ERGOs

(Re)architecting the financial system for a post-carbon economy

Sgouris Sgouridis

in collaboration with Scott Kennedy

The Pilot – January 28, 2010

Technology Entertainment Design

1  
Money  is  

a  “belief  about  a  belief”  

generated  by  debt  in  a  fractional  reserve  banking  system  

further  expanded  by  (unregulated)  securitization  of  the  debt  

 US GDP & Oil Price
(Normalized Nominal)

4  

2  

0  
1  
3  
5  
1979  January   6  
1979  February  
1979  March  

GDP
1979  April  
1979  May  
1979  June  
1979  July  
1979  August  

Oil Price
1979  September  
1979  October  
1979  November  
The  1970s  

1979  December  
1980  January  
1980  February  
1980  March  
1980  April  
1980  May  
1980  June  
1980  July  
1980  August  
1980  September  
1980  October  
1980  November  
1980  December  
1981  January  
1981  February  
1981  March  
1981  April  
1981  May  
Data sources: Bureau of Economic Analysis & Energy Information Administration

1981  June  
1981  July  
1981  August  
1981  September  
1981  October  
1981  November  
1981  December  
1982  January  
1  
2  

0  
1.5  
2.5  

0.5  
 US GDP & Oil Price
(Normalized Nominal)

4  
14  

2  
12  

0  
6  
8  
10  
16  
18  
20  
2007  January  
2007  February  
2007  March  
2007  April  
2007  May  
2007  June  
2007  July  
GDP

2007  August  
2007  September  
The  2000s  

2007  October   Oil Price

2007  November  
2007  December  
2008  January  
2008  February  
2008  March  
2008  April  
2008  May  
2008  June  
2008  July  
2008  August  
2008  September  
2008  October  
2008  November  
2008  December  
2009  January  
2009  February  
Data sources: Bureau of Economic Analysis & Energy Information Administration

2009  March  
2009  April  
2009  May  
2009  June  
2009  July  
10  

9.3  
9.5  

9.2  
9.7  

9.4  
9.8  

9.6  
9.9  
10.1  
Tipping  the  house  of  cards…  
Electricity  bill.    
Water  bill.    
Taxi  fare.    
Metro  ticket.  
Gas  price.    
Food  price.    
Hotel  rate.  
Mortgage  payment.  

Aggregate  pricing  of  a  service  results  in  embedding:  

  energy  requirements  (hidden)  
  externalities  (unpriced  and  unknown  =  doubly  hidden)  

5  
2000s:  first  collision  of  real  and  imaginary  economies  

not  yet  critical  as  fossil  wealth  remains  accessible  

but  

what  if  a  community  desired  to  rely  on  renewable  energy  

and    
maintain  standards  of  living?  
Varia9ons  of  Energy  Systems  
Renewable Energy Targets

Energy Independence Targets

 Autonomous  Grid    Autonomous  Grid  

Unlimited  fuel   Fuel/resource  limits  

Strong

Autonomous  
Fossil  fuel  
Sustainable  
Constraints

dominant  –  
Capacity

City  
capacity  
limited   Hydro/
Nuclear  
Fossil  fuel  
dominant  
dominant  –   Connected  
excess   Sustainable  
Weak

capacity   City  

 Interconnected  Grid    Interconnected  Grid  

 Unlimited  fuel   Fuel/resource  limits  

Weak Strong Energy
Constraints
Sustainable  City  Needs  
Net  Zero  Carbon    energy  balance  100%  renewable  
  Strong  energy  constraint  +  peak  load  management  
  Energy  accounting:  transparent  and  auditable  

Demand  management  
  Incentives  for  efficient  energy  use    
  Mechanism  for  informed  decisions  on  energy  use  
  Simplicity,  flexibility,  commonality  

Resident  energy/environment  awareness  

Innovation  and  replicability  

8  
Commitment  to  a  strong  energy  constraint  could  lead  to  

a  form  of  technocratic  dictatorship  

can  we  maintain    

 freedom  of  action,    
 promote  equality,  and    
 meet  resource  constraints?  
ergo  Ergo  

introducing  energy  as  a  parallel  currency  

Ergo:  Energy  Credits  System  Concept  

Ergo:  Unit  of  energy-­‐based  complementary  currency  

  i.e.  with  a  “fiat”  currency  exchange  
Ergos  are:    
  Issued  proportionally  to  energy  output  
  Allocated  by  a  facilitating  authority  to  subscribers  
  “Surrendered”  for  energy  portion  of  services  
  Traded  in  a  spot  market  

An  Ergo  Energy  Credit  (EEC)  system  makes  energy  

tangible  and  fungible.  

11  
Ergo  Defini9on  –  Tangible  Energy  
1  Ergo  =  1  Energy  Unit  (e.g.  kWh)  
Services  have  an  Ergo  price  component  reflecting  their  
true  direct  and  indirect  energy  needs  
Ergos  represent  a  finite  energy  resource  that  can  be  
allocated  equitably  
Ergos  have  an  expiration  date  
Ergos  cannot  be  hoarded  speculatively  but  are  
surrendered  for  a  service  transaction  

12  
Ergo  Defini9on  –  Fungible  Energy  
Ergos  have  a  subscription  fee  
For  generation  cost  recovery  

Ergos  are  traded  asymmetrically  and  have  a  spot  price  in  $  

Revenue  neutral;  externality  pricing  

A  conserving  user  can  sell  excess  Ergos  at  the  spot  price  
A  user  above  budget  can  buy  and  immediately  surrender  
Ergos  at  the  spot  price  in  exchange  for  a  desired  service  

13  
Proposed  Ini)al  Ergo  Coverage  
Ergo  Users:  
Residents  
Businesses  
Visitors  
City  authorities  

Service  Coverage:  
Electricity  
Climate  Control  -­‐  HVAC    
Water  &  hot  water  
Transportation  
Waste  disposal  
Common  utilities  

14  
Ergo  Issuance  
Ergos  issued  centrally  by  City  Energy  Administration  
(CEA)  reflect  energy  generation  budget  

Ergo  
Energy   Budget  Carry   Forward  
Monthly   = Forecast   + Over   + Credits  
Budget  

Electricity   Biomass  &  

Energy   Thermal   Adjustment  
Forecast  
= Generation   + Generation   x Factor  
Forecast   Forecast  

15  
Ergo  Alloca9on  
Ergos  are  allocated  to  subscribers  based  on  a  flat  subscription  fee  and  
equitable  allocation  (other  options  exist)  

Ergo  
Residential   Commercial   Common  
Monthly  
Budget  
= Users   + Users   + Utility   +…

Visitor   CEA   Pre-­‐allocated  

Reserve  
+ Exports  
+ Ergos  

Ergo  per   Residential   Number  of  

User   = User  Budget   / Users  

Commercial user allocation determined on case by case and by benchmarking

Ergo  Pricing  
Subscription  fee  
  Cost  recovery,  tier-­‐pricing,  subsidized  etc.    
Ergo  spot  price  
  Updated  regularly  
  Based  on  the  comparison  of  Cumulative  Demand  Profile  
vs.  the  Cumulative  Supply  profile  

Short  Term  
Ergo   Base  Ergo  
Price   = Price   + f( Cumulative   )
Demand  Gap  

17  
Ergo  Pricing  Mechanism  

Cumulative
Demand Curve
Cumulative
Supply Curve

Cumulative Demand Gap

18  
Ergo  Market  
Ergo  Market  differs  from  traditional  energy  markets:  

1.  it  is  retail  based,  

2.  users  cannot  speculatively  trade  Ergos,  and  

3.  users  cannot  hoard  Ergos  due  to  expiration  

19  
Ergo  Forward  Markets  
  Two  Types:  
  Pre-­‐allocated  Ergos  
  Ergo  Futures  

  Accommodate  temporary  capacity  shortfalls-­‐  Pre-­‐allocated  Ergos  

  Used  as  regular  Ergos  
  Trading-­‐off  carbon  offsets  with  Pre-­‐allocated  Ergos  
  Potential  to  finance  future  incremental  capacity  
  Supports  energy  balance  accounting  

  Finance  investment  in  future  renewable  energy  capacity-­‐  Ergo  Futures  

  Fully  tradable  
  Activation  date  (converted  to  regular  Ergos)  
  User  price  risk  management  
  Improved  demand  forecasting  

20  
 User  Experience  
Seamless  &  uncomplicated  

Rely  on:  
 smart-­‐phone  type  devices  with  access  to  user  accounts  
 wireless  communication  with  Ergo  &  $  debit  devices  

Pre-­‐programmed  modes  and  intuitive  ambient  indicators  

21  
Of  Ci9es  and  Spaceships  
Sooner  than  later  Geonauts  on  Spaceship  Earth    

will  act  as  citizens  of  a    

Sustainable  City  

Energy  is  a  most  precious  commodity  

And  only  its  appreciation  will  herald  the  transition  to  a  sustainable  economy  

Photo credits: Robert & Shana ParkeHarrison, www.geos.ed.ac.uk, www.masdar.ae