Tag Archives: local liquidity

Solar Dollars: How to promote renewable energy by providing local liquidity

Solar Dollars: How to promote renewable energy by providing local liquidity
A concept paper by Thomas H. Greco, Jr.  Sept. 23, 2013 (rev. Dec. 13, 2015)

Preamble

In good times and bad, local economies find themselves short of liquidity. Communities always find that, to some degree or other, there is unused business capacity alongside unmet consumer needs. What is lacking is sufficient money circulating in the community to connect these unmet needs with the unused supplies. This situation derives from our banking system that is increasingly centralized and reluctant to provide credit to local businesses, especially the small and medium-sized enterprises (SMEs) that are the backbone of every economy. If and when banks do provide credit, it is on onerous terms, including high interest rates, burdensome repayment schedules, and the demand for collateral assets to secure the loans.

The defects and instabilities inherent in our system of money and banking increasingly appear to be insoluble. In the credit expansion phase, banks create asset price bubbles based on government guarantees, subsidies, or the expectation of government bailouts when the loans go bad; then, in the contraction phase, they become risk averse, choosing to invest in “safe” government securities rather than financing the legitimate needs of businesses in their communities, especially SMEs.

At the same time, industrialization and population growth are causing other problems including despoliation of the natural environment and climate destabilization. It is clearly desirable to shift our energy production from fossil fuels to renewable sources but the incentives for doing that have not been adequate to propel this shift quickly enough to stave off severe environmental, economic, and political consequences.

Solar Dollars (SD) are intended to address both of these problems simultaneously. SD can provide liquidity to the local economy while at the same time providing a strong incentive for energy providers to shift from fossil fuels to energy from renewable sources.

Q1. What are Solar Dollars (SD)?
A1. Solar Dollars are currency vouchers that are issued into circulation by a local Electric Power Company in some limited proportion to the annual amount of energy from renewable sources that the company is selling to its customers.

Q2. How are  Solar Dollars issued into circulation?
A2. Solar Dollars are spent into circulation by the utility as payment to suppliers and employees who are willing to accept them as partial payment for the goods and services they have rendered to the company.

Q3. Why would suppliers and employees want to accept SD instead of taking all that is owed to them in US dollars. What makes Solar Dollars valuable?
A3. SD are valuable because the company stands ready, willing, and able at all times to accept SD back as payment for the electric services it provides, or for any other payment owed to the company. SDs represent credit obligations of the issuing company that are solidly backed by the energy that it produces and/or sells.

Q4. What’s the point? What can be accomplished by such a project.
A4. There are several advantages that derive from a project of this sort, including the following:
1. Financial and Economic Benefits
*  Vouchers, such as SD, that are spent into circulation provide an interest-free source of working capital to the issuing company. As such, they provide significant savings over the interest costs on bank loans.
*  Vouchers spent into circulation by a trusted entity such as a local utility company provide the local community with home-grown liquidity, i.e., a supplemental means of payment that is independent of the monetary policies of banks and central government, providing the community with a greater measure of self-determination and making the local economy more resilient.
*  Vouchers, such as SD, that are spent into circulation by a trusted issuer can change hands many times between their issuance and their redemption, thus stimulating local business.
*  Home-grown liquidity based on the production of real goods and services provides sound exchange media that stays local and encourages local economic development. Locally issued currency vouchers, by their nature, stimulate local production and prosperity because they tend to stay within the community, and even if they do range more widely, must ultimately come back home to be redeemed by the issuer when accepted as payment for utility bills.

2. Environmental Benefits
*  Anyone who is concerned about problems like global warming, pollution, depletion of fossil fuels, the ill effects of resource extraction like fracking and offshore drilling, will want to encourage a shift to renewable energy sources. Accepting the company’s own solar energy vouchers as payment will provide that encouragement and help move the company toward the goal of providing more of its energy from renewable sources. The more renewable energy the company produces or distributes, the more Solar Dollars it will be allowed to issue, providing it with a greater amount of interest-free credit.

3. Public Relations, Publicity, and Image
*  There has been for some time a great and growing amount of media interest in stories about community currencies, local self-help initiatives, green energy, and alternative finance. This innovative project can provide a tremendous image boost to the utility company, the municipality, and the state, and establish the region as a hub of creativity and innovation. As the significant benefits of the project become apparent, all the involved entities will gain in prestige, and other communities will follow its lead.

4. Educational Benefits
*  A private local currency that is spent into circulation by some trusted issuer like an electric utility is an important step in promulgating new memes and weaning the public away from their illusions about political currencies, like the U.S. dollar, as the only way to pay bills or settle accounts.

Q5. What form will Solar Dollars take?
A5. We’re talking about using the credit of the local utility to provide local liquidity. That can manifest in a variety of forms: Paper vouchers or coupons, stored value cards, prepaid debit cards, or ledger credits that can be accessed with cards and point of sale card readers, or via mobile phones. There are advantages and disadvantages to each of these and it will probably be advantageous to use some combination of these forms depending on the local availability and cost of the required technologies.
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Technical note

The essence of a currency, its form of manifestation, and methods of transmittal are three separate things. This point must be thoroughly understood by anyone who contemplates the issuance of a currency.

The essence of a currency is credit, it is the issuer’s i.o.u. or promise to reciprocate, i.e. to provide real value and accept his currency back as payment for whatever products or services he sells.

A currency can manifest as a paper note, a number in a ledger (written or computerized), a smart card balance, etc.

It can be transmitted hand to hand or electronically.

Of course, the same concept that has been articulated above for SD issuance could be applied to monetizing ANY locally produced goods or services, like locally grown organic farm produce, that we wish to promote and are in general demand.
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