Renewable energy as backing for a community currency

Greetings Blogosphere!

This is my first foray into the wild west of journalism. I’m posting here because I’ve been scheming with Dave Smith about how we can introduce a community currency here in Mendocino County. I’ve been interested in this topic for some time, since college actually, when I saw my first Ithaca Hour, while grabbing a low quality east coast burrito in that quaint college town (Ithaca is lovely, but not a mecca for Mexican food).

Now residing in Mendocino County and intimately involved with the localization movement the concept of launching a community currency takes on new relevance. We’ve been kicking around ideas of how such a process would work, and a seed that was planted in my brain at the Regional Localization Networking Conference hosted by WELL in Willits several years ago is beginning to germinate. What if we had a currency back by renewable energy generation as opposed to a precious metal or “full faith and credit” as we do now? Could we create a viable currency while providing for the creation of renewable energy in our community. I put this out to the world trusting that there exist people with more experience in this realm who can help guide this plan to a workable model.

Basics of the Plan

• Community members and businesses purchase Community Notes (CN) in exchange for Federal Reserve Notes (FRN) from a non-profit entity. They receive CN on a 1 to 1 basis for FRN.
• The non-profit then uses the FRN to purchase and install Solar Photo-Voltaic (PV) systems on City owned property, which are donated to the City (In our case Ukiah owns its own electric utility).
• The City then benefits by selling the power generated from the PV systems to its customers.
• In exchange for the donated system the City agrees to redeem any notes from the public in exchange for credit against monthly utility bills.

Benifits of the System

• The City would benefit by having it’s own source of energy generation which would be immune to increased cost of generation likely elsewhere in the electricity market.
• City residents would benefit by having a renewable and consistent source of electricity supply and would also be insulated against rising energy costs.
• Individuals and businesses using CN would be willing to accept them knowing they could be used to pay for a known expense if they needed to be redeemed.
• The hope would be that many of the CN would never be redeemed, as some would leave the area as souveners, while others would become permanent fixtures on the refrigerators (now powered in part by PV systems) of community members, and others would remain in circulation.
• If a large number of CN remained unredeemed after a period of years it would encourage the city to support additional issuings of the currency.

Potential challenges to the system:

-The payback period of the solar system is going to be several years. For example a if the initial release of CN was for $100,000 the a PV system that could be purchased for such an amount would likely produce only $10,000 worth of electricity per year (rough number here that I’m working on calculating more precisely). If this was the case there could be a potential shortfall for the city if a majority of CN were redeemed before the system had generated $100,000 dollars worth of electricity.

Potential solutions: The City purchases a bond to cover the entire amount of the initial issue that would be paid back over time using revenue generated by the PV system. Create a currency with a specific redemption window. For example a note issued in year 1 could be redeemed for full value (used to pay a utility bill, or exchanged for a newer issue) in years 3-5, which a discount occurring in year 6-8, and totally unredeemable thereafter. This would ensure that notes wouldn’t be redeemed during the first several years of the program.

-A successful CN system encourages people to spend their notes, increasing the rate of turn over, and thus economic activity. A note that is redeemable for a utility bill could end up being used a form of savings rather than a medium for exchange.

Potential solutions: Education outreach that would stress the importance of flow through for maximum benifit to the community. A redemption window here would accomplish the purpose of keeping CN from becoming a savings mechanism as they would loose value if not redeemed in a specific period.

-Notes would only be redeemable by people receiving a city utility bill, which would limit their use to people living in the City.

Potential solutions: Create an online exchange where people with excess CN could find buyers within the city to purchase the notes. Eventually this could also be a driving force in the creation of a County Owned utility, analogous to the Trinity County Public Utility District or the attempts by San Francisco to become its own utility.

Looking for your input

Please provide your feedback to this idea. I trust that critical analysis will lead to a system that is workable and benifical for our community. I look forward to your comments.

In Sun We Trust,

Cliff Paulin