24 Jan 2006
Local Energy – Local Currency – Local Power
I have an idea evolving in my head, and I want to put it out there for your feedback and thoughts. As the ‘Hands’ part of the **Head, Heart and Hands** approach I am developing towards the response to peak oil, I am exploring structures and mechanisms that we can develop for driving localisation. The one I am focusing on at the moment is the ESCO, or Energy Supply Company, which is designed to provide people with the services that energy does, rather than the energy itself. ESCOs are often the tool used to drive forward microgeneration initiatives, the only one I know of in the UK being Thameswey, which was set up and is owned and managed by Woking Borough Council in London. You can read a very detailed guide to microgeneration and ESCO’s in Greenpeace’s excellent ‘Decentralising Power’ report. The subtle shift in emphasis from providing energy to providing the services that energy does, means that it becomes more cost effective to insulate houses than to just sell energy to poorly insulated homes. This company could be owned by the community through a share launch, as have many of the community wind developments in the UK such as Baywind. There is a lot of data about community ownership in the Irish context in ‘To Catch the Wind’, a report edited by Richard Douthwaite.
The clever bit that came to me when listening to Bernard Lietaer last week, and then in discussion with David Boyle of the New Economics Foundation , is that 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.
The idea of energy backed currencies is not new, they were promoted by Shann Turnbull in articles called Selecting a Community Currency andDemocratising the Wealth of Nations – from new money sources and profit motives, and also in a piece called “Notes on the World Kilowatt Dollar”, which I can’t find on the web anywhere, but which appears in David Boyle’s excellent book “The Money Changers”.
There is a very concise reference to the idea in an excellent article on the site of the Schumacher Society by Robert Swann, called “The Place of a Local Currency in a World Economy” in which he says;
>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”.
I really feel that this could be one of the keys to whether this whole thing works or not. Richard Douthwaite believes that although such an approach is viable and desirable, it is only effective when over 30% of the town are using the energy supply. I’m continuing to explore this and will post new information as I come across it.