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Pitch

Urban communities are in growing need of energy+water while creating wastewater and sewage. Here: a self-sustaining solution incl. finance.


Description

Summary

In order to successfully address the energy - water nexus urban communities must be involved.

They are major users of energy and water as well as the main producers of waste water and sewage. At the same time, new approaches to finance efforts for solutions in the water and energy nexus have to be identified as public budgets are strained already. This proposal presents a self-sustaining solution through a continuous deployment of private capital to finance novel technology.

 


What actions do you propose?

Urban communities have to become petri dishes for new technological solutions. Initiated by municipal entities such as mayor's offices and water departments together with the civic communities local water&energy innovation labs need to be established to identify Start-ups and SMEs with novel technology (see references for examples).These labs will be financed through a Community Development Venture Capital (CDVC)fund organized as a Business Development Company (BDC). The BDC will be capitalized through mission related investments by foundations/non-profits, venture capital and accredited investors interested in the technology. Once the technology demonstrated its viability in the lab it will be implemented in the urban community. The BDC can be listed on an exchange thus creating an opportunity for unaccredited civic investors to participate in it. As soon as start-ups are no longer in need of funding via the BDC their share(s) will be sold and the returned capital can be re-deployed in the next lab round. Thus continuously financing and deploying inventions in new technology.

There are several key steps involved:
1) The financial structure consisting of a Community Development Venture Capital fund                                          http://www.newyorkfed.org/research/staff_reports/sr572.pdf         formed as a  Business Development Company (BDC) which is an established format in the US and can be listed on any stock exchange.
http://www.investopedia.com/terms/b/bdc.asp
It allows to raise the investment capital (pre-listing)from foundations with a mission in the sustainable water and/or renewable energy sector (Mission Related Investments = MRI)
https://www.missioninvestors.org/mission-investing,
as well as venture capital investors and so called accredited high net worth investors.
The BDC's acts like a privately funded infrastructure fund. Its role is to identify and subsequently invest in start-ups and small and medium (SME) sized firms with novel technology assembled in an innovation lab
http://www.rockefellerfoundation.org/blog/how-social-innovation-labs-contribute/
2) The Lab acts as an incubator/accelerator. Together with the local community using civic crowd funding/participation platforms
http://www.ssireview.org/blog/entry/civic_crowdfunding_a_new_way_of_spending_down
the Lab will determine which of the firms identified are suitable
candidates to implement their technology in any given municipality. The firms selected will receive the necessary capital from the BDC while the BDC in return will become a shareholder in these companies.
3) The companies will start implementing their technology while the BDC will be listed on a stock exchange. Once listed everybody can buy and sell shares in the BDC which means that
a) unaccredited investors can invest
b) initial investors (foundations etc.) can sell their shares should they so wish
c) the BDC's capital remains unaffected by these transactions

4) After successful implementation the companies start to grow, create jobs and revenues. The BDC continues to assist their management and - if necessary - helps finance their growth. At some point the BDC will sell its shares in these companies while the companies continue to operate.
5) The resulting sales proceeds will be reinvested by the BDC into a new round of investments into start-ups and SMEs thus continuously supporting new developments in the water/energy sector.

A sustainable structure to address energy-water nexus for urban communities

 


Who will take these actions?

  • Mayor's offices, civic communities and municipal water departments create urban water&energy Innovation Lab
  • Municipal water departments and civic communities identify Start-ups and SMEs for inclusion in Innovation Lab
  • Foundations and non-profits through mission related investments (MRI) and venture capital and accredited investors jointly create business development company (BDC)  to invest in Start-ups and SMEs
  • unaccredited investors can buy shares in BDC once listed


Where will these actions be taken?

Any urban community globally in the US as well as European Union or developing countries. In the US cities like Portland,OR, Philadelphia, Chicago or Washington DC on one hand in partnership with Mission Related Investments from Rockefeller Foundation (Resilient Cities), Knight Foundation (City Challenge) or BMGF (Water) would make for an excellent first start.


How will these actions have a high impact in addressing climate change?

All technologies mentioned in this proposal produce energy and/or water without contributing to CO2 increase and hence address climate change and reduce production of green house gas. From the U.S. Global Change Research Program: Energy, water, and land systems interact in many ways. Climate change affects the individual sectors and their interactions. The dependence of energy systems on land and water supplies will influence the development of these systems and options for reducing greenhouse gas emissions, as well as their climate change vulnerability. Land-use planners need to consider the interactive impacts of strained water supplies on cities, agriculture, and ecological needs. Across the country, these intertwined sectors will witness increased stresses due to climate changes that are projected to reduce water quality and/or quantity in many regions .


What are other key benefits?

The proposed actions will increase awareness about the energy-water nexus amongst the civic population at large and will lead to a more responsible handling of precious depleting resources such as water and energy. Most importantly it will attract private investments necessary to implement such technologies. Public coffers are empty and the investments are in the trillions of dollars globally. In the US alone the EPA estimates that $600B                                        http://www.forbes.com/sites/ericagies/2012/06/28/spending-cuts-threaten-u-s-water-infrastructure/                                                 are needed just to repair its ageing water infrastructure. Without offering a viable solution on how to attract private capital for this sector there is little hope to speed up the process of implementation.


What are the proposal’s costs?

Rather than economic costs this proposal will have additional economic benefits. Financing start-ups and SMEs and thus help implement their technology will create additional jobs. Investments into these companies through a vehicle that will allow unaccredited investors to participate will involve the public at large in the solution process and create additional wealth.


Time line

This concept can be started in one urban community within a very short period of time as the technologies as well as the financial structures (CVDC and BDC) are readily available and can easily be implemented. Once a location has been identified a pilot can be launched within 12 months or less. When its viability has been demonstrated it can quickly be scaled and replicated and become a blue print for similar projects.


Related proposals

None so far to the best of my knowledge.


References

Companies and start-ups that lend itself to such an approach are increasingly to be found in the
waste water and sewage treatment sector, where more energy is generated while treating the water than is actually needed, i.e.:
http://janickibioenergy.com/
http://www.aquaporin.dk/
http://www.monsal.com/                           http://www.cambrianinnovation.com/
But also in sectors that deal with available hydro power in a city's pipe network:
http://aquakin.com/
http://www.lucidenergy.com/

These are merely a few examples.