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And so I am developing the concept of Coop EneFin, which I hinted at inLean and adaptableand started developing more seriously in La morale de ce conte de fées. The whole idea comes from the observation that, in the European market of electricity, there is a strong differentiation in the retail price of 1 kWh, depending on the category of consumer. Small users, namely all the households plus small institutional ones, pay a price much higher than the big consumers of energy. I am designing the business concept of Coop EneFinas a way for small, local suppliers of renewable energies to attract capital and to find themselves a place in the market. The basic concept is that of complex contracts, which combine a futures contract on the supplies of electricity with the acquisition of participatory deeds in the supplier of that electricity.
If the price to pay by small users is PH, and the price for the big institutional ones is PI, and a representative small user consumes QHkilowatt hours, that basic concept can be expressed mathematically as QH(t+z)*PH= QH(t+z)*PI+ K(t)and K(t) = QH(t+z)*(PH– PI). In that mathematical expression, ‘t’ is the present moment in time, whilst ‘t+z’ is a moment in the future, with said future being distant from the present by ‘z’ periods. K(t)is investment capital supplied today, to the provider of electricity, by the means of this complex contract.
In other words, the Coop EneFinconcept assumes that households will buy their future supplies in electricity, and, in the same time, they will buy participations in the providers of that future electricity, and they will pay just the normal price they pay today for their average kilowatt hour. Coop EneFinis supposed to be a business on its own right, an essentially FinTech enterprise, partly or completely independent from the suppliers of electricity.
I need to check more thoroughly the components of this business concept. It is worth exploring what exactly should I expect to find, in real life, under the label of ‘small local supplier of renewable energies’, i.e. what do those entities really look like today, what are their ties with their markets, and what are the likely vectors of development for the future. I need to develop the concept of ‘participatory deeds’, and, in general, to blueprint the financial product to be marketed. A more in-depth study of the energy market could serve, too.
There is one thing I certainly need to work on for Coop EneFin: the name. I need to change it. I was so engrossed in the ‘cooperative’ meaning of ‘Coop’ that I completely forgot other connotations, such as ‘chicken coop’. We certainly don’t want any business to stay in a coop, unless it is money laundering. Coops are safe, but sort of limiting. Thus, I am trying to extract some other catchy word from that idea, and, in the meantime, I simply kick the ‘Coop’ out of the name, and I return to the initial ‘EneFin’.
Mind you, I have that curious ape inside me, and that happy bulldog. They love rummaging in anything that can be even remotely useful in my intellectual quest. Here are some sources those two helpful beasts have dug out of the Internet, just like that, on the spot. European Small Hydropower Association, Wind Europe, Solar Power Europe, and World Energy Councilare the ORG-type pages, just as IRENA. The latter (Irena) publishes a lot of useful stuff regarding renewable energies. Here are the links to some of their reports: Renewable technologies cost analysis – hydropower, Renewable Power Generation Costs in 2017, and Cost-competitive renewable power generation: Potential across South East Europe. Besides, I collected some stuff, here and there online: ‘The Economics of Hydroelectricity’ by Jean-Marie Martin-Amouroux, ‘Hydropower Costs. Renewable Energy Hydroelectricity Costs vs Other Renewable & Fossil Costs’ by Glenn Meyers, ‘Hydropower Baseline Cost Modeling’ by Patrick W. O’Connor et al. , and finally State of the Art on Small-Scale Concentrated Solar Power Plantsby A.Giovannelli.
Right, now it is time for the third inside me, my internal austere monk, the one armed against bullshit with the Ockham’s razor, to step into the game. Let’s nail it down: what is a small provider of renewable energy? As I rummage through the literature, being small has different denotations, depending on the exact type of renewable energy we have in mind. In the wind energy, being small is probably the hardest job. One windmill of average size generates about 1,5 MW of electrical power, and still there is one caveat: noise. Ever heard one of those buskers who perform with a two-person buck saw? That long, flexible blade played on with a fiddlestick? If the answer is ‘yes’, now imagine that performance by someone deprived both of musical ear, and of elementary skill with a fiddlestick. This is the type of noise that windmills make, partly in infrasound. Really nasty, I can tell you, and this is why they have to be located some distance from human habitats.
There seems to be some new generation of windmills coming to the market, though. As I can read with Vanessa Bates Ramirez at SingularityHub, a company named Semtiveis launching small windmills, like 1,6 kilowatt each, designed for being used in densely populated, urban habitats. Another one is the Dutch Archimedes, and those guys are doing really small as wind turbines come. Their designs range from 125 watts of power, up to 1 kW. This is really retail in wind energy. The two designs differ substantially from each other, yet both create an opening for reducing both the size of one windmill, and the distance it needs to be located from residential buildings. As a matter of fact, the distance shrinks to zero. That 125-watt thingy by Archimedes is something you can basically drag behind you on a bicycle. As I think of it, my EneFin concept QH(t+z)*PH= QH(t+z)*PI+ K(t)and K(t) = QH(t+z)*(PH– PI)could be a nice financial leverage for launching those technologies among the general public.
As for hydro, you can find all sizes: from a fancy-looking small one, 1 kW of capacity, from PowerSpout, all the way up to the 30-megawatt bulky ones by General Electric. Still, as I browsed through my notes from the last year, there are two thresholds as for the hydroelectric: 1 MW and 10 MW. Anything up to one megawatt is basically considered as DIY power generation, and between 1 MW and 10 MW the installation can be still eligible for public funding addressed to ‘small hydro’. All kinds of designs are burgeoning; it seems to be like the Golden Age of small hydro. You can even have embroideries on.
The photovoltaic is probably the most scalable, with a typical roof-of-my-garage installation going into something like 200 – 300 watts, and possible to expand according to the available surface. Yet, photovoltaic is not the only cat in the yard, as it comes to solar energy. There is that big comeback from the part of concentrated solar power. Do you remember those science-fictionish movies, mostly from the 1980ies, where solar energy was being captured with parabolic mirrors (occasionally turned by evil geniuses into deadly weapons)? Well, this is basically concentrated solar power. You capture the heat in the centre of the parabolic mirror, and then it becomes really hot, and it can give heat to water, which turns into steam and puts in motion the basic electric turbine you have in an ordinary, thermal power plant. Heat can be stored in molten salt during the night, so as not to turn the turbine off completely. In places with really a lot of heat from the sun, like from Marseille (France) southwards, you can have the most of your sun with that technology. The paper I have already linked to, namely State of the Art on Small-Scale Concentrated Solar Power Plantsby A.Giovannelli gives an idea of what is possible. Apparently, the possible is quite versatile, starting below 1 MW of power.
So, all in all, I have two classes of size, out of my research. One is around 1 MW of capacity, the second more like 10 MW. I call them, respectively, a small power installation, and a medium-sized one. Now, I go one step further and I follow Adam Smith: the size of a business is determined by the size of its market. I take my two model sizes: 1 MW and 10 MW, and I calculate the number of individual customers that such an installation could provide with electricity. Table 1, below, shows my calculations. What I did was to take the data about final consumption of energy, in kilograms of oil equivalent, as it is published by the World Bank. Then, I took 17,3% out of this final consumption, for selected European countries. That 17,3% roughly corresponds, according to what I found, to the strictly spoken household use of energy. Then I multiplied the number in kilograms of oil equivalent by 11,63 in order to have it in kilowatt hours. This is how I got the first numerical column in the table. Next, I divided the kilowatt hours by 8760, i.e. by the number of hours in an ordinary year, and so I got the capacity presented in the next column, measured in kilowatts. After having divided 1000 kW (or 1 megawatt) by that required capacity, I obtained the number of households that an installation of 1 MW could possibly supply in electricity, should they switch completely to the services of said installation.
|Country||Estimated household use of energy, kWh per annum per household||Capacity needed for 1 household, in kW||Number of households supplied by a 1 MW installation|
|Austria||7 654,60||0,87||1 144|
|Switzerland||5 955,64||0,68||1 471|
|Czech Republic||7 766,29||0,89||1 128|
|Germany||7 680,87||0,88||1 140|
|Spain||5 173,51||0,59||1 693|
|Estonia||8 396,69||0,96||1 043|
|France||7 419,85||0,85||1 181|
|United Kingdom||5 561,10||0,63||1 575|
|Netherlands||8 516,84||0,97||1 029|
|Poland||5 010,27||0,57||1 748|
|Portugal||4 288,92||0,49||2 042|
The size of the market nailed down, I turn to its value. I return to my QH(t+z)*PH= QH(t+z)*PI+ K(t)and K(t) = QH(t+z)*(PH– PI)golden recipe, and I consider the prices in question. Just to update those, who have not quite followed so far: the whole scheme consists in selling futures contracts on electricity to households, paid nominally at the ordinary household rate per 1 kW, only that ordinary rate buys them electricity at non-household prices, much lower, and, additionally, participatory deeds in the balance sheet of the supplier.
Anyway, I take prices of energy as they are, and I calculate the things you can find in Table 2, below. What I call ‘Revenue from the local market of a 1 MW installation, at non-household prices’ is the market value of electricity sold, and non-household prices to the population of households calculated in the last column of Table 1. The so-called capital contribution from the same population is the amount paid in as the surplus of the household price over the non-household price of energy. Now, I take a value which I found online – €2 445 – which apparently corresponds to the cost of physical investment in 1 kW of capacity in small hydro. It makes €2 445 000 for 1 MW, and I divide my ‘Capital contribution’ by that sum. What I get is the estimated contribution of said capital contribution to the physical setting up of the installation. Why hydro? I am a bit obsessed with it, I admit. You can find an explanation with Impakter.
Germany looks like the best market for my EneFin scheme, hands down, once again. Spain, Austria, Poland, and Portugal follow at a respectable distance.
|Country||Price of electricity for households, per 1 kWh||Non-household price of electricity, per 1 kWh||Revenue from the local market of a 1 MW installation, at non-household prices||Capital contribution from the local market of a 1 MW installation||Estimated percentage of the physical investment needed in small hydro|
|Austria||€ 0,20||€ 0,09||€ 788 400,00||€ 963 600,00||39%|
|Switzerland||€ 0,19||€ 0,10||€ 898 517,81||€ 765 882,19||31%|
|Czech Republic||€ 0,14||€ 0,07||€ 613 200,00||€ 613 200,00||25%|
|Germany||€ 0,35||€ 0,15||€ 1 314 000,00||€ 1 752 000,00||72%|
|Spain||€ 0,23||€ 0,11||€ 963 600,00||€ 1 051 200,00||43%|
|Estonia||€ 0,12||€ 0,09||€ 788 400,00||€ 262 800,00||11%|
|Finland||€ 0,16||€ 0,07||€ 613 200,00||€ 788 400,00||32%|
|France||€ 0,17||€ 0,10||€ 876 000,00||€ 613 200,00||25%|
|United Kingdom||€ 0,18||€ 0,13||€ 1 138 800,00||€ 438 000,00||18%|
|Netherlands||€ 0,16||€ 0,08||€ 700 800,00||€ 700 800,00||29%|
|Norway||€ 0,17||€ 0,07||€ 613 200,00||€ 876 000,00||36%|
|Poland||€ 0,15||€ 0,09||€ 788 400,00||€ 525 600,00||21%|
|Portugal||€ 0,23||€ 0,12||€ 1 051 200,00||€ 963 600,00||39%|
I am consistently delivering good, almost new science to my readers, and love doing it, and I am working on crowdfunding this activity of mine. As we talk business plans, I remind you that you can download, from the library of my blog, the business plan I prepared for my semi-scientific project Befund (and you can access the French versionas well). You can also get a free e-copy of my book ‘Capitalism and Political Power’ You can support my research by donating directly, any amount you consider appropriate, to my PayPal account. You can also consider going to my Patreon pageand become my patron. If you decide so, I will be grateful for suggesting me two things that Patreon suggests me to suggest you. Firstly, what kind of reward would you expect in exchange of supporting me? Secondly, what kind of phases would you like to see in the development of my research, and of the corresponding educational tools?