Sustainable investing is where the community served by the infrastructure self-fund the infrastructure they use. All pay the same for using the infrastructure, but those who use less are allowed to invest more in the infrastructure. Investors get a return of say 8% fixed per annum inflation adjusted in the form of discounts on payments for the use of the infrastructure.
The following example shows how, using this approach, we can create as much renewable energy as we need through Energy Rewards.
Let us assume a community of 50,000 wishes to
- Invest $100M in renewable energy plant that delivers 150M kilowatt hours per year. (typical wind or solar farm numbers)
- The plant costs $4M per year to operate.
- The price per kWh is 0.08 cents adjusted yearly for inflation.
- The discount is 8% per annum fixed.
- The plant has an operational life of 30 years.
Let the capital owing increase with inflation and assume the investors get their money back plus discounts over 30 years.
The operator of the plant will get a $666K profit each year. At the end of 30 years, the community owns a renewable energy plant that continues to operate, and the profit can be used for other community infrastructure. The community can increase the price per kWh and adjust the discount rate to fund other pressing infrastructure. The price is set by community needs, not by a market in energy.
The same renewable energy plant could be financed with 6% external debt, but the outcomes for the community would be different.
Energy Rewards for this scenario works as follows. Each member of the community on average gets the right to invest $2000. Let us assume each person consumes an average of 4000 kWh per year. For each kWh above the average 50 cents is taken from the right to invest. For each kWh below the average 50 cents is added.
If a member of the community does not have $2000 to buy the Rewards, they can sell some of their rights to someone who does and use the money to buy their remaining Energy Rewards allocation. The rights are attractive to those in the community with savings to invest as they have the backing of the community and give a high fixed inflation-adjusted return.
This approach overcomes issues with the existing market-based approach.
- Encourages people to consume less.
- Encourages the operator to do more with less as the price is fixed.
- Provides price stability
- It makes long-term investments equal in profitability to short-term investments.
- Is fair because it gives a benefit to those who consume less of the community resource.
- Is fair because it allows all members of the community to invest.
- The investment has liquidity.
- The community benefits from the returns on the investment.
- The community has control over the asset.
- It removes community debt.
A market-based approach
- Encourages more consumption.
- Encourages the operator to increase prices as the easiest way to increase profits.
- Encourages short-term exploitive investments.
- Increased regulatory costs to control exploitation.
- Those who consume more get more benefit from the community resource.
- It favours those who already have assets and can get credit.
- Normally excludes the community from investing.
- It creates external debt.
Rewards for any Community Infrastructure
The approach can self-fund any community infrastructure requiring capital investment including health, public transport, traffic violations, communications, water, fuel, and education.