There are three ways to fund the Rewiring of Australia.
- Governments could do it.
- Governments could outsource it to large companies.
- Local Communities with assistance in coordinating could do it.
Of the three, Local Communities will do it in half the time and half the cost because One Plus One equals Three for locally-owned investments.
Suppose there are two households with Solar Panels but no Batteries. If both households have the money to purchase a Battery, one could buy the Battery, the other could buy the use of the Battery, and both share the profits from the Battery. Owners of assets sharing the profits with those who pay for its use require the least money, hence the lowest cost.
It is the least cost because sharing profits increases the rate at which the profits are reinvested to make more profits. Sharing profits at the time of payment is the fastest and lowest-cost way to distribute Capital.
Sharing is a bookkeeping change when payments happen. It incurs no extra cost, meaning the electricity cost drops without changing how the electricity system operates. The approach works for all investments and scales to any number of households. Sharing increases investment, and investment to make cost reductions reduces the amount of money circulating. The system will stabilise at the minimum cost of producing the product needed.
The technology to rewire a suburb is well-known, and the economics are favourable — provided the residents share the profits. Alternatively, if residents depend on externally controlled service companies, the system's operation will not stabilise but will inevitably move to more money for less electricity. The Australian Energy Market over the last twenty years is an example. The jurisdictions where governments retain some ownership have the highest money returns to the citizens.
The alternative is for all service providers, including Community owned companies, to share their profits with the Communities they serve. Using this approach will Rewire Australia with ongoing profits while reducing the cost of renewable electricity and spreading the new wealth evenly across the Community.
Reciprocal or Community Capital
A Community may need to borrow money. It should borrow money from its residents first; if they cannot supply it, the Community will borrow money from Banks, Superfunds or other lenders using Reciprocal or Community Capital Loans.
Community Companies or Cooperatives will be structured with Reciprocal Capital as outlined in Financing and Selling Companies or Cooperatives.
Community Businesses will reinvest all their profits into the Community, and community members will realise their investments with lower electricity prices or by selling their shares to other investors.
An Example of Minimum Cost Local Financing
Assume two Reciprocal Markets are needed to supply electricity to a local market — like a suburb. One Market generates electricity, and the other Market stores and distributes electricity. Call Companies in the generating Market G and Companies in the storage market S. Companies make a profit PG on each kWh of energy, and Companies S make a profit SG on each kWh of energy.
Suppose the profits go to an external service company. In that case, none is left in the Community, and there is no incentive for new investment in reducing greenhouse gas or saving electricity.
However, if the Community owns the generating and battery companies, all the profits will be spent reducing greenhouse gases and saving electricity. The profits will be distributed according to the social norms within the Community and will be fair and equitable. All the profits will be invested. It will not accumulate in static assets, and the profits from the new investments will go to the Community.
Minimum Market Example with Numbers
The following is the minimum case but the approach scales with more households and companies.
In the minimum case, there are only two members in the local Community, household A and household B. Household A owns a Battery, and household B owns Solar Panels.
Assume 100 kWh is produced and consumed. The total profit is
100 times (PG + SG)
If PG is $5 and SG is $10, the total profit is $1500. Because of reciprocity in sharing profits, household A gets $750, and household B receives $750. The Community has decided that all the profits from the two businesses will be invested in reducing the cost of electricity in the Community.
Reciprocal Capital scales and automatically adjust as people move households and communities. Households will group into street communities. Street communities will group into suburban communities and suburbs into cities until the whole country becomes part of a single self-organising minimum-cost energy market.
Community Batteries as an Enabling Technology
A Community Battery serves all households equally on the low-voltage section of the existing grid. These households form a Local Community. A government can supply a battery to each local Community if the Community agrees to set up a community company or cooperative to distribute the profits from the Battery and share the profits equitably. The profits from the Battery must be spent locally on rewiring the local Community.
There are 10,000,000 households in Australia. Assuming an average of 100 homes in each low-voltage section of the grid, this is 100,000 local communities. Each Community could receive $100,000 for a Community battery as zero-interest loans repayable from taxes on the Community Companies and individual households. The taxes come from profits and GST on the sale of electricity.
Communities will develop in parallel and independently. The Rewiring of Australia will happen quickly and equitably. Each Community will be financially and electrically isolated, meaning the Battery will supply the local Community with power for a short time if the grid power isn't available. As local communities are not competing, financial, storage and renewable generation adaptations will move rapidly across communities.
Importantly, suburban and city communities will learn to organise and govern themselves for other purposes — like affordable housing.
The initial deployments will treat Batteries as producers in the National Grid and leave all existing financial and electrical arrangements in place. The Community will choose a service provider who agrees to share the profits to operate the Battery. The preferred operator will be the local distribution Company.
As the Battery operates within a State or Territory, payment for electricity distribution across the low-voltage network can be a local arrangement and benefit both the Local Community and the Distributor.
Without Capital Costs, the Battery makes a profit, and the members of the Local Community decide how the savings are invested and distributed. The Community decides, not the Market.
Karl Polanyi's The Great Transformation says distributing wealth using the social principles of reciprocity, distribution and householding rather than markets is the way to build a stable social order.
Sharing profits will implement these principles automatically. Investments will produce the greatest profits. For Rewiring Australia, the assets will give the maximum electricity output for the least money and the least greenhouse gases and environmental damage.
Benefits to the Federal Government
With Reciprocal Capital, the Federal government will see a reduction in electricity costs for all Australians without an increase in costs. As Australians own the infrastructure, the government will see increased taxation due to more investment and profits remaining in Australia.
Critically the increase in wealth will be fairly distributed across the Community, making Australia a more equitable society with less need for taxes to transfer wealth from the wealthy to the poor.
The government could provide a public way for taxpayers to announce they will invest their Stage 3 tax cuts for three years in Community Batteries. Those benefiting from the tax cuts could do this before they become law. It would accelerate rewiring and benefit everyone, and wealthy people would be acknowledged in their Communities.