smart energy markets

Iran - Gas by Wire..or Fibre?

Bosphorus Energy Club 11th October 2016Chris Cook

Institute for Security & Resilience Studies University College London

Gas Swaps

Category Swap – production sharing Gas to Power – gas by wire CNG/LNG to transport – eg Iran CNG fuelled public transport fleet

Location Swap – Gas by FibreFlow of gas into one location swapped for gas flow from another

Hybrid SwapFlow of gas fuel into one location exchanged for flow of energy as a service from another

Smart Gas SwapsIP use exchanged for gas savings – Fifth Fuel

2June 2016 Caspian Energy Grid – Silk Road

Smart Gas – Energy as a Service

Pumping-as-a-Service – from 1778 the great Scottish engineer & inventor James Watt supplied new & efficient steam powered water pumps to Tin mines in exchange for 33% of their coal savings.

Turbines-as-a-Service – Mitsubishi/Siemens/GE provide 60% efficient CCGT generators to replace 35% efficient generators and receive an agreed %age of gas savings

Solar-as-a-Service – electricity production of solar PV is shared with solar energy service provider.

Outcome – Technology (IP) swap for intrinsic retail value of Energy


Smart Trade 1778 - Pumping as a Service


Promises, Promises, Promises An Energy Credit is a Promise issued by an energy producer in exchange for value received and which he will accept in payment for energy production

An Energy Credit instrument is notDebt instrument - the holder may not demand moneyForward (Derivative) instrument– the holder may not demand deliveryEquity Share instrument – the holder has no asset ownership or dividend

An Energy Credit holder may use the credit to pay for energy supplied by the Promissor or by another energy producer who will accept it

Acceptance of a Promise requires Trust in the producer


Clearing Union – 'Trust – but Validate' For Investors/Consumers to trust Producers to honour their Promises requires a “Trust Framework” agreement – a Clearing Union

Clearing Union mutually assures credit risk in the same way Protection & Indemnity (P&I) Clubs have assured shipping risk for 140 years

Trusted service provider administers system; manages mutual credit risk (but does not take risk); resolves disputes etc etc

Service providers require intellectual capital but not finance capital

Clearing Houses/Exchanges concentrate market risk in a single point of failure - Clearing Union distributes market risk among end users


Energy Credits - Examples Renewable EnergyWind Turbine owner sells 100,000 electricity credits each returnable in payment for 10 kWh of production

Credits are returned in payment for electricity supply when the wind blows

Gas/PowerGas fuelled generator sells 100,000 electricity credits each returnable in payment for 10 kWh of production

Problem: If the generator's gas purchase price rises he may make a loss

Solution: Generator agrees a Gas/Power Swap and the gas supplier receives an entitlement to electricity credits


Outcome - Smart Market

Smart Grid – Physical Energy Network'Smart' Grid optimising energy production and use

Clearing Union – Financial Energy NetworkProducers connect direct to consumers via Energy Swaps & Credits

Smart MarketMost efficiently produced power is always despatched first – Smart Market


Energy Dividends Renewable EnergyWind Turbine owner sells 100,000 electricity credits each returnable in payment for 10 kWh of production

Credits are returned in payment for electricity supply when the wind blows

Gas/PowerGas fuelled generator sells 100,000 electricity credits each returnable in payment for 10 kWh of production

Problem: If the generator's gas purchase price rises he may make a loss

Solution: Generator agrees Gas/Power Swap and gas supplier receives entitlement to electricity credits


Pool & Dividend Energy LeviesEnergy Pool fund in local currency is created by levies on

Renewable Energy – %age allocation of sales revenue Fossil Fuel - %age levy on gas & oil product consumption

Energy DividendEnergy Dividend of energy credits made to population - not inflationary local currency subsidy

Energy LoansEnergy Pool invests in renewable energy & energy efficiency projects with an Energy credit return.


Why a Smart Market?

Fifth Fuel - Resource Resilience rationale is self evident: the higher the fossil fuel price the more profit in energy savings made at the retail price

COP 21 - reduction in gas use leads direct to reduction of CO2 production – a complementary market approach to COP21 implementation

Commodity to Service – (Smart) intellectual capital replaces finance capital

Co-operate to Compete – those who do not share risk and costs will be outcompeted by those who do

Maybe Ethical is Optimal?


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