Electricity As Currency? 10 Reasons It Could Work

Energy-backed currency concept

Activist Post

Remember the good old days when gasoline only cost $1.50/gallon way back in the ancient times of 2000? Why does it cost more than double that today ($3.71)? A gallon of gas is still a gallon of gas, so it seems obvious that the dollar has lost value.

This rapid devaluation of the U.S. dollar makes it an unstable medium of exchange and certainly not a good store of value — two aspects considered to be the main functions of money. This has led many to examine the flaws of the current monetary system and search for possible alternatives.

Some have suggested that returning to the Gold Standard (pegging the dollar to gold) will help control the fraudulent expansion of the money supply and protect the value of the currency. Others say eliminating the interest attached to each dollar created will get rid of scarcity and provide abundance. Each of these ideas has merit since they correct some of what’s broken, yet they both also have flaws which make them difficult to fully support.

One interesting alternative that has been proposed is using an energy-backed currency. The idea is not new. Thomas Edison envisioned an “energy dollar” after seeing the value of electricity, and Henry Ford also conceptualized backing a currency by a “unit of energy” instead of gold. Motivated by the failed monetary system during the Great Depression, Ford even planned to support the idea with his own electric dams. Of course the central bankers scolded Ford’s idea because it threatened their schemes.

In more recent times the idea of using electricity as a currency has gained some traction. An online ebook Energy Backed Money was published in 2009 supporting the concept of backing the dollar with electricity. Kilowatt Cards were introduced as gift cards for electric power meant to be a transferable means of currency. And former NASA scientist, Michael Rivero, proposed the Lectro, a universal electricity based currency whose supply is controlled by production and use of electric power.

Currently, Federal Reserve Notes (dollars) are not backed by anything valuable and their value is determined primarily by how much supply is in circulation. The supply of money under our current system is lent into existence as fast or as slow as the bankers or the government determines, leaving a lot of room for manipulation.

Dees Illustration

Significantly, all money is lent into existence with interest owed to central bankers. But this interest is money yet to be created in the system so there are never enough dollars in the system to pay off the debt accrued from the creation of the dollars themselves. This creates a false scarcity and the perpetual need to expand the money supply, which then breeds inflation. This simultaneous scarcity and inflation have a tremendously negative impact on the economy, especially for the poor. Ultimately, it’s this interest on every dollar created that inherently enslaves us all to the central bankers who hadn’t produced anything of value to demand our servitude.

The only way to solve the inefficiencies of the current system is to use a currency that has real value, whose supply is tied to an accurate economic indicator, and doesn’t need interest attached just for the sake of creating it. Electricity has measurable value in our society and since everything in our modern world runs on power, it may be the most accurate gauge of economic activity we have.

An electricity-backed currency would not be nearly as complicated as our fractional reserve system. It could work something like this: electric producers could issue certificates (money) as kilowatts are produced and they would be removed from circulation once the electric bill is paid (redeeming their receipts), thus always maintaining a consistent and stable supply.

Here are 10 reasons for an electricity based currency:

1. It Has Real Value: Electricity has recognizable value for every person on Earth, as opposed to gold or silver which are just pretty metals with some minor industrial uses.

2. Easily Measurable Units: A kilowatt-hour (kWh) is an absolute unit that can be measured easily and is impossible to counterfeit. The average cost of electricity in the United States has remained relatively stable (mainly due to regulations) over the last few years at around $0.13 per kilowatt hour. But we must stop thinking in terms of measuring things in dollars for this concept to become clear. This currency would represent a kWh, not a dollar amount.

3. Universal Flexibility: An electric-backed currency can work just as well as a local competing currency or as a global medium of exchange. Since a kWh of power has the same value all over the world, a kWh certificate issued in Hawaii could theoretically be redeemed anywhere.

4. Supply Can’t Be Manipulated: The electric money supply would naturally be tied to population growth and economic productivity because electricity is an indicator of those measures. Money (kWh notes) would be created when new electricity is produced and eliminated from the economy when electric bills are paid, maintaining a stable balance.

5. Cannot Be Monopolized: Central banking monopolies are at the heart of many economic problems around the world where entire nations are held hostage by these singular entities. Even though electricity has a universal global value, it would be impossible to monopolize the production of kilowatts.

6. Decentralized: Literally, anyone can produce electricity if they choose to do so. Although larger organizations may be necessary to handle the issuance or certification of kWh notes, independent energy producers would compete to produce electricity as efficiently as possible.

7. Spurs Innovation: The incentive to create electricity would spur incredible innovation in technology. Rivero, of the Lectro, suggests perhaps more valuable certificates could be issued for electricity derived from clean technology to incentivize its expansion. And if by some chance a source of “free energy” is discovered – fantastic – it could still be measured and used to control the supply of money.

8. Spurs Conservation: When electric power literally equals money, everyone will immediately become more conscious of their energy use. This alone would have a tremendous benefit on the environment.

9. Transportable: Pure gold and silver (commodity money) are not practical physical currencies because large quantities are not easily carried in our pockets. kWh notes would be a paper form of “receipt” or “representative” money where the note can be redeemed for something real and measurable. Fully-backed receipt money is historically viewed as the only form of honest paper money.

10. Creates wealth instead of poverty during the transition from human labor to machine labor. As we move towards more automation, we become more reliant on electricity and less on human labor. Rivero postulates “At present, human labor precedes all capital, payable in a monetary system that pays primarily for human labor. In switching to a monetary system that pays for machine based power production, we evolve towards a society where machines become the primary creators of capital, and all humans shift towards the demand side of the economy. Instead of creating poverty, the push towards automation creates more wealth.”

Does a currency backed by kWh’s of electricity seem viable enough to be used as a possible alternative to our broken monetary system? Tell us what you think in the comments.


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10 Comments on "Electricity As Currency? 10 Reasons It Could Work"

  1. Cheaper energy would create cheaper products, and wouldn’t necessarily change the amount of energy used unless the cheaper energy caused whatever increase in energy demand. Inflation in some form or another is needed to maintain growth. With energy the money created by inflation is not made up and instantly bonus for the ones issuing the currency. It’s backed by energy that’s going to be sold/used.

    Energy storage could create some sort of pseudo inflation issue, although creating incentive for better energy storage is probably much more valuable than whatever kind of economic issue it could cause.

  2. Err, except gold doesn’t actually do anything. Gold’s intrinsic value is what? It’s an element that happens to exit in certain amounts?

    Not that it’s realistic to store energy now.(Something like this would probably spur energy storage efficiency which would be a nice side effect). Which would you rather have when you can no longer trade it/no one wants it, yearly limiting amounts of gold as you gradually step up it’s worth to keep up with growth money supply. Or yearly increasing backed amount of energy…lets say in a battery.

    Give me that battery any day, golds only worth is what people want it to be worth, for any reason it could drop to it’s usefulness, which “rarity” is pretty thin use. Energy is much more strait forward usefulness.

  3. If energy is literally money it’d be pretty hard to monopolize it’s production, you can buy/people can sell energy units that are pretty close to on par with what energy companies sell you, some places like Hawaii even cheaper. That’d be a pretty hardcore government.

  4. Well there is always the issue the commodity backing the currency could devalue to the point of being worthless for about any reason. Gold has no intrinsic value apart from being rare and shiny. 1kWh is about as stable intrinsic value as you can really find in nature. It also happens to follow our economy building in an increased money supply.

    Energy is already highly regulated and I don’t see how it’d be much different than current generation. If you want to hook it up to the grid you go into the system, if you are off grid your energy balance would null out anyway so there is no reason to target it form a monetary stand point.

    I believe if what you say is an issue were to pass, it’d happen regardless if energy was backed currency or not, it might make it some smidgen more likely, but not enough I’d consider to be a threat.

  5. Actually the dollar doesn’t really represent anything apart from how much people believe we can back it, divided by how much the fed releases.

  6. Why exactly would anyone want to ration the energy? If anything energy companies would be incentivezed to produce as much as it as cheaply as possible.

  7. You devalue everyone’s currency for a while till production catches up. New “energy credits” will be x% of their normal backed value for x rounds of energy production/payment cycles.(Or whatever till it equalizes the energy lost)

  8. This would just be an energy generation to energy use agreement, neither you nore the store owner would be able to actually produce new currency from this transaction. That’d probably be regulated much over you’re guys heads.

    You could do this now

  9. Human labor is much more variable in it’s efficiency. 1 kWh is less variable currency and more easily measured.

  10. …they’d create an energy credit on the generation of energy from specified large power plants I’m sure. Your generator created energy, but then you go around and use it immediately. There isn’t really a need to create an energy credit for immediate use energy that you aren’t selling to anyone.

    While energy is “Free” creating it isn’t and it’s very useful. You could use this same argument for pretty much anything…is food grown by a farmer “free” the work required to make it useful is similar.

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