Use-Credit Obligations
= "issuing vouchers for future produce or services, and selling them at a discount, to attract customers".
Interview
Marcus Saul, working around Energy Commons, interviewed by lowimpact.org:
"The genius of the use-credit obligations approach is that it can help small businesses avoid debt, by issuing vouchers for future produce or services, and selling them at a discount, to attract customers.
The example Marcus gives is a small farmer who, instead of taking out a loan to create an apple orchard, instead approaches a local cider-maker and offers vouchers for the apples that will be produced, but at a discount – so the cider-maker will get 120 apples for the price of 100 (say), when they’re harvested. The cider-maker saves money on apples, and the farmer gets the money required to set up the orchard. This is just an example, but the idea works for any kind of business.
In the case of energy, it means that communities will own their own energy infrastructure.
* The vouchers don’t come from somewhere else – they’re issued by the community?
Yes. In the example of the apples above – the farmer knows roughly how many apples can be produced, and in the case of energy, the community knows roughly how much energy can be produced with the infrastructure they want to build.
The purchasers of the energy vouchers (‘energy-credit obligations’, or ECOs) can redeem them for energy when required, keep them as a form of savings, or sell them for a profit.
So, for example, a community group want to put up a wind turbine. They issue vouchers, get the money to put up the turbine, and they’ll get customers because the vouchers represent cheaper energy than current market prices? Exactly. Plus, we offer vouchers to the local community first, and any left over are sold into the market. So we try to ensure local energy resilience, which is a big difference from other models. If communities generate renewable electricity, they export it to a grid (usually at a low price) and import it back (usually at a higher price). Instead, we distribute via a local micro-grid first, and only then, any excess is exported. This builds local resilience.
* In your ideal world (if you were energy minister, say), would all energy infrastructure be owned by communities, and everyone’s energy generated locally?
100%. You can’t have a healthy local economy without a functioning local energy system. If the energy system is extractive, it hinders the local economy. If we move away from the centralised model to a decentralised model, we’ll be able to train up more people in a range of diverse skills, repopulate and generate employment in remote areas, and spread energy production and demand more widely, rather than rely on huge, centralised energy companies. Also, the more remote locations tend to have more natural energy resources, but they never seem to get a good deal.
It’s similar to what happened with the discovery of oil in the Middle East and various other place. The agreements set up were highly extractive, which meant they benefited giant energy companies, but not the local communities. The same is happening now with renewable energy. Our model allows communities to own the energy production, and to benefit from the financial output.
* So your approach allows infrastructure to be built without incurring debt?
Yes. That’s the interesting thing. When you start to build the infrastructure, this is where the acceleration comes in. We’re creating a diverse infrastructure than can address different problems. We have agreements with equipment manufacturers (for example, wind turbines). They have production / salary costs, plus marketing, depreciation etc., so they need to get their kit to market and sell it. We provide an ‘energy as a service’ solution, working with the manufacturers as partners. They provide their equipment in return for energy revenues from our projects. So they get a long-term, secure income.
This is another good point for Chris’s plan – energy producers are rewarded for efficiency in providing really good equipment, whenever it’s required, so that the projects generate lots of energy, which provides their return."
(https://www.lowimpact.org/posts/building-the-energy-commons-marcus-saul-of-island-power)