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La Bourse  /  Volume III  /  Nº III.02  /  Workbook — the Gainshare employee

WORKBOOK — THE LUMINOUS GAINSHARE EMPLOYEE

Chapter III.02 · Energy as the Denominator

For the person working inside a gainshare arrangement — where a defined share of verified improvement returns to the people who created it. This chapter matters to you more than most, because the moment a gainshare is measured in energy rather than money, the question of which joule was saved becomes the question of what you get paid.

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WHY THIS ONE IS DIFFERENT

Most gainshare schemes are denominated in currency: the scheme computes a cost saving and returns a share of it. That works until the price moves, and then two things happen that nobody warned you about.

The price falls and your gain vanishes. You saved the same physical kilowatt-hours. The tariff dropped. The money saving shrank, and so did your share — for a reason that had nothing to do with your work.

The price rises and your gain is claimed elsewhere. The same kilowatt-hours are suddenly worth much more, and the scheme quietly discovers a reason to recalibrate, because nobody intended to pay that much.

An energy-denominated gainshare fixes the first problem and exposes the second. It measures what you actually did — quantity — and leaves the price to whoever is carrying the price risk. That is the right split, and it is worth understanding well enough to ask for.

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PART ONE — DISCOVERY

Days 1–30: find what your scheme is actually denominated in

Exercise 1.1 — Read your own scheme for its denominator (90 minutes)

Take the scheme document and answer these in writing:

1. Is the gain measured in money or in a physical quantity?
2. If money: whose price? Contract price, spot price, or an internal transfer price somebody sets?
3. If quantity: which quantity — delivered energy, or energy weighted by grade?
4. What happens to the measured gain when the price moves and nothing physical changes?
5. What happens to the baseline when the gain is realised?

Question four is the one this chapter adds, and it is the one almost nobody asks. Question five is the ratchet question, and it decides whether the scheme is worth being in at all.

Exercise 1.2 — Find the grade of what you save (one week)

Split the energy your team touches into grades. Against a 20 °C ambient:

Now the arithmetic that will affect your payslip. Suppose a project saves 14.0 GWh a year, 60 percent electricity and 40 percent 80 °C heat. Flat, that is 14.0 GWh. Exergy-weighted, it is 14.0 × (0.60 × 1.00 + 0.40 × 0.1699) = 9.35 GWh.

The flat figure overstates the tradeable saving by 49.71 percent.

If your scheme pays on flat joules and your employer sells the saving on an exergy basis, the difference is a margin nobody has named. If your scheme pays on exergy and your team's work is mostly low-grade heat recovery, you are being weighted down by a factor of up to 15.7 for doing genuinely useful work. Neither is wrong. Both need to be decided in the document rather than in the dispute.

Exercise 1.3 — The appreciative conversation with your team (45 minutes)

"When has something we did here saved real energy and nobody got credit for it? What was it, and what would it have taken for it to count?"

Write down conditions, not complaints. What you are building is a list of uncounted gains, and an uncounted gain is an unshared gain. Making it countable is the single highest-leverage thing available to you inside a gainshare.

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PART TWO — THE ARITHMETIC

Days 31–45: compute what you are owed

Exercise 2.1 — The quantity, the price, and the two of them separated

Rebuild your last scheme period in three columns rather than one:

If the money difference and the quantity difference point in different directions, you have found the most important fact about your scheme, and you have found it in an afternoon.

Exercise 2.2 — Size the price risk you are carrying (2 hours)

You are carrying price risk whether anyone told you or not. Size it.

For scale: in the ERCOT market the annual average real-time price was around $22 per MWh in 2020, and in February 2021 it sat at the offer cap of $9,000 for roughly 96 hours — 409.1 times the average. The floor is negative $251, so the span is $9,251 per MWh. Across an ocean rather than across hours: European TTF gas peaked near €339.20/MWh in August 2022 while Henry Hub sold at $8.80 per MMBtu — €29.39/MWh, a factor of 11.54.

Now ask the question that follows: in a period where the price moved by even a tenth of that, would your gainshare have paid on what you did, or on what the market did?

Exercise 2.3 — Model your own share (90 minutes)

Take the instrument from the chapter and put yourself in it. A £4,000,000 facility, verified savings of 14.0 GWh a year at a contracted index of £95.00 per MWh — £1,330,000 a year — with 75 percent assigned to repay the facility.

  annual value of saving     £1,330,000
  to the facility (75%)        £997,500
  reverting to the unit (25%)  £332,500
  payback                       4.01 yr
  after repayment, the whole £1,330,000 reverts

The reversion is where your share lives. Until year four or five, three pounds in four are repaying capital. After that, the full saving comes back to the operating unit — and the question of whether the people who produced it get a defined share of that is a question to settle now, in the term sheet, while it costs nobody anything, rather than in year five when it is worth £1,330,000 a year and everybody has an opinion.

Exercise 2.4 — The breakeven, and why you should know it (45 minutes)

  breakeven  =  £4,000,000 / (5 x 14,000 x 0.75)  =  £76.19 / MWh

Against the £95.00 index there is £18.81 of headroom, 24.7 percent. At a forward price of £70.00 the facility recovers 91.9 percent of capital and fails.

Know this number. It tells you exactly how much room the scheme has before the arithmetic turns against it, and it lets you have a calm conversation in a bad year instead of a defensive one. At a 6.0 percent coupon over five years the service is £949,586 a year, so at a 75 percent share the cover is 1.050 and at 80 percent it is 1.120. Thin cover is not a reason to distrust the scheme. It is a reason to ask for the floor-price covenant rather than the ratio covenant.

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PART THREE — DESIGN

Days 46–70: make the uncounted countable

Exercise 3.1 — Propose the second column (one page)

Write a one-page proposal that the scheme report carries two columns: the physical quantity saved, exergy-weighted, and the money value at the contracted index. Not a change to the payout. A change to the report.

This is deliberately modest and it is how these things actually move. Once the quantity is in the report, three arguments become impossible to have: whether the gain was real, whether the price caused it, and whether the baseline moved.

Exercise 3.2 — Ask the five questions of the conversion table (30 minutes)

If your scheme weights by grade, somebody owns the weights. Ask:

1. What ambient temperature are the factors computed against?
2. What version is the table, and when was it last changed?
3. When it changes, is history restated?
4. Who owns it, and do they have a position in the outcome?
5. Where is it published?

If the answer to any of these is nobody has ever asked, that is the finding, and it is worth more than this quarter's payout. Odum's whole field had to multiply every published figure by 1.271 when its baseline was revised. A gainshare whose conversion table can move silently can move your payout silently.

Exercise 3.3 — The ratchet, in writing (30 minutes)

Confirm in writing what happens to the baseline when a gain is realised. A well-designed scheme either holds it fixed for a stated term — three to five years — or ratchets on a published schedule everyone can see coming. If the baseline resets to the improved level each period, every gain you make raises the bar you are measured against, and the same effort yields less each cycle.

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PART FOUR — DESTINY AND DELIGHT

Days 71–90: make it hold

Get the quantity into the standing report. One row, monthly: quantity saved, exergy-weighted quantity, index price, money value. Anything reviewed monthly persists.

Recruit a second owner, and recruit them by giving them the credit for the first result. One person is a hobby; two is a practice.

Keep your own copy of the series. Not from suspicion — from arithmetic. The value of a quantity series is entirely in comparison across time, so it is worth little this year and a great deal in five, and the person most likely to still have the early months is you.

The delight. There is a particular satisfaction in the first period where the report shows quantity and money moving in different directions, and everyone in the room can see instantly which part was the work and which part was the market. That clarity is the thing you were actually asking for. It is worth more than the payout, because it is what makes every future payout arguable on facts.

And a smaller pleasure worth having on purpose: find the most expensive hour in your site's year and find out what was running in it. Moving it costs nothing, needs no capital and no vendor, and it is the cheapest saving in the building — which makes it the cleanest possible thing to have your name on.

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THE TERM PROJECT

One thing, carried the whole way

Produce one page that puts your team's last four scheme periods into two columns, and defend it.

Four things in it.

1. Quantity, by grade. Megawatt-hours saved in each period, split into electricity, steam, and low-grade heat, weighted at 100.00 percent, 43.96 percent and 16.99 percent respectively, with the ambient temperature stated.
2. Money, at the index. The same four periods valued at whatever price the scheme used, with the price printed beside each one.
3. The divergence. One line for each period: did quantity and money move in the same direction? Where they did not, say by how much.
4. One question for the scheme owner, drawn from the checklist below, chosen because the four periods showed you it mattered.

The fourth is the point. A page of numbers with no question attached gets filed; a page with one specific, answerable question attached gets a meeting. And the question will be better than any you could have asked before you built the page, because it will be about something your own data showed you rather than something a workbook suggested.

If you can only get one period. Build it anyway, and start the second. The value of this page is entirely in the comparison, which means it is worth little this quarter and a great deal in two years — and the person most likely to still have the early periods is the one who started keeping them.

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SELF-ASSESSMENT

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KNOW YOUR SCHEME — A CHECKLIST

Tick what is written down. Anything unticked is a conversation, not a complaint.

• The gain is defined as a quantity, with its unit stated
• If weighted by grade, the conversion table is published, versioned and dated
• The ambient temperature the weights are computed against is stated
• The price index used to convert quantity to money is named
• Who carries price risk is stated explicitly
• The baseline is signed and dated, and its ratchet rule is published
• The share percentage is a number, and it says gross or net of costs
• The verifier is named, and the period is stated
• What happens after the facility repays is written down
• History is restated when any convention changes

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THE CONVERSATION, SCRIPTED

For the meeting where you ask for the second column. It is short on purpose.

"I'd like the scheme report to carry the physical quantity beside the money — megawatt-hours saved, weighted by grade, next to the pounds. It doesn't change the payout and it doesn't change the share. What it does is make it obvious which part of a good year was us and which part was the price. In 2022 the same gas was worth eleven and a half times as much in Europe as in the US in the same month. If something like that happens here, I'd rather we could all see it in one line than argue about it in three meetings."

Then stop. The proposal costs nothing, and a proposal that costs nothing and clarifies something is usually accepted the first time it is made clearly.

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APPRECIATIVE QUESTIONS FOR YOUR TEAM

1. When has this team saved something real that the scheme could not see? What would it have taken for it to count?
2. Which of the numbers in our scheme report would we defend to an outsider, and what makes us confident about those particular ones?
3. If the report carried quantity beside money, what is the first conversation we would stop having?
4. What would make this scheme still worth being in five years from now, for people who are not yet here?