Rewiring Australia with Community Capital
Rewiring Australia requires more investment in dwellings than electricity infrastructure. Of the houses, at least 50% have occupants who cannot find Capital or need investment assistance. This article starts with a cautionary tale of a government initiative to rewire Canberra and a minor modification to extend the program to all buildings in the ACT without further government support.
Like many government investment incentives, those who need assistance cannot obtain it. It is the case with the ACT zero-interest sustainable housing loans. People who most need investment assistance have little or no investment experience, have limited access to zero-interest finance, and, if they have access, cannot take the personal risk of debt. Government attempts to address the problem by giving cash grants, and subsidies fail to address the issues. The same people often cannot access cash grants and subsidies for the same reasons they do not access zero-interest loans.
A Non-distributing cooperative financed with Community Capital is one way to address the issues.
Non-distributing Cooperative with Community Capital
All members of a Non-distributing cooperative collectively own assets installed in dwellings, while occupants of the homes take responsibility for the investments from which they benefit. All community members have access to Community Capital, and governments do not need to have special subsidies or grants for the disadvantaged. Occupants take custody of assets purchased and installed in or on their homes. These assets reduce the cost of electricity by buying low and using electricity when the price is high.
Community Capital takes the form of payment for products produced with the Capital. It provides a return on investment with a discount when used. Investors can buy Community Capital and use it to purchase goods or services from the use of the Capital. They can sell it to others who must use it to buy goods or services. When they purchase goods and services, consumers acquire Community Capital depending on the Capital cost included in the sale. Capital transferred to consumers comes from investor redemptions and replaces the need for a Capital market. Removing the need for Capital markets and Capital to earn money can halve the amount of Capital needed to fund community infrastructure.
For example, a battery cooperative calculates the savings generated by the battery and will invoice the occupants for a percentage of the savings. Funds from the payment are paid to the investors until they have their money back. Investors receive a return as a discount on the Capital earnings, while an occupant receives the Capital released by the investor and the discounts from using the Capital.
Assume the savings from an investment are $150 a year. The occupant pays $120. Assume the investor has invested $1000, gets a 6% return on investment, and receives $120 in a year for 16 years. Of this, $60 is a discount, and $60 is a return of Capital. The investor’s Capital goes to $940 while the occupant receives $60. At the end of 16 years, the investor receives $1,960, and the occupant owns $960 worth of Capital and has received $480 as discounts.
Alternatively, assume the investment is with a loan of $1,000 with an interest rate of 6% over 16 years. The external investor receives a total of $1583; after 16 years, the occupant has an asset of $1000.
Advantages of Community Capital
Investors and Consumers share the profits and savings from Capital equitably. The profits are greater without using debt because there is no interest cost. Capital transfers each time a consumer buys something. It increases investment as Capital moves continuously and removes the cost of a Capital Market.
Consumers become investors without having to worry about the investment as that is the concern of the Cooperative. For example, it means everyone in a community who pays for electricity becomes a part-owner of the community battery in proportion to their use of the battery.
Suppose the government of the ACT subsidises community batteries with Community Capital. The subsidy is fair to the community, including renters, those who have difficulty raising Capital, people who leave Canberra, and the taxpayers. If the government does not require a return on Capital, profits increase, and the community becomes wealthier. If the government issued the money and spent it into existence, this would not increase inflation and would reduce government debt.