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Market Structure

  • Upstream services are synchronised so that their impact is optimised
  • The use of a ‘Catchment Trading Intermediary’ (CTI) supports payments from many ‘downstream’ buyers to many ‘upstream’ providers
  • The value chain is maximised – downstream benefits are calculated and used as the basis for payments
  • A market structure makes it easier for infrastructure investors to invest
  • Other stakeholders (e.g. insurance companies) can engage to help increase the value for both upstream and downstream organisations

 

 

 

A market represented by nodes, each node representing an upstream service provider or a downstream beneficiary

Market Components

 

Basic market structure

 

 

‘Upstream’ organisations provide services to meet downstream targets, e.g.

  • water companies
  • infrastructure operators
  • housing developers
  • industrials
  • farmers

‘Downstream’ buyers set the necessary targets to mitigate water problems so that they may benefit from upstream services, e.g.

  • power and telecoms utilities
  • transportation
  • households
  • businesses

Downstream targets may include,

  • river level to avoid flooding
  • flow rate to provide sufficient water
  • chemical parameters
  • biological parameters
  • physical parameters

‘Catchment Trading Intermediary’ (CTI) – an independent organisation which is set up in order to manage a central fund and facilitate the market

Trading can be in the form of:

  • Transactional (one entity paying another for a service)
  • Pricing (e.g. a water company incentivising customers to change behaviour)
  • Bartering (two or more entities providing mutual services)
  • Regulatory (forcing or coercing an entity to undertake a service in order to meet compliance, including conditions within a planning permission)
  • Moral (influencing entities to act, e.g. for a company to meet their Environmental Social Governance objectives)

 

Approach

Development of value chains

  • A value chain is the value which downstream buyers place on the benefits they would achieve if their risk exposure to water issues was avoided
  • A value chain can also be enhanced by the value that stakeholders place on the resolution of water issues (e.g. Councils wanting to see a resolution for political and social reasons)
  • Managing the value chain and unlocking its potential value is essential if affordable distributed infrastructure solutions are to be achieved

Development of distributed infrastructure solutions

  • Where services are provided (such as holding back flood water in a mini-reservoir by a farmer) by multiple providers, then these aggregated services make up a distributed infrastructure solution
  • To make the most of these services, their use ideally needs to be synchronised and this is best achieved using technology
  • Each service may be available at different times and be charged on a different transactional basis – this creates flexibility in the market place

Development of agile trading structures

  • There needs to be a mechanism whereby the downstream value chain can make payments to upstream service providers
  • In order to allow many upstream and downstream entities to participate, there is ideally an independent body which can manage a central fund – a Catchment Trading Intermediary (CTI)
  • The trading mechanism used needs to be appropriate for the flow of funds being considered, the service level agreements required and the levels of responsibility necessary
  • There could therefore be a range of trading mechanisms within one local market, so long as critical issues are synchronised

Technology

 

 

Network optimisation is used to bring together

the most effective cluster of services

Key to the PyTerra approach is the analysis of the value chain created by the benefits made by upstream services.

 

Each entity (upstream or downstream organisation) is represented by a ‘node’ within a statistical analysis.

 

Loading these nodes with data and then manipulating their relationship using algorithms then allows the objectives of the network to be achieved.

 

This can be taken to the next step when the network is then enlivened, using technologies such as smart contracts, Blockchain and IoT (Internet of Things) – see ‘Network Nodes’ graphic below.

Networked nodes, each representing an upstream service or a downstream impact