Why it makes sense
"once you have a company generating local energy, you have an asset that you can use to back up a local currency. The problem with many local currencies such as LETS is that they can’t be exchanged for things in shops, and are not much use to business. Lietaer said you have to start with the idea that the currency can be used by business, and then also by the community. A currency backed by energy achieves this. Then people can part pay their bills in the local money, which would liberate the workpower needed to start to implement localisation in other areas such as land use and community development. The currency would be of use to everyone, not just to people who want an aromatherapy massage, as can sometimes be the problem with LETS. It can be either a printed currency or an electronic one. The company could give favourable loans to business start-ups that are driving forward the Energy Descent Action Plan." (http://transitionculture.org/?p=198)
How to achieve it
From an excellent article on the site of the Schumacher Society by Robert Swann, called “The Place of a Local Currency in a World Economy”
"If we are to begin to design a local money system that would work for development of a local economy, what are the elements or characteristics for such a system? It would have to be simple to understand, but consistent with our experience of the present money system. That is: it would have to consist of both cash (or paper currency) as well as a checking system–or some other form of bookkeeping which utilizes the computer to simplify accounting.
Unlike our present money system, it would have to be redeemable (i.e. exchangeable) in some real value–not necessarily gold or silver, but real needs of everyday use such as energy. Without redemption system it will be difficult to convince people of its value–after all isn’t that exactly why the dollar so devalued–because it is not redeemable for real value from the primary issuer, the Federal Reserve. Most importantly, we would need to establish a measurement of value which would be as universal as possible and not subject to swings in value up or down as our present money system is. In other words, it would have to remain as constant in value as possible in order to establish a sense of permanency and security as well as make it more practical for exchange to take place. Such a method of measurement would be the most revolutionary element in the design and would be the key factor in making it possible for a universal system of money and banking–without the need of central banks or central governments becoming involved in money issue.
Once this standard of value had been arrived at, it could be monitored by the state or federal government just as the Bureau of Standards maintains and monitors other standards of measurement such as weights and units of space. But it would not require state intervention into the economic sphere, as is now the case. And finally, it would have to be organized at the local level and controlled by the community as a whole (i.e. each community would elect members of the board of the issuing bank which would preferable be a non-profit institution). Under such a structure as I am suggesting, banking would become more truly a profession, and bankers would be paid for their services, but the community would decide how and where its currency would be invested”.
Current Projects in Operation
The most advanced project on the ground appears to be Kilowatt Hours. From their website:
"Kilowatt Cards are gift cards that pay for 10 kilowatt-hours of electricity (including taxes and fees) to benefit any consumer electricity account when redeemed though this web site. The electric utility does not accept Kilowatt Cards - we do - and then send cash payment to the company at the rate it normally charges retail customers for electricity.
Because these gift cards may be redeemed by anyone to pay for electricity, they can also be used to barter for other things, anything, worldwide. Kilowatt Cards are issued by a non-profit corporation founded to demonstrate the idea that financial liabilites denoted in kilowatt-hours constitue a new asset class having stable value, and to provide fixed-value paper to those who want it." http://www.kilowattcards.com/template/index.cfm
Bitcoin (http://p2pfoundation.net/Bitcoin)would not be defined as an energy backed currency, but could be used to purchase energy products and services by anyone choosing to accept them as payment. A partial list of goods and services that can be purchased with bitcoin: https://en.bitcoin.it/wiki/Trade
Ideas + Theories
There are a number of theories about how an energy-backed currency could be developed and run. A brief highlight of each, taken from their website, below:
- http://www.odemagazine.com/exchange/4085/renewable_energy_backed_p2p_currency and
The P2P Energy Economy fuses the latest advances in SmartGrid technology, P2P trading and lending, and P2P energy production (from renewables) into an abundance-sustaining economy, including a new kind of currency designed to work with a small but growing category of goods and services that can be produced on abundant basis.
"The benefits of the P2P Energy Economy are summarized below:
1. Provide an energy based currency that has a fixed work value and a use value that only increases over time.
2. Enable 'Fair Exchange' (which assures that producers recoup the cost in work energy it takes them to produce and deliver a given good or service plus a fixed reward margin.)
3. Direct the flow of money into higher production efficiencies for energy, goods and services.
4. Direct the flow of money towards socially, ecologically and environmentally intelligent producers of goods and services.
5. Enable a model of the economy where in order for peers to grow their revenue they have to share it with others through no-interest lending, i.e. “the more you share, the more you have.”
6. Enable increased autonomy through increased inter-dependence between equally empowered peers. "
- http://www.smashwords.com/books/view/67291 - Non-fiction E-Book
"The town went through an economic depression. The local manufacturing plant shut down. Money was leaving the community. Unemployment was over 10 percent and the jobs remaining were low paying. Most people in the town with mortgages owed more than the home was worth. Foreclosures were at a record high. The schools and the city budgets were deep in the red.
In this environment, the town adopted alternative currencies. These currencies were backed by land, labor and energy. The town issued loans against future production to help entrepreneurs get a start. The people and town set up local energy systems and used electricity credits as money. People laid off from the factory found new jobs or set up workshops making small energy systems. People agreed to payment part in Federal Reserve dollars, and part in local currency backed by electricity production."
"SunMoney - based on locally produced energy -.... With this approach, the region's electricity provider is required to accept scrip for a percentage of their product and at a discount. The provider must then use the scrip to purchase labor, energy, and other supplies locally, financing the development of local energy autonomy and producing active local marketplaces in which everyone has the opportunity to participate."
"I would like to make a simple proposal that we consider using some form of energy as the unit of measurement and as the reserve currency for redemption purposes. It is generally recognized that energy is a factor in all forms of production and in meeting the needs of society as a whole. In this respect gold, commodities or resources that provide essential energy are replacing gold as the traditional form of reserve currency. Thus oil is referred to as "black gold."
In brief, to outline how this transfer could take place, let us begin with energy production. Almost every community has renewable resources for producing energy. Such resources could be wood, wind, hydro, or waste material that can be burned in a modern furnace, such as a pyrolytic burner that converts wood wastes or other wastes into gas, oil, or charcoal. All such energy sources can be converted into electricity or measured in kilowatt-hours."
"Every couple of months, the Federal Reserve takes a look at the average price of electricity paid by all customers (industrial, commercial and residential) in the US, and then shifts their monetary policy in order to keep the average price of electricity a constant at the average price of electricity at time that the US decided to switch to a electricity-backed currency. The Federal Reserve could do this by some combination of: 1) Printing or Removing Dollars (depending on whether the prices were dropping or increasing); 2) Increasing or Decreasing the borrow costs (depending on whether the electricity prices were increasing or decreasing); or 3) Increasing or Decreasing the percentage of bank deposits that must be held in cash (depending on whether the electricity prices were increasing or decreasing)."
"....international trade should be denominated not in dollars, but in energy. Producers of energy, such as Russia and Iran may then-–in exchange for value received--issue Units redeemable either in electricity, or in “energy vector” fuels such as gasoline, heating oil, fuel oil and above all natural gas, which all have a fixed value denominated in energy.
Global transactions will then take place within the framework of an International Energy Clearing Union subject to the collective guarantees of energy producer and consumer nations generally. Both energy creditor nations – such as Russia, Iran, the GCC and Norway – and energy debtor nations, such as the US, UK and EU would all pay an amount into a global “energy pool” in support of the guarantee. The resulting balances would be deployed in massive investment in new renewable energy infrastructure and energy efficiency savings."
"there are several examples of energy coins, currencies, and cryptocurrencies that are based on some form of energy accounting or representation. Here are a few examples:
SolarCoin: SolarCoin is a cryptocurrency that rewards solar energy producers for the electricity they generate. The currency is earned by solar power producers who can claim one SolarCoin for every MWh of electricity they generate. SolarCoin is intended to incentivize the adoption of solar energy and promote sustainable energy production.
PowerLedger: PowerLedger is a blockchain-based platform that allows people to trade renewable energy. The platform uses a digital currency called POWR to facilitate transactions between energy producers and consumers. The system tracks the generation and consumption of energy in real-time, allowing consumers to buy renewable energy directly from producers.
WePower: WePower is a blockchain-based platform that allows renewable energy producers to sell their energy directly to consumers. The platform uses a digital currency called WPR to facilitate transactions between energy producers and consumers. The system tracks the production and consumption of energy in real-time, allowing consumers to buy renewable energy directly from producers.
Grid+ (GRID): Grid+ is a blockchain-based platform that allows users to pay for electricity in real-time using digital currency. The system tracks energy usage and costs in real-time, allowing users to pay for their electricity as they use it. The platform uses a digital currency called GRID to facilitate transactions."
- A socialcompare chart would be a useful tool for comparing these ideas.