 12:30:24 PM EST
I would be happy to at least match that provided I was happy the project was viable and well managed.

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 01:22:32 PM EST
[ Parent ]
If it's well managed and viable, I'll put more ;-) Well, if I can find a good way to hedge for the exchange rate of course. Otherwise it's iffy.

But there's an amount I'm ready to lose, just because I like the idea and because it could be used to get ET some exposure. Over that, indeed, I want to make sure that it's viable -I hope to have to take care of a family one day.

All in all, I reckon 300 k$ is something we could raise pretty much among us (if it's viable, we'd have twice "at least" 13 k$ between the two of us already). Further than that? Well, I'm sure I could convince some people who believe in windpower and in international partnerships. As a rule of thumb I'll estimate that we could double our own contribution (possibly optimistic) if we were to start finding other sources.
This should mean that if we can get 80% funding from debt, we should be OK. That would of course also mean that we would be more resilient to unexpected issues than a normal project (with 90% debt).

I'm cautiously optimistic that we could do it.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue Nov 11th, 2008 at 01:37:19 PM EST
[ Parent ]
Oops, it's 300 k€ we need. Anyway. We should manage that hurdle.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Tue Nov 11th, 2008 at 01:43:20 PM EST
[ Parent ]
ARGeezer and The Twank have also expressed an interest in participating, so that's 4 of us already.  25 more doesn't sound an impossible number, though I suspect the capital cost could be a lot more than the 300K needed to 10% part fund the turbine - land, banks reluctant to lend 90% etc.

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 02:00:51 PM EST
[ Parent ]
Same here.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Nov 11th, 2008 at 02:35:32 PM EST
[ Parent ]
I too would be interested in participating in something like this, in principle. How would it work (formally, I mean)?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Tue Nov 11th, 2008 at 12:51:53 PM EST
Well Chris Cook is pretty experienced in the legal options for setting up a formal company structure.  Jerome has a lot of professional experience in Financing much larger projects but might know of some planned projects experiencing difficulty raising finance at the moment and therefor willing to cut us in for a small part of the action on a larger project.  Crazy Horse has a lot of experience on the practicalities of building wind farms and may also know of putative projects in need of some finance.  

I'm not sure that one standalone turbine and all the planning issues and overheads that would require would be such a good idea- we need the economies of scale of a larger development - and I suspect planning authorities would favour that as well - but I'm a total amateur in this area.

Effectively we are creating a new kind of investment bond linked to the known costs and revenues of such a project.  The big problem is that all such investments are long term. and thus any legal arrangements we come to have to be robust enough  to withstand the passage of time - i.e. survive long after ET is no more or has evolved into something totally different.  There is also the issue of liquidity - i.e. will it be possible for an investor to bail out if s/he needs the money for something else, and what would be the terms of that.  So there are a lot of issues which would have to be thought out.

Perhaps such investments "products" are already available in the market place - i.e. bonds linked to known costs and revenue of financing and managing wind farms.  If they don't already exist, I suspect they soon will, and perhaps we could pioneer a more cooperative form of such investment.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 01:49:03 PM EST
[ Parent ]
After chewing on this overnight I've come around to the same conclusion regarding a standalone turbine as you (and CH downthread). It would certainly be more efficient to work within a larger project.

The liquidity thing doesn't concern me that much; a guaranteed revenue stream is something that becomes more attractive in a later phase of life.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Wed Nov 12th, 2008 at 04:31:06 AM EST
[ Parent ]
An other thought (I realise it would make it twice as hard to finance): it would be really nice to have one turbine in Europe as well.

OK, if we were to have just one, I'd rather it were in Europe (this is the European Tribune), but I realise the idea came with the US in mind so I can live with that. But the symbol of having one in each continent would be nice.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue Nov 11th, 2008 at 01:41:31 PM EST
This is clearly not a fundraise efforts.. but I can guarantee that someone I knwo will be ready to invest...

Basic numbers: A wind turbine is 3 Million euros.. we need to pay the people , integrate in a program, localize it, and then get the structure to get the money back.. Al in all put the tag at 3.5-4 million euros... Ok 4 million  ..

given that we are 100 people who pariticapte directly on comments.. I would guess is around 40.000 euros per person...

It is too far for me.. But I can afford 10k.. so we need to expand the ET abse contribution to 400... (there are five times these people registered but...)

And then.. how many people would have the money and the willing here?

it seems that not enough people :) I hope it changes...

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue Nov 11th, 2008 at 03:36:42 PM EST
... then €3M is equity of €600K, which for 100 shares would be €6,000/share.

I've got well over that on my balance sheet, but its not in the credit side of the ledger.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Nov 11th, 2008 at 03:56:46 PM EST
[ Parent ]
Sure sure.. good point.. but my grand pa always faithful to the real-based economy always told me not to buy anything on debt... but pay up-front everything.. no mortgages, no credit card nothing..

I broke the rule and I got a credit-card.. which I try to cover with 10 times the credit int he account..He still loks at me as "know-nothing of the world" (he is absolutely right I have never been in a fascist concentration camp, he has)

So I count as if all the business go south .. then I know how much I lost at the most... So 10k is the msot I am ready to lose... so I would only take the equivalent on shares. It would be 2000 euros... a third of a share... I can push up to half a share.

I always do numbers like this.. if banks would do it like that we would not be in the mess we are.. but there again, capitalism would be a very different beast :)

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue Nov 11th, 2008 at 05:04:18 PM EST
[ Parent ]
... the amount put into the shares (units) is the most that people buying units could lose. The leverage would be by the LLC, not by the individual owners.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Nov 11th, 2008 at 05:22:25 PM EST
[ Parent ]
We do not have to back it up if we create it?

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Nov 12th, 2008 at 01:54:11 AM EST
[ Parent ]
It would be backed by the physical asset ... that's what the equity share is for, so that there is a buffer on the value of the asset if the operation goes belly up.

The greater the equity share, the more the security of the debt share, all things equal ... of course, for different countries, all else is not equal, and if a feed-in tariff is in place, the downside risk of being unable to service the capital stake is much less.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Nov 12th, 2008 at 02:15:25 PM EST
[ Parent ]
Proportional shares are infinitely divisible, so that if you put in $10 you would get a hundredth of what the guy investing $1000 gets.

But IMHO investment should be in line with Cooperative principles ie one investor one vote.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 11th, 2008 at 05:33:03 PM EST
[ Parent ]
Well, we may go for something in between and not be merely proportional to capital, but I wouldn't like to see a crowd of 1€ shares in order to get all the votes...

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Wed Nov 12th, 2008 at 01:43:10 AM EST
[ Parent ]
You're thinking of a Company.

Proportional shares ie"n'ths" or %ages don't have votes.

Neither would Units redeemable in (say) Kilo Watt Hours.

Both are forms of "quasi Equity" but they don't have votes.

Members have votes: and one Member would have one vote, and THEN only in matters which concern them.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 12th, 2008 at 03:13:46 AM EST
[ Parent ]
Well, it's the same: what about if you end up with someone bringing 1000 members?

The thing with a wind turbine is that it's almost purely capital once it's installed. I know there's a bit of maintenance, but, well, it's not like a medical practice where the partners are, rather obviously, the doctors, and possibly anyone else working (you may make a secretary a partner after all). But with a wind turbine, and a feed-in price, once it's online what do you have to contribute?

So it would seem that the partners would have to be mostly the ones bringing capital. Since the online turbine is pretty much just financial management, I fail to see where not taking the amount at risk into account would greatly improve things.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Wed Nov 12th, 2008 at 03:23:38 AM EST
[ Parent ]
Cyrille:
The thing with a wind turbine is that it's almost purely capital once it's installed. I know there's a bit of maintenance, but, well, it's not like a medical practice where the partners are, rather obviously, the doctors, and possibly anyone else working (you may make a secretary a partner after all). But with a wind turbine, and a feed-in price, once it's online what do you have to contribute?

Any individual who owns redeemable Units - and these would be what makes up the Capital, having been sold to redeem any conventional debt and to give Equity Share punter investors an "exit" once the turbine is built - would be a member of the association of investor/users who would have little more than an advisory role.

The people with the continuing "Equity Share" rights to production would be the "Community" ie locals, who get an "energy dividend"; and the "Operator" (for as long as he is the operator).

Punters who invest in the development could "exit" by exchanging their "Equity Share" rights upon completion for "Units", and it's up to them whether they use them, or keep them as a pension investment.

As for a "feed in" price, that's another issue. I'm interested in the approach that the UK town of Woking takes, with a private wire locally. Also the "stranded wind" approach, where the effect would be to create (and possibly sell forward) a stream of (say) fertiliser.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 12th, 2008 at 03:45:02 AM EST
[ Parent ]
My tremendous respect for you and my awareness that you have spent a lot of time thinking these things through make me expect that you are right.

On the other hand, to be honest, my impression when reading you in those few posts is that you are creating complexity for ideological reasons.

So, I hope I will eventually understand (and I realise that I should have spent the time to read your website in detail before entering the conversation), because, again, I fully expect that you are right.
For the time being though, my impression remains that, while I see many cases where the cooperative system is obviously better, this particular case may not be one of them.


Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Wed Nov 12th, 2008 at 07:15:25 AM EST
[ Parent ]
I think for a project like this ET should very much not be about building a pet windmill for the sake of it, but to use a windmill as a pilot to pioneer new forms of participatory and open finance.

I'm not sure that the model Chris is proposing is the very best possible, but I think it's certainly a better alternative than the traditional model, and unless and until we invent up with an even better alternative I'd be happy to support it.

I'd be happier still to view this is a trial ballon for even larger projects. The Saharan Solar project has a lot of potential, and it's probably not a good plan to wait for the EU to make it happen officially.

I'd be very excited about an EU-wide Saharan Solar public investment project, combining grass-roots micro-investment with more traditional capital funding.

Grass-roots contribution machines shouldn't just be for US elections. I'm sure we can do something interesting with them in the EU too.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Nov 12th, 2008 at 07:26:16 AM EST
[ Parent ]
Well, I agree we should try to push things we believe in. But I also reckon we can separate our goals, otherwise we'll end up chasing too many hares.

I see that as contributing to renewable energies, enabling a joint initiative over two continents but involving only "normal" people (as opposed to super rich), and giving ET some exposure of course. That's already quite a lot, and very worthy.

If we want to promote arrangements that give more rights to the workers, lock in long term deals between producers and consumers... that's very fine as well, but I doubt that a wind turbine is the right project for that. I may be wrong, in which case by all means let's do it. But I'd hate to see a good idea go to waste because we would have loaded it with too many dreams and expectations.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Thu Nov 13th, 2008 at 07:34:44 AM EST
[ Parent ]
I think this is right ... something with a smaller sized unit that would make it easier for people to take a flier on being in on the ground floor of a new way of doing things.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Nov 13th, 2008 at 08:55:55 AM EST
[ Parent ]
ChrisCook:

Neither would Units redeemable in (say) Kilo Watt Hours.

Presumably these units are the "dividends", or whatever term we wish to use to denote the revenue stream (value stream) produced. But those of us on a different grid need to monetarize these units anyway, don't we?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Wed Nov 12th, 2008 at 11:23:40 AM EST
[ Parent ]
Interesting thread so far, and the assumptions of ET'ers so far are quite conventional.

There are two phases to such a project: the risky development phase, and the much less risky phase once the productive asset has been built.

Interested ET'ers need to make their mind up which group they are in.

Jerome's not interested in small projects. I'm not interested in conventionally structured projects.

It might well be that I'll shortly have a UK proposition for people who are interested in funding an ET Energy Pool.

So if Frank could also run a poll asking whether people are punters or pensioners, that might be helpful, in addition to the current poll establishing how much they might - hypothetically of course - be up for.....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 11th, 2008 at 05:25:58 PM EST
ChrisCook:
It might well be that I'll shortly have a UK proposition for people who are interested in funding an ET Energy Pool.

Correction.

A UK proposition available  to ET'ers interested in funding an Energy Pool.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 11th, 2008 at 05:35:19 PM EST
[ Parent ]
Can only put up one poll at a time, so might leave that for a follow-up diary.  However if I read the contributions so far correctly, people are managing their risk by controlling the amount they are prepared to put up.  After that it all depends on what kind of partners/opportunities prospective risk/return ratios any possible project involves.  I've put up a median amount based on a median risk/reward project.  I'm prepared to adjust up or down depending on how good the project proposition turn out to be in the end.

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 05:53:19 PM EST
[ Parent ]
... it would definitely be a punt. My current investment consists of paying a debt quicker than the due date.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Nov 11th, 2008 at 06:05:10 PM EST
[ Parent ]
may the rate at which Chicago School Economics comes to be discredited rapidly accelerate and give you employment opportunities more appropriate to my estimate of your perspicacity.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Nov 11th, 2008 at 08:24:15 PM EST
[ Parent ]
There are already models for this kind of financing of utility-scale turbines by individuals and coops, though they all are based on conventional, dinosaur finance prevalent in the Pre-Cook Era.  As i've posted in the past, Minnesota and Denmark have a history of allowing the development of individual and community based turbines, and though i'm not familiar with the details, here in Germany as well.  (In fact there's even an offshore project with thousands of individual investors going against the grain of major utility financing.)

Here's the Community Wind Toolbox for the USA side.

A pioneer friend in Denmark sent me this note tonight:


I know that many Danish banks and small companies help with investments (for Danes) in German and French (!!)  wind turbines....

yes.. I think you should contact Danish Wind Turbine Owners organisation   ( Try Asbjørn Bjerre, and say hello from me...)

Find contact info at    http://www.dkvind.dk/eng/index.htm


What's important to realize is that with multi-megawatt turbines, it's best to hitch a ride on a larger development...  and there are some in Germany willing to do that for a management fee.  In the right circumstances, stand-alone can work as well.  WindGuard has its own Enercon 2MW powering the new wind tunnel.

Of course that means that there is enough experienced expertise right here to get it all done right at the highest standards, from resource assessment to siting to sourcing vendors.  In addition to whatever equity i brought, i'd put in a serious amount of sweat equity to make sure the project was top of the line.

Wish i had more time to further develop the concept; ain't gonna happen tonight.

But the concept is something which we could actually make happen.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Tue Nov 11th, 2008 at 06:34:14 PM EST
Crazy Horse:
There are already models for this kind of financing of utility-scale turbines by individuals and coops, though they all are based on conventional, dinosaur finance prevalent in the Pre-Cook Era.

Well, if people can fund it conventionally, best of luck, I say....and the Danish model is maybe the least worst...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 11th, 2008 at 07:42:44 PM EST
[ Parent ]
In Canada we have

http://www.windshare.ca/

The estimated payback period for the Lakewind Power Project is twelve years, with a projected IRR (Internal Rate of Return) of 7.23%. WindShare will obtain a Standard Offer Contract from the Ontario Power Authority to sell the renewable energy produced by the Lakewind Power Project into the Ontario grid. The contract guarantees a 20 year power purchase agreement and price, interconnection to the grid, and allow wind power projects under 10 MW to compete economically with larger power generation projects.

http://www.windshare.ca/lakewind/economic_snapshot.html

aspiring to genteel poverty

by edwin (eeeeeeee222222rrrrreeeeeaaaaadddddd@@@@yyyyaaaaaaa) on Wed Nov 12th, 2008 at 05:19:27 PM EST
[ Parent ]
This is fortuitousness.

The town where I live has 40 acres (16+ hectares) waiting for development which could be gotten for free and the town has $30k in potential seed/development money that could be used -- if I could convince them this was a worthy project.

A recent law was passed requiring all electric companies in New Mexico to work toward acquiring 10% of their power from renewable sources, such as wind.  Our local rural co-op has money that, in theory, could be invested in a project.

The State of New Mexico has wind-power monitoring equipment that could be gotten - for a fee? - to quantify the wind power potential of the site.

If this sounds interesting let me know and I'll talk it around, see what responses I get.


Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue Nov 11th, 2008 at 07:20:52 PM EST
Sound promising.  Is the 40 acre site suitable/big enough for a wind farm? Is there a local partner with the required expertise?  How would we safeguard people's investment from an unscrupulous operator?  Just some questions that come into my mind when considering putting money into a small scale project far away from home...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Nov 11th, 2008 at 07:32:31 PM EST
[ Parent ]
In order...

Yes.  

Yes.  

We got guns; they got guns; all God's children got guns.  (This IS New Mexico pard'ner.  ;-)  )

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue Nov 11th, 2008 at 08:06:52 PM EST
[ Parent ]
What about feed-in tariffs?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Wed Nov 12th, 2008 at 04:24:32 AM EST
[ Parent ]
I got no guns, and I wouldn't want to use them if I had.  This thing has to be based on verifiable trust.

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Nov 12th, 2008 at 06:05:20 AM EST
[ Parent ]
No where near being able to even start looking for a management company and won't be for at least a year, more likely two years.  

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Wed Nov 12th, 2008 at 01:03:21 PM EST
[ Parent ]
type of project is 'near and dear' to me. If you like, you can read my earlier diaries on the subject of a land LLC, which would be a vehicle for a variety of 'intentional community'. Most of the 'intentions' would have to do with energy, food, and co-operative work/ownership issues.

I have a chartered LLC with a set of bylaws, but I am currently what we called in Texas "land poor". In typical Texas' style, it means the opposite of what it seems to say. IOW I have too much land, which means less money. If I had sold one particular property this year, I would be starting to implement my land LLC this month. But I didn't, so I'm not.

I am interested in this project and can invest, but I agree with Chris that the approach is a key matter, both in terms of organization and of equity. However, I would like to hear from Chris how energy-units can be the 'currency' for those of us who are not in the service area of the turbine?

Here are a few other suggestions and questions:

  1. make no move in the U.S. until the Obama administration and the new state administrations lay out their renewable energy programs in 2009. There are few states with feed-in tariffs here, and those programs seem to be fading. On the other hand there are many recent and new state mandates for varying %s of electricity generated from renewables. Some states will be trying to reconcile program with mandate.

  2. I told nb41 that I would write a diary soon about the three-PUD LLC in Klickitat County for wind turbine development. I have good contacts there who will fill in the details. I think that there is a chance that we could piggy-back on their activities, in which case we would be part of a large enterprise with concomitant purchasing power. (Yes, it's a turbine sellers' market, but there are related matters of construction, transmission infrastructure, etc. that can reduce overall expenses.)  2a) The downside is that our electric rates here are low, so the income side of the equation is reduced.  2b) The upside is that the wind resource here is very good.  2c) No feed-in tariff in WA - yet.

  3. In Europe where are the logical locations? What are the electric rates in various regions/countries? Are the countries generally set up to integrate wind-generated electricity? Which states have feed-in tariffs or capital tax credits? Are there projects which we could join in some sense, but maintain an independent operation/organization?


paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Wed Nov 12th, 2008 at 12:11:58 AM EST
paul spencer:
I am interested in this project and can invest, but I agree with Chris that the approach is a key matter, both in terms of organization and of equity. However, I would like to hear from Chris how energy-units can be the 'currency' for those of us who are not in the service area of the turbine?

Such units would be more likely to be accepted as currency in the area where you can redeem them. They would always have a value equivalent to the local market price of electricity, since if the price falls much below that locals would have an interest in buying them for use against their own consumption.

Acceptability outside the area would require a clearing system, and currently this depends on the reach of the local utility who would accept them for redemption, and thereby would act as billing partner, for a fee.

I see the current transaction-based electricity model changing to a service provider model, by the way. The present model is entirely dysfunctional.

I've been asked twice now by the Iranian National Grid to help them set up an electricity market on the UK, US, Nordpool model with trading intermediaries. these markets are not IMHO fit for purpose and are detrimental to the interest of consumers, not to mention the environment.

I told the Iranians that this may be what they want, but it's not IMHO what they need, and to find another consultant who will take their money - not that easy for Iran....!

I digress.

I guess there could well be a market on a town's website, where people could post them for sale.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 12th, 2008 at 04:02:22 AM EST
[ Parent ]
  1. Everyone, to date, is enthusiastic about the concept in principle.  We have a lot of the required knowledge/expertise already within the community.

  2. 64K pledged by 12 members in poll so far.

  3. Possible projects/opportunities identified in New Mexico (ATinNM); Klickitat County, Washing State (Paul Spencer); and the EU (Crazy Horse).  Chris Cook may also have a different proposal in Sterling area (!?!)available soon.  

  4.  A preference for being part of a larger wind farm development rather than owning a standalone installation seems to be emerging.  We need to identify a suitable partner with local knowledge of whatever location/project type is selected.

  5. A variety of "Investor needs" have been identified - from long term pension to medium term income stream and currency hedging, but the key issues are probably security, transparency, and liquidity - i.e. ability to convert part or all of investment to cash if/when required

  6. A variety of options for structuring such an investment have been discussed from conventional share capital based company to CC's members based redeemable energy units.  Is every one clear on the different costs and benefits of the two approaches?

  7. We have very little data to date on the relative attractiveness of different locations in terms of development and management costs, finance and legal costs, government incentives, feed in tariffs/guarantees, and thus the overall viability of the project.  We need to do a lot of homework on this.  

I will undertake to research the situation in Ireland, which has excellent wind resources, very high electricity prices, big government/state utility plans to convert to wind, no nuclear option, and a generally receptive regulatory climate with the Greens in Government, but I am not clear on the details of feed in tariffs and guarantees available.

Perhaps Jerome/Crazy Horse already have comparative international data on this available - or at least sources for finding it - as it would be required to plan/evaluate the prospects of any wind farm project.


notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Nov 12th, 2008 at 06:50:57 AM EST
Obviously, the answer to 6 is no in my case.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Wed Nov 12th, 2008 at 07:03:42 AM EST
[ Parent ]
I still don't understand what CC's approach brings, nor how it works. Maybe it's the legacy banker in me that prevents me from understanding, but I think that it is either hopelessly naive, or just a more complex way to do what actually already exists.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Nov 12th, 2008 at 09:13:36 AM EST
[ Parent ]
What's complicated about a proportional share in a stream of production?

And what's complicated about a Unit redeemable in (say)kilowatt hours?

Why is it complicated for an entity simply to issue redeemable units in relation to a pool of future energy production, and to sell these to the sort of investors who like to invest in Exchange Traded Funds?

If you can show me a simpler financial product than either a proportional share or a redeemable unit, then I look forward to reading about it.

You're the one who deals in complexity, not me.

I think that your first option is the correct one: it is the legacy banker in you that prevents you from understanding.

I'm not saying banking as value-adding service provision is unnecessary, but I am saying that banking as credit intermediation is not only unnecessary, but is in terminal decline.

The banking system you know is fucked, Jerome: get used to it.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 12th, 2008 at 06:31:22 PM EST
[ Parent ]
I don't want to get into the larger philosophical argument - just the practicalities of this particular project.

Because we have no hope of raising the full €3M for the turbine we presumably have to fund at least 80% if not more from bank debt - unless there is another  form of capital we can access that I am not aware of.

Once the turbine is up and running and selling its output to a utility at an agreed rate we have a source of cash which we can use to Pay bank interest/capital repayments and other project overheads - management and maintenance fees etc., and Pay cash dividends to shareholders/members  with the remainder. (the classical model?)

Alternatively we can allocate our production energy units pro rata to our members (shares) and they can either hold on to them as an investment or sell to the utility at a pre-agreed rate or on some energy exchange at the then market rate?  In this scenario would would have to charge our members (again pro rata) a management fee sufficient to cover bank interest/capital repayment and management/maintenance fees. A lot of cash, in other words.

Effectively, under this scenario, members would have the choice to immediately convert their share of energy production into cash (effectively a dividend) or else accumulate energy units which they can hold onto in the hope of getting a better price later.

Is that what your model entails Chris, or have I got this all wrong?

If so I have some further questions:

  1. Does such an energy exchange or futures market currently exist so that different members can do different things with their energy shares?

  2.  What are the income/capital gains tax implications of receive "income" as energy units rather than as cash?

  3. Would the bank not prefer that our partnership got the bulk of its income directly as cash from the utility so they could be sure of getting their interest/capital repayments directly rather than relying on the partnership gathering up the cash from its members in the form of fees (which would then have to be quite substantial)

  4. Would there not be greater transaction costs for members handling all their energy units investment/selling decisions individually, rather than the Partnership doing all of this on their behalf?

A bit like Jerome and Cyrille, I really must be missing something here.  I'm not sure what the advantages for the partnership and its members are unless we all want to become energy futures traders or something like that - and I could see complications in terms of individual transaction costs, differential tax treatments in different jurisdictions etc.  Given that most of any energy generated will have to be sold immediately to cover bank repayments and management/maintenance fees, why not sell the lot and distribute the surplus cash to members and be done with it?


notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Nov 12th, 2008 at 07:31:15 PM EST
[ Parent ]
Frank Schnittger:

Effectively, under this scenario, members would have the choice to immediately convert their share of energy production into cash (effectively a dividend) or else accumulate energy units which they can hold onto in the hope of getting a better price later.

Is that what your model entails Chris, or have I got this all wrong?

An LLP can operate exactly as a Limited company would,by borrowing conventionally etc etc.

And yes, it opens up a further option as you describe. It is also possible for further units to be sold to investors, and for these to be used to repay the bank debt

Does such an energy exchange or futures market currently exist so that different members can do different things with their energy shares

No. But then a stock market did not exist before stocks were invented either. The future I see is essentially a "Peer to Peer" market network, but with the possibility of a "market" actually taking place between members on the LLP's website

What are the income/capital gains tax implications of receive "income" as energy units rather than as cash?

LLP's are "tax transparent" or "pass through". I suspect the taxman would regard energy Units as taxable income at the market price of energy.


Would the bank not prefer that our partnership got the bulk of its income directly as cash from the utility so they could be sure of getting their interest/capital repayments directly rather than relying on the partnership gathering up the cash from its members in the form of fees (which would then have to be quite substantial)

Cash would be routed through the account held in the name of the "Custodian" member, and the bank would have the first crack at it.

Would there not be greater transaction costs for members handling all their energy units investment/selling decisions individually, rather than the Partnership doing all of this on their behalf?

If the market were to take place (say) on the LLP's web-site where bids and offers are posted privately between members, or periodic auctions held, or whatever, then the transaction costs would be minimal.

Frank Schnittger:

Given that most of any energy generated will have to be sold immediately to cover bank repayments and management/maintenance fees, why not sell the lot and distribute the surplus cash to members and be done with it?

That is indeed the logic of the conventional financing system of Debt and Equity, whether the equity is in an LLP or in a Company.

But what bank is going to lend you the money?

Whereas there just might be investors around before too long who might actually see a purchase of units redeemable in energy as a relatively low risk investment.

You are working on the assumption that banks will - as they always have - continue to create the money you need.

I do not think that bank credit will be an option in the future - it will be far too scarce. On the other hand, there is a shed load of money out there, looking for a home - any home - that holds its value.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 12th, 2008 at 08:45:50 PM EST
[ Parent ]
... than being paid in units convertible into money.

AFAIU, one day these units will become a means of exchange, store of value, standard of deferred payment and unit of account, and therefore will be a new class of money institution, in which case being paid in units is being paid in money. However, even granting that for the sake of argument, that day is not today.

What is the means by which this new institution invades the current economy under the current institutional rules ... given that in order for the institution to become established firmly enough to develop all four functions of a money, it must have some niche in which it can become established before it becomes a money.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Nov 12th, 2008 at 07:56:51 PM EST
[ Parent ]
Being paid in fiat money would indeed be simpler, Day One.

Firstly, what we are talking about here is a complementary currency not an alternative currency.

Secondly, we are not talking about a new money issuing "institution". What we have here is simply a consensual agreement between two individuals that one will accept a Unit in settlement of a bilateral "Peer to Peer" obligation rather than accepting a fiat Unit in settlement.

That consensual agreement is the partnership framework agreement I talk about - the "Guarantee Society".

Sellers will extend Buyers credit (= "time to pay") and both Buyer and Seller will make provisions (in fiat money or Units) into a "Pool" or Fund in case of defaults.

In this Peer to Peer credit model, we need a Risk-Manager-formerly-known-as-a-Bank who no longer creates credit (as money) but manages the creation of credit, operates the accounting system, and deals with settlements and defaults..

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 12th, 2008 at 09:01:25 PM EST
[ Parent ]
Secondly, we are not talking about a new money issuing "institution".

Institution as in social institution. Money is an institution, so the topic of a question in institutional change.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Nov 12th, 2008 at 09:27:58 PM EST
[ Parent ]
So does that mean money is an object, or a relationship?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Nov 12th, 2008 at 09:32:31 PM EST
[ Parent ]
... objects and relationships?

All things social are simple entities without any reproduced systems?

What about regular habitual patterns of human behavior that people rationalize, that is, the collections of rules of behavior and folkviews regarding that behavior that we refer to as social institutions?


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Nov 12th, 2008 at 09:38:47 PM EST
[ Parent ]
Too difficult for 2.45am...!

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Nov 12th, 2008 at 09:46:09 PM EST
[ Parent ]
Bloody hard enough for 9:48pm on this side of the lesser pond.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Nov 12th, 2008 at 09:49:04 PM EST
[ Parent ]
Firstly, what we are talking about here is a complementary currency not an alternative currency.

There are a wide range of financial assets that are not money, but are complementary to money.

In order for this to be money, it has to function as a medium of exchange, a store of value, a unit of account, and a standard of deferred payment. Unless it serves all four functions, it is not a money, but rather a financial asset of greater or lesser liquidity in terms of something that does serve all four functions.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Nov 12th, 2008 at 09:31:55 PM EST
[ Parent ]
Well, in the case of electricity, it simply doesn't.
If I am given some electricity production, I don't have the option to hold onto it. I need to either use it or sell it immediately. It can't be kept for future use.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Thu Nov 13th, 2008 at 01:38:17 AM EST
[ Parent ]
You have a unit redeemable against electricity you consume. ie you can pay in conventional money, or in units.

The unit you can hold on to indefinitely, and either redeem it, or exchange it for something else of value to you - possibly conventional fiat currency....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 06:15:28 AM EST
[ Parent ]
Who will ensure that you can exchange this electricity for future one?

Imagine that all electricity is produced in that fashion. Then, for a period of time, there is simply more electricity produced than could be used. It didn't find anyone to "redeem" it if you like.

So you now have, going forward, some redeemable units in some quantity. Yet, everytime one more unit is produced, it will create one more redeemable unit. You'd then be back to trusting that you can redeem them, while knowing that they can't all be redeemed.

But I guess I see where you are going: since this is also a problem of fiat currency, it cannot be said to make things worse on that score. On the other hand, you reckon that it would create an energy futures market without the spread from the bank. But then you still need to pay the management fee. Is it certain that the fee will be less than the spread?

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Thu Nov 13th, 2008 at 09:26:31 AM EST
[ Parent ]
Cyrille:
So you now have, going forward, some redeemable units in some quantity. Yet, everytime one more unit is produced, it will create one more redeemable unit.

That's not how I see it.

Only a proportion of the production would be unitised.

Unitisation is an undated forward sale, and is a replacement for securitisation, which is also a claim over future production, but is typically dated.

Units sold are presented for redemption against electricity consumed. Units differ from forward or futures contracts since these are dated, and the buyer may demand delivery upon a particular date or dates.

While Units are outstanding, the Unit issuers are benefiting from the benefits of what is known as

Seigniorage

The Lombard goldsmiths apparently were the first to achieve this benefit in modern - "fractional reserve" - form when they realised they could issue more certificates of deposit in relation to gold sitting on their "bancs" for safe-keeping than they actually had gold, and charge a fee for the privilege...

The average wind turbine could be financed, or more likely re-financed, by selling forward Units equivalent to maybe 30 to 40% (depends on how windy it is) of the production  on this basis.

An amount of production would need to be retained to cover operating costs, and maybe a payment to the land-owner (if private) but not every turbine builder is averse to partnership arrangements

Enercon PartnerKonzept


Yield-oriented cost structure

The costs for the ENERCON PartnerKonzept contract are based on the annual wind turbine output. The customer pays a minimum fee depending on the respective wind turbine type and a yield-oriented surcharge. This means that the customer pays more in good wind years with good yield and less in bad wind years with less output thus stabilising annual wind turbine profit.

In order to keep customer charges as low as possible, ENERCON assumes half of the EPK fee during the first five year operational period. The customer is then obliged to assume the entire fee starting from the sixth year of operation. This is a definite advantage for the operator.

The balance of production is sold either locally (on a private wire) at a local price, or into the grid at the wholesale price. The resulting income is then a "Community Dividend".

The "monetary management" aspect comes from the fact that many of the Units might not be presented for payment for years if ever, and a close eye has to be kept on the amount in issue, and those redeemed, and the capability of the plant to produce sufficient energy.  So a "sinking fund" would be a good idea, towards a replacement turbine.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 10:09:44 AM EST
[ Parent ]
Yes, this is a question. The unit entitlement would have intrinsic value in its own right, which would substantially complicate it working as a medium of exchange ... so even in the impoverished model of money in marginalist economics, its hard for me to see it evolving into a money.

And the intrinsic value would also interfere with it being used as a legal standard for deferred payment on contracts, which would make it difficult to have wages denominated in energy units.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Nov 13th, 2008 at 08:51:57 AM EST
[ Parent ]
... in the build up to the current Panic was not in the traditional banking business of becoming creditors for lending and debtors for bank account liabilities.

It was in banks getting more and more into the business of being pure intermediaries, with serious moral hazard problems in terms of wanting to build up the volume of "business" without a stake in whether or not the liability side of the debt could in fact deliver over time.

So it sounds like this is a suggestion for more of the same that got banks into trouble, except with the sources of credit being spread even more widely among household with ability to pay even more tightly bound to the level of economic activity.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Nov 13th, 2008 at 09:46:41 AM EST
[ Parent ]
The core problem with "peer to peer" investing is that you still need someone to bring together the requisite number of investors in the same place at the same time to put up the (large) amount needed for the initial investment.

History tells us that, unless you are in particularly bubbly times, this will require someone to make the full commitment and redistribute it amongst the dispersed investors. That's what a bank does.

It's not just risk analysis, it's credible risk-taking-coordination (the important word being "credible": banks are about trust - the fact that many banks abused the trust of many investors lately does not change the fact that they are needed as institututions able to trustfully assess, collate and distribute risk)

You, of all people, working in Iran: have you never wondered why the Iranians could not do LNG? It's not that they don't have the technology, or cannot buy it. It's that they are not seen as a credible counterparty to the massive contracts that are needed to underpin the industrial chain.

I do banking at its simplest, not at its most complex.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 13th, 2008 at 04:28:05 AM EST
[ Parent ]
trying to coordinate a slew of gas end users (especially risk adverse utilities) to get them to make an investment in exchange for future gas from a historically unreliable source (Iran/Russia) is something I'd like to watch.  

Sounds a bit like the Iranian Oil Bourse.  Still a figment of imagination.

by HiD on Thu Nov 13th, 2008 at 04:58:02 AM EST
[ Parent ]
Ask Jerome how unreliable Russia is.

And what's unreliable about Qatar?

Come to that, when did Iran last default on a contract?

If gas producer and consumer states get behind it, it could happen. If they don't, it won't.

As for the Iran Oil Bourse, what happened to that was nothing to do with me. The Oil Ministry didn't want it, so it never happened - or rather it did happen as a spreadsheet registering the odd petrochemical transaction.

Indeed, I never recommended an Iran Oil Bourse in the first place, but a Middle East Exchange.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 06:22:08 AM EST
[ Parent ]
If gas producer and consumer states get behind it, it could happen. If they don't, it won't.

Fair enough.
So, with regard to our one wind turbine, probably in the middle of a much larger project, could we say that we would join any such scheme as soon as the states or, short of that, regional authority would create the market, without making it a pre-condition that WE would create it for the one turbine to exist?

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Thu Nov 13th, 2008 at 07:21:40 AM EST
[ Parent ]
ET'ers are free to join any scheme that takes their fancy.

Paul Spencer might have a pragmatic LLC-based proposition in Washington state at some point. From what I know of Paul, it should work in the real world.

It may be that I'll have a pilot scheme at some point, too, and if so I'll let people know. As I said elsewhere, I think that if a Community Energy Partnership actually works, then it will be possible to link such initiatives together, and next thing you know, you've got a networked energy market developing...

But these are entirely independent of - but possibly complementary to - what governments decide they need to do.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 07:43:06 AM EST
[ Parent ]
a little put-out in your latest diary. Some of the comments here are unnecessarily aggressive, if not dismissive. I can only repeat that you have become very adept at explaining your system. Congratulations to you and to all of us in that regard.

It's a strange coincidence that I had planned some months ago to get back into the LLC/co-op discussion this November - after the U.S. election dust had settled and a house-building project was completed (this weekend). Maybe the wind turbine project will fit in.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Thu Nov 13th, 2008 at 12:03:56 PM EST
[ Parent ]
a few years.

Both Russia and Iran have had revolutions in the last 30 years.  Iran is led by a theocracy that will end in bloodshed.  Russia is held by a strongman oligarchy that will also likely end in yet another revolution.  

You want to make 30-40 year bets in those places without a serious front loading of your returns, be my guest.

by HiD on Thu Nov 13th, 2008 at 04:31:05 PM EST
[ Parent ]
Russia is held by a strongman oligarchy that will also likely end in yet another revolution.

Please elaborate.  

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Thu Nov 13th, 2008 at 04:46:18 PM EST
[ Parent ]
Do you think BP feel Russia honors contracts?
by HiD on Thu Nov 13th, 2008 at 05:07:15 PM EST
[ Parent ]
Jerome a Paris:
It's not just risk analysis, it's credible risk-taking-coordination (the important word being "credible": banks are about trust - the fact that many banks abused the trust of many investors lately does not change the fact that they are needed as institututions able to trustfully assess, collate and distribute risk)

I agree with that entirely. I agree that banks have a valuable role doing exactly what you say.

But it is not necessary for them to be credit intermediaries to provide that service.

You have never answered this point. Why is it necessary for banks to create credit?

Jerome a Paris:

You, of all people, working in Iran: have you never wondered why the Iranians could not do LNG? It's not that they don't have the technology, or cannot buy it. It's that they are not seen as a credible counterparty to the massive contracts that are needed to underpin the industrial chain.

Sorry, but you are wrong on this.

The two principal reasons why they have had problems making progress with big projects are:

(a) International oil and gas companies hate Iranian contractual terms - and I'm not surprised;

(b) without exception, Western banks have been scared off by the US.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 06:32:40 AM EST
[ Parent ]
What is unusual about Iranian contract terms so that oil and gas companies hate them? or is it just than any contract that isn't weighted entirely in their favour they hate?

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Nov 13th, 2008 at 06:40:56 AM EST
[ Parent ]
It comes down to "Ownership".  

Companies need to demonstrate to shareholders that they "own" rights to oil; whereas politicians (particularly in Iran - UK politicians long ago sold the family silver) need to demonstrate to voters that they own the rights.

How this contradiction is bridged - or not - is a matter of contractual terms.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 06:56:58 AM EST
[ Parent ]

But it is not necessary for them to be credit intermediaries to provide that service.

You have never answered this point. Why is it necessary for banks to create credit?

Because otherwise it does not happen, as reality shows. And that is not because of any conspiracy, but because it is a task by many orders of magnitude more complex to coordinate the risk profiles of many different parties than it is for one party to set the terms it finds acceptable, do the deal and then either keep the risk or syndicate it on an "as is" basis to others.

One version works - has for centuries, in fact; the other does not work at all.


The two principal reasons why they have had problems making progress with big projects are:

(a) International oil and gas companies hate Iranian contractual terms - and I'm not surprised;

(b) without exception, Western banks have been scared off by the US.

(a) well, if you want to sell something, you have to provide terms that attract some buyers. What you don't understand is that gas is not a business where you sell molecules of methane, it's a business where you sell long term flows of gas. Iran is not a credible provider of long terms flows of gas. The terms you refer to, the Buy-Backs, are indeed not liked by the oil companies but they are not the obstacle - South Pars 2&3 happened on that basis and more could have if the Iranians did not always change their mind on what they want.

(b) may be true today, but it certainly wasn't in 1999-2002 when the Iranians could easily have financeda project with serious contracts. They were never willing to provide serious contracts.

Blaming the oil companies and the banks is lazy and stupid. Oher countries did LNG at the same time (Qatar with ExxonMobil, Egypt with  BG, Yemen with Total and I'm pretty sure they are not feeling bad or exploited about these deals, which are extremely favorable to them.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 13th, 2008 at 12:57:32 PM EST
[ Parent ]
Jerome a Paris:
Because otherwise it does not happen, as reality shows. And that is not because of any conspiracy, but because it is a task by many orders of magnitude more complex to coordinate the risk profiles of many different parties than it is for one party to set the terms it finds acceptable, do the deal and then either keep the risk or syndicate it on an "as is" basis to others.

That is a valid justification for credit intermediation, and is exactly parallel to the justification for risk intermediation by clearing houses.

Btw why the reference to a conspiracy?

Jerome a Paris:

One version works - has for centuries, in fact; the other does not work at all.

Indeed it did work after a fashion - with mathematically inevitable booms and busts -for centuries.

But it's not working now, is it?  

And IMHO the Internet enables an entirely new option which makes banks as credit intermediaries redundant.

Jerome a Paris:

What you don't understand is that gas is not a business where you sell molecules of methane, it's a business where you sell long term flows of gas.

Excuse me?

Upon what basis do you say that I do or do not understand the gas market?

Jerome a Paris:

Blaming the oil companies and the banks is lazy and stupid.

It would indeed. Is this what you think I'm doing?

Well, it really doesn't matter, because I'm shortly going to take a break from ET, you'll probably be glad to hear.

Anyone interested in contacting me has my e-mail.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 01:38:30 PM EST
[ Parent ]
Well, I greatly doubt that Jérôme will be glad to hear that.
And I certainly hope that it's just that- just a break, as in temporary.

We all care a lot for our opinions, otherwise we wouldn't be blogging. But I have still found ET far more civil than any other blog. And while I must admit that I don't always understand your posts (I guess some require more knowledge than I have), I would be missing them if they weren't around.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Thu Nov 13th, 2008 at 02:47:07 PM EST
[ Parent ]
Kind of you to say so, Cyrille, and yes, the standard of civility has been one of the attractions for me too.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 03:03:48 PM EST
[ Parent ]
i think the confusion springs from a few issues coming to a head here, if i may be so bold as to try and analyse the group psyche around this conversation:

i don't pretend to fully understand chris' solution, ('bout half way there, i'm guessing!), but if i'm grokking it right, it portends as big a revolution in how we assign economic responsibility and risk as anything karl marx came up with, so it's not surprising that it's talking into a cultural headwind, considering we have all had our brains bernaised around this issue since birth.

many people feel pretty pissed off at banks right now, as they have broken trust with their customers, and now it's bit them in the ass and they don't trust each other...no honour among these thieves. chris' frustration, after patiently and carefully explaining over and over, in diaries and comments for two years+, to an above average intelligence group, can only mean three things, a. chris is not cutting it as explainer, b. the idea itself is deluded or needlessly arcane, and chris has drunk some kind of koolaide, having succeeded in having better luck explaining it to iranian diplomats than to this motley crew at ET, or, c. the idea is above anyone's paygrade other than chris, and the idea will revolutionise capitalism as we knew it, and we'll all be slapping our foreheads 20 years from now, going 'why couldn't we get it, it was staring us in the face all along?'

i vote for c...

it's not stupid on any level that i can ascertain, and chris' dedication to explaining it has shown a tenacity at ET matched only by jerome's shredding of the Serious Journalists' illogic, as they continue to try and throw the public off the scent of what's really going down, and how mesmerisingly stewpydde our present course in europe is as regards energy policy.

that for me is why i came here from dkos, because jerome has an inside view on the back room shit between governments, banks and gas companies, he's a lefty, (as rare as albinos in banking, i imagine), and he's found one of those golden gigs where his work has relatively great effect on how more and people think about the economy as social function (blogging), and about climate change (empowering concrete changes in ways to mitigate global warming).

it's obvious some of chris' comments about banking, while surely not designed to provoke defensiveness from jerome personally, (if he's been that kind of troll it would have showed in other situations by now) have touched a nerve in jerome, who understandably doesn't appreciate the edge in some of chris' comments, since no-one would, in that situation, even if the kind of banking he does is as beneficial as it freakin' gets!

the funny thing is, i think you're both much more in agreement than not, but you haven't met in the middle yet, or the two lines of thinking haven't yet converged, or not enough reality has happened to reveal how the two lines of thought could become one without any sacrifice of either's belief.

maybe i'm naive, but i sense neither of you to be polemic about anything else here in the hallowed halls of ET... chris is picking up on the zeitgeist of dumping on banks and the debit system in a wider sense, and he's welcome to his edge, imo. jerome is not henry paulson though, he myself this time! 's proof that banking has a good and (until we move to chris' system, force majeure!) necessary function in order to make really big things happen. he extols 'boring' banking  not 'buccaneer' banking, lol!

chris speaks for most i think in our shock doctrine phase of being disconcerted by the alarmingly parlous state of world banking, and our friends and relatives losing pensions, savings around us makes us look for whom to blame, it's human, just as it is to want retribution and acknowledgment of responsibility from these asswipes... instead they're golden parachuting into beauty spas with bonus billions!

anyone who is not just a leetle beet pissed off by that is either braindead or a masochist. it's indefensible, unspinnable even. the public knows it, and you don't need a weatherman to see which way the wind blows... the time could be right for something as radical as marxism to be tried, tho' i don't know enough to endorse it....still data-collecting...

chris' ideas about revolutionising capitalism deserve his own blog, and yet ET is such a good forum for this kind of idea. i suspect it's a tad too avant-guarde for the average ET reader, and i think we would appreciate seeing more examples in the real world, so it's not so conceptual.

i can't see anything illogical about it, in fact it grows on me the more i think about it, but if i get it, it's going to turn the whole financial services industry on its collective head, and while being forced willy nilly into a yoga headstand might have salutary effects on those who survive the repositioning, it's understandable that a considerable amount of resistance emerges to the idea...

there's also a twinge of doubt as in: if it's as good as it sounds, why is it taking so long to catch on?

i would like to see chris inviting someone else to come and do a diary on his system, preferably someone with a history of how it transformed his/her understanding and practice vis a vis economics, and the history of their own company, LLP, or whatever.

some interplay between two people of the same economic philosophy would help too, to see how on the same page they were, if there was any debate within the movement, so to speak.

i don't sense any hidden agenda from chris' advocacy, or much gloating as the present system comes unglued, but i think his enunciation of many peoples' rage at what's going on, and the patently untruthful responses fo most of the media (duly noted and ghostbusted by jerome) put you both solidly on the same side, from where i hover!

nuff of my bullshyte, you'd be missed chris, as much for the humour on the open freds as for the unbelievably patient approach to explaining an idea as improbable as it is logical and sustainable-(sounding). godspeed and may the wind be always at your back wherever you sail, come back and shoot the breezes with us again soon.

breaks are good, we're coming up to the solstice period, when i had cyber nervous breakdown last year, i'm really going to try and keep ON A TIGHT REIN.

starting tomorrow, promise...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Thu Nov 13th, 2008 at 04:52:59 PM EST
[ Parent ]
Cheers, melo.

I'll miss comments like that.

I'll be looking in of course, but I really do have too much on my plate to spend time banging my head against a pretty solid wall.

I think that through ET I have polished a pretty rough diamond, and for me that's enough.

The bonus has been meeting and interacting with some great people.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 05:20:17 PM EST
[ Parent ]
I don't think your proposals are crazy. What I don't get is why you don't believe that they can't be done (or approximated with enough closeness) within the existing system - when I see they already are, to a large extent.

There is no need to break what works in the banking system. You don't need to convince me that large parts of the financial system are broke, some beyond hope of salvation. That still does not mean that banking is not a useful or needed function ,whn done properly. That it was abused does not mean that it is dead or needs to be.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 13th, 2008 at 05:36:02 PM EST
[ Parent ]
Jerome a Paris:
I don't think your proposals are crazy. What I don't get is why you don't believe that they can't be done (or approximated with enough closeness) within the existing system - when I see they already are, to a large extent.

It is possible to create a curve by adding together a huge number of approximations.  But there may well be a simple but elegant way of generating that curve based on different axioms.

And it is possible to bring together two magnets North South and North South with enough pressure, but they will always tend to fly apart. Whereas if you turn them around, North South; South North they will tend to stick naturally - but there is no guarantee they will stick, if magnetism is lacking.

I believe that it is necessary to reverse the polarity of the financial system, and to do so with what are - I believe - an extremely simple concept at base. The trouble is that a genuine "paradigm shift" is the most difficult thing of all to explain. It's obvious once the penny drops, but until then....

Jerome a Paris:

There is no need to break what works in the banking system. You don't need to convince me that large parts of the financial system are broke, some beyond hope of salvation. That still does not mean that banking is not a useful or needed function ,whn done properly. That it was abused does not mean that it is dead or needs to be.

I am not proposing to break anything. What I am proposing is complementary to the existing system, and if it works, then people will use it in preference to the existing system.

I think I have explained many times that I think that banking is indeed a very useful, and indeed necessary discipline. But my critique is not of banking as a discipline, but rather of the structure of banking.  

Before I understood the structure of the system in depth I tended to sympathise with those who criticise banking on moral and ethical grounds.

Now I do understand it, I criticise it only in terms of the fact that I believe it is sub-optimal in structure. ie in a post Internet world, credit intermediaries are simply unnecessary, and bankers should look to a future as service providers - like you - adding value without risking your capital creating credit based upon it.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 13th, 2008 at 06:04:17 PM EST
[ Parent ]
i loves the smell of resolution...

cheers to ya chris, you definitely have bigger fish to fry. thanks for using us to polish up your points.

btw i watched your slide presentation and found it excellent, best of luck. a prophet is never honoured in his own land, one of the most puzzling quirks in human nature.

jerome gets to keep his golden gig....aaaah

i was a bit worried i might have to teach him massage for a while there...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Thu Nov 13th, 2008 at 06:25:16 PM EST
[ Parent ]
Can I attempt to put Chris' concept  in a practical context like this project to see if I understand how it might work.  Let's think of it as us investors buying not the windmill itself, but the energy we know it will be able to produce.

To make the numbers, simple, lets imagine some country is offering a feed in tariff of €120 /mwh.  We expect the mill to be on stream in 2 years.  Suppose we offer investors (us) the option of buying the right to one mwh of electricity in two years time for €100 up front now.

Investors will get €120 Euro back for it in two years time when the Mwh is actually produced and sold - and will have made almost 10% p.a. return in return for taking on the risks associated with the project - e.g. project delayed in which case I might have to wait 3 years for my money.

The partnership uses the €100 investors have paid up front for their rights to future electricity production to part fund the purchase and installation of the turbine - getting the rest of the money from other investors and banks.

When my investment matures (my mwh is produced) I have the option of taking my €120 at that point or reinvesting it in more future production, the price of future production being determined by an auction of future production bonds.  At that point I may have to pay €105 for a Mwh of electricity (projected to be produced in a further 2 years time) because the project risk will have reduced at that stage and everybody wants part of the action - thus bidding up the price of a bond entitling you to 1 mwh to be produced in two years time.

The partnership uses that money to reduce its bank borrowings or to fund operating costs.  At some point in the life cycle of the project, perhaps when the bank borrowings have been paid off, the turbine will be producing more money than is required to fund its ongoing operation.  At that point the partnership will be able to pay its members a dividend arising out of the surplus - or use that money to fund a second turbine.

What I am not clear on is who that dividend or additional future production accrues to - is it the people who have bought the original bonds, or everyone who has bought bonds over the lifecycle of the project, and if so, in what proportions.  I know this is an odd capitalist question, but who actually owns the mill - especially when the time comes for it to be decommissioned or radically overhauled?  Who makes those management decisions?

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Nov 13th, 2008 at 07:39:03 PM EST
[ Parent ]
I'd imagine there's a trust of some sort which actually owns the mill. Decommissioning and maintenance would - rationally - be included in forward budgeting, so dividend calculations would be adjusted to suit.

But there are more questions. If there banks and major investors involved, wouldn't they want a preferential pay-off for their investment? Effectively they'd get their energy units first.

Secondly, accounting for the ownership of the energy units is going to get interesting, especially if production is queued so some owners get their units before others.

This isn't a minor wrinkle because if the windmill stops working, the true status of energy units becomes - what? If all units are equal and can be bought and sold ad lib, what happens if the units don't exist?

Finally wouldn't it be more sensible to build the windmill somewhere where there's already a guaranteed customer base? Relying on feed-ins is risky because they can be changed without notice - unless you can persuade a major government or utility to agree to a contractual price for an extended term. Which might be negotiable - or might not.

There are business and science parks in the UK which already have one-off windmill power. I'm thinking the scheme becomes much less risky if it's pitched as offering a combination of stable pricing and reliability of supply to a captive customer base which is likely to want to invest in those features for itself.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Nov 13th, 2008 at 08:12:30 PM EST
[ Parent ]
Feed-in odds and ends:

Power Engineering - Ireland announces feed-in tariff package for offshore wind power

11 February 2008 - Ireland has announced a government-backed guaranteed price for offshore wind power in a bid to boost the development of renewable energy.

Under the government's feed-in tariff scheme, offshore wind power that is produced will get a support price of €140 ($202.9) per megawatt-hour.

Nothing about a sliding scale.

Deutschland erhöht Einspeisevergütung - Global Wind PowerGermany raises feed-in tariff
Am 6. Juni 2008 verabschiedete die deutsche Regierung eine Novelle des Energie-Einspeisegesetzes (EEG). Inhalt dieser Novelle ist u.a. die Vergütung von Windstrom ab 2009.
On 6 June 2008, the German government enacted an revision of the EEG, the law governing feed-in tariffs. Among other things, this revision regulates compensation for wind energy as of 2009.

Festgelegt wurde, dass neue Onshore-Anlagen ab dem 1. Januar 2009 einen Anfangs-Vergütungssatz von 9,2 Cent pro kWh erhalten. Die neue Basisvergütung liegt bei 5,02 Cent pro kWh. Die Anfangsvergütung sinkt für neue Anlagen jährlich um ein Prozent.
The statute established an initial feed-in tariff of 9.2 (euro) cents per kWh. The new base tariff is 5.02 cents per kWh. The initial tariff declines by one percent per year for new plants.

Britain is playing catch-up here:

Renewable Energy Focus


LONDON, UK, October 20, 2008. On 16 October 2008, in a dramatic U-turn, the UK government, which has strenuously resisted renewable energy feed-in tariffs, finally endorsed the concept, thus acknowledging a role for small-scale electricity generation.

Proof of concept but no tariff in the UK...

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Wed Nov 12th, 2008 at 09:49:47 AM EST
[ Parent ]
European Tribune - Comments - European Tribune Sponsors Wind Turbine [Update with Poll]
The statute established an initial feed-in tariff of 9.2 (euro) cents per kWh. The new base tariff is 5.02 cents per kWh. The initial tariff declines by one percent per year for new plants.

= 92 or 50 Euro per mwh
Is that comparable with the 140 euro per mwh offered by the Irish Government?

There seems to be quite a range of regional variation in electricity prices and presumably we should target a high electricity price market.

Is there an international league table of feed-in tariffs and how do these vary for peak/base load supply and over the lifetime of a project?

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Nov 12th, 2008 at 02:23:59 PM EST
[ Parent ]
for onshore wind - typically 7-9c/kWh (70-90 EUR/MWh)
for offshore wind - typically 14c/kWh (140 EUR/MWh)

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Nov 12th, 2008 at 02:47:43 PM EST
[ Parent ]
Thanks.  Some questions you may be able to help with:

  1. Do you have a standard project appraisal spreadsheet which looks at initial capital purchase, installation, and ongoing maintenance costs, start-up and ongoing legal/financial costs, revenue projections based on feed-in tariffs and average wind speed/output projections and other factors we could use to structure our research/debate and ensure we are comparing apples to apples?  

  2. Are there any locations/jurisdictions which are regarded as extremely attractive at the moment?  

  3. Are there any developers/operators you are aware of who would entertain participation/partnership with a relatively small partnership/collective like ourselves, and if not

  4. Do you think it is realistic for us consider a standalone project given that most of us are looking for a progressive sustainable investment rather than seeking to become wind entrepreneurs/project managers


notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Nov 12th, 2008 at 03:15:28 PM EST
[ Parent ]
Well done, Frank!

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Wed Nov 12th, 2008 at 09:51:08 AM EST
[ Parent ]
yup, brilliant frank!

i loves me some traction...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Thu Nov 13th, 2008 at 09:39:28 AM EST
[ Parent ]
Since my last summary the discussion has focused mainly on a more general discussion of CC's alternative vision for the future of global credit provision.  If I could focus more on points specific to this project, my take on the discussion since summary 1 is as follows:

  1. There has been no significant additional pledging of funds - we currently stand at c. €65K - which is not likely to be anywhere near enough to fund a serious project.

  2. If Chris is right about banks being increasing unable to create more credit, we may not be able to persuade a bank to provide sufficient debt financing to make the project viable in any case.  There may be loads of capital out there looking for a safe home, but we have no means of accessing it.

  3. Chris has acknowledged that there is no current market for exchanging or en cashing energy units and so we would have to create one.

  4. As most of us are likely to reside outside whatever grid the project is located in, being able to encash energy units is vital for people to be able to fund the interest and operating costs of the turbine on an ongoing basis.

  5. Even if we create our own internal "market" in energy units, it is likely to be very illiquid as few if any of us are likely to be able to afford to pay our share of the interest and operating costs of the turbine in cash, and so there will be far more sellers than buyers of energy units within our community.

  6. There has been very little progress on researching the feasibility of the more practical aspects of the project - ok its early days yet - but our energy seems to be in danger of being deflected towards more general issues and not on addressing issues on the critical path to making this project feasible - e.g. researching possible partners, locations, regulatory regimes, and funding sources.

My intention in floating this idea was not to set up another academic talk shop, but to see if there was any prospect of an ET Sponsored Turbine being practicable in the real world.  I don't think we have made a lot of progress in ascertaining that to date, although in fairness, these things can take a lot of time.  

I appreciate we all have to get our heads around a lot of complex issues in order to make informed choices and even to figure out what we need to find out in order to explore the feasibility of the project further, but my sense is that unless those of us with real practical experience in the field take the lead on this, this project will never fly.

I promised I'd look into the Irish situation further but pressure of other business has not allowed that to happen yet.  I will report back when I feel I have a better handle on the situation here.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Nov 13th, 2008 at 09:02:32 AM EST
As I've said, I think the windmill is the least interesting part of this process. Even if I had the cash to invest, which I don't, I don't think building a windmill as an addition to a pension or investment portfolio qualifies as an interesting activity.

If - hypothetically - there were a way to create a new global open-acess market for tradeable units of whatever kind, that might be more interesting.

Perhaps we should think about how that might be made possible, and see what happens then.

I can see all kinds of possibilies for a project like that, from the very local level to the international one.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Nov 13th, 2008 at 09:40:38 AM EST
[ Parent ]
I give up.  OK lets dump the windmill.  Lets create some kind of hypothetical market for something or other.  There.  Done.  What do you want to trade?  I'll trade you a dozen hypothetical markets and diaries about same for one windmill in the real world.

Deal?

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Nov 13th, 2008 at 09:56:38 AM EST
[ Parent ]
All I'm saying is that windmills are being built already, and the politics and finance to build them are already in place, subject to local variations.

Yes, we could do it, but then we have our windmill and - what? It would be a good PR move, possibly, but unless there's some other point to the project we'll have copied what other people are doing already.

The PR angle isn't a bad one, but wouldn't you rather have something which can be used by others for more projects than windmill, one off, now working, end of story?

You've already said the internal funding isn't there to make it happen, so - assuming we want to get anything built at all - there's already no choice but to consider wider options for both financing and returns.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Nov 13th, 2008 at 10:03:29 AM EST
[ Parent ]
The point of the project is to give people a real opportunity to invest real funds with a reasonable and predictable return and at the same doing something socially responsible - rather than putting that money into failing banks, speculative stock market shares, or the dodgy and opaque financial products the financial services industry likes to create.

If somebody were already offering "renewable energy bonds" whereby you bought future windmill output which you could then sell at the feed-in tariff rate once it was produced - then we wouldn't have to actually do this ourselves, we could simply go out and buy those bonds.  The problem is, no one is doing this at the moment, so the innovation lies in giving people an opportunity to invest their hard earned savings in a reasonably secure, transparent and socially responsible way.

Thus we are creating a market that doesn't currently exist, and a means of financing such projects which doesn't currently exist.  Banks don't have the money to do all of it, and thus the further development of sustainable energy is currently constrained by a lack of bank capital availability.  Thus while wind farm development is currently happening anyway, it could do so much faster if we helped to create such an innovative  financing market.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Nov 13th, 2008 at 10:45:05 AM EST
[ Parent ]
Ireland has highest electricity prices in EU, says study - The Irish Times - Thu, Nov 13, 2008

IRELAND HAS the highest electricity prices in Europe for many businesses and domestic consumers, largely due to a dependence on electricity generated from fossil fuels, according to a new report.

Electricity costs the Irish domestic consumer 20 per cent more than the EU average, according to the report by Sustainable Energy Ireland (SEI), and some industrial customers are paying up to 52 per cent above the EU average.

snip--------

SEI says that the main factor behind high electricity prices, especially in times of volatile price changes, is a dependence on generation from fossil fuels. Some 88 per cent of Irish electricity is generated from fossil fuels, and 60 per cent from oil and gas alone.

This is the highest in Europe, according to Brian Motherway of SEI, and leaves us exposed to the vagaries of fuel price changes.

"Increasing the contribution of renewable sources to energy supply is critical - it will help address costs, support our security of supply and ensure we deliver on all our national and EU targets in energy and climate change," he said.

Ireland's use of renewable energy has doubled in the past five years, largely thanks to a boom in wind power, a second report by SEI finds.

Renewable energy sources - principally wind, hydro and biomass - generated over 9 per cent of total electricity last year, and a target of 15 per cent by 2010 is "within our reach".

Wind power has grown rapidly since the first wind farms came on line in 1992 and Ireland now has the greatest wind power penetration in the world. Opposition to wind farms has grown commensurately and the report says that there has been a "significant slowdown" in development in the past two years.

However, Mr Motherway said that he was confident the growth targets for wind energy would be met. "There is plenty of controversy, but also many successful projects going ahead. For every one that is delayed, another one or two are going ahead," he said.

Between 50 and 100 new wind energy projects are currently in planning.

The share of electricity generated from renewable energy nearly doubled between 1990 and 2007, from 4.9 per cent to 9.4 per cent. The longer term target is to generate 40 per cent of electricity from renewable sources by 2020.



notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Nov 13th, 2008 at 11:41:51 AM EST
I guess I should start by apologizing for butting in late, as a newcomer, and at an angle to the discussion so far (but not orthogonal, I'd say).

Have you considered a solar energy (PV) system instead of wind? A number of countries have feed-in tariffs for PV systems that are tuned to systems of different size (from a few kW upwards).

The technology is less standardized than wind energy and there are a number of new concepts getting on the market, for instance in tracking systems.            

One advantage is that you can make systems of almost any size, so you could go ahead even if you don't have external financing. Though there are cost advantages in going to bigger systems the difference is not that big. The cost per kW is probably not more than twice as big for a 3kW system as for a 20MW plant, likely less if you shop around a bit.

I have been looking to invest a bit of money (say 25kEuro) in something that would make a bit of money and at the same time do something for CO2 emissions. I had begun to think about putting a system on my own roof, but it is not really ideal (wrong orientation and in the rainiest part of Italy).

The boom in PV installations in Germany and Spain have kept prices high so far, but from next year Germany is reducing the feed-in tariff by more than the normal depreciation, and Spain has been planning to limit the annual amount of installations that can get the feed-in tariff (I don't know if it has already been decided). Combined with the credit crunch it could mean reduced prices in the near future.

I should probably also state up front that I'm not "soliciting" anything (is it just me or does it sound like pimping?). I work in research on PV but I'm not in sale, installation or financing of PV systems.
~


Real capricorns don't believe in astrology.

by tomhuld (thomas punkt huld at jrc punkt it) on Thu Nov 13th, 2008 at 05:11:26 PM EST
given the scale we're looking at, your proposal actualyl makes a lot of sense.

It's just that, on my side, I'm less qualified to comment about solar.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 13th, 2008 at 05:37:09 PM EST
[ Parent ]
I'm not an expert either when it comes to the nitty-gritty of the acutal installation. I don't even know at what power level you can no longer feed into the low-voltage (380V) grid and have to be near a medium-voltage power line. Technical things like that are probably country-dependent.

I know that Italy has a decent feed-in tariff but that the bureaucracy can be a hassle (varying with the Regione you are in). My dream is to meet someone whose cousin has a 500m2 factory roof somwhere in Puglia. Something like that would remove the need to buy land.

An interesting concept is this one which allows dual use of land (PV with  car park or grazing cows below) and is tracking so it will get up to 30% more energy. I don't know if they are mass producing this yet. They mention a 600kW system which should be finished about now. This is still medium-large for a PV system.

I would be willing to lend a hand with whatever relevant experience I have but I don't think I'd be able to do it alone. Otherwise it would probably not be ready before the time when you want to get your retirement money out.

Real capricorns don't believe in astrology.

by tomhuld (thomas punkt huld at jrc punkt it) on Thu Nov 13th, 2008 at 06:39:19 PM EST
[ Parent ]
In principle, I should be game for a couple of thousand € for a sustainable-energy type project. A thousand or so on ideology and a thousand or two as investment if I think there's a real chance that I'd be getting the money back.

But (you knew there'd be a but), I have some student loans I'd need to get rid of first, because I don't like the idea of investing while still having outstanding consumer debt - yeah, I'm old-fashioned that way - and I'm not sure that I'd still be "a couple of thousand €" in the black after that little exercise, nevermind enough in the black to justify sinking that much money into just one asset.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Nov 13th, 2008 at 06:10:42 PM EST


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