Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Please tell me why would anyone buy your redeemable units, and at what price. Who decides to sell them at 30 or at 50? Who buys them, and why?

Leaving to one side the sort of Investors who buy gold as an investment, these units could be sold to anyone who has an interest in hedging electricity consumption.

What I am describing is an undated, un-geared futures contract. If you want gearing, then borrow to buy units, or buy call options on them (a market would develop soon enough).

Moreover this will be a market suitable for retail customers, because it is un-geared.

If your idea is to have a government-run pool, isn't is a lot easier to have a government-run electricity operator that builds windfarms and distributes power to consumers at society-favorable prices?

Government run? You must be joking. We don't all have efficient and non-bureaucratic governments like the French, you know. ;-)

Community owned, yes. By which I do not mean "the State" in the form of local or national government.

I mean assets placed in trust, with government participating as a market user/consumer, and as an investor.

The Managing/Operating partner within a "Community Energy Partnership" framework could, probably would, be a "private" sector operator, or maybe a community cooperative if they have the skills.

Essentially I propose a partnership between service users and service providers.

No, there's the operational risk, there's the price risk, there's the regulatory change risk, there's the fraud risk, etc... How do you deal with these? ie who takes a loss if they happen, and how can they mitigate it?

Operational risk you would probably build in to a leasing model, as I said. And if the turbine manufacturer isn't up for it, because he's a Plc or debt funded, or both, then you buy him out, or start your own, again as a Community (or Federation of Communities) owned business.

Regulation (and taxation) are always a risk but it works two ways: the units an investor buys could become more or less valuable.

Fraud? The use of a Custodian for funds will limit that, but shit happens.

It's your job as an investment banker to do the due diligence on projects to see that they appear viable and that no more units are to be sold than the project is capable of producing. A prospectus will be needed in the normal way, and there will be a minimum unit sale price below which a project will not happen.

Price Risk? Of course. That's what this is all about.

Investors are taking a risk as to price. If the market price doubles they make 100%. If it halves, they lose 50%.

Hedgers are off loading price risk. So if the local school buys 100 MwH and the physical market (externally provided) price goes down, they don't lose anything: it's just that they don't gain from the fall in physical market price.

Please give me an exemple for my turbine, telling me who buys what at what price and gets what in return. In particular, given that the actual number of kWh produced in a year in unknown, and that the value of the kWh each year is unknown, how are either kWh or revenues shared, according to the volume available.

Be concrete, please.

Let's assume we've sold 30,000 units at 50 euro's to hedgers and investors, local or otherwise.

Each year there will be operating costs to meet and sufficient production must be sold to meet these costs, or future production (if there is any unsold).

The liquidity pool must be managed, essentially a Treasury function.

The balance - if there is any - is firstly sold locally to anyone presenting units for redemption, and whatever is not consumed locally in this way is sold to the Grid under conventional arrangements, as now. In fact, it would be possible to provide that local sales could only be made in energy units.

Locals would be quite happy to pay anything up to the Grid price for these units. Until we buy out the Grid by "partnerising" it.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 19th, 2008 at 08:04:37 AM EST
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