This is the fourth post of the Electricity-Backed Currency blog series
Originally Published by Triple Pundit on May 5, 2014
To review: SolarCoin is a digital currency designed to reward producers of solar power. One SolarCoin is granted for each megawatt-hour (MWh) of solar electricity generation.
SolarCoin is valuable because, like any computer-based currency with a block chain public ledger, it provides a trustworthy way to transact money online without an intermediary charging fees and exposing your information to vulnerability. Moreover, unlike other digital forms of money, SolarCoin represents the physical production of clean, useful energy.
Information on how to get SolarCoin is included in my introductory post, the second piece of the series describes the currency’s inherent value, and the most recent post contains more details about how SolarCoin can become popular and gain exchange value.
Granting this new currency to people with solar panels at their residences and owners of large solar installations shows that SolarCoin users agree that renewable electricity from the sun is a good thing, but how does using SolarCoin actually contribute to prosperity for people and ecosystems?
In short, SolarCoin will drive the implementation of solar electricity projects. All else equal, more solar power equals less global warming, less air pollution, less freshwater consumption, slower depletion of natural resources, and greater energy freedom.
As more people and business recognize SolarCoin as useful money, its value will rise and stabilize. Therefore, as the quantity and variety of goods and services that SolarCoins can buy expand, the incentive to generate solar power grows in tandem.
Adding SolarCoin as an extra reward for solar electricity producers will increase solar power production in two ways.
First, SolarCoin offers added benefits to solar electricity projects, which means more solar investment.
With SolarCoin, solar electricity production can earn standard money (dollars) and digital money (SolarCoin), adding to the benefit side of of any potential installation’s cost-benefit comparison. As a consequence, some ‘on-the-margin’ prospective installations whose costs would outweigh the future revenue in strict dollar terms may become good investments thanks to the value of the SolarCoins that they will earn.
Put another way, SolarCoin is another cash flow for solar power producers. This extra benefit above and beyond the money earned from selling power to electric utilities or using it to offset energy bills will increase the number of potential solar projects that make economic sense.
Second, by increasing the number of projects undertaken, SolarCoin will speed the price decrease for new solar installations.
Solar projects get cheaper as we become better at making efficient panels, putting them up, and using them to capture the sun’s energy. Economists call this price drop ‘experience curve effects‘; as we gain more experience with solar power, it becomes more cost-competitive with — and ultimately less expensive than — fossil-fueled electricity.
Remember, SolarCoin makes more potential solar installations worthwhile investments because it offers additional benefits to the producers of solar electricity. The extra reward for solar power increases the rate of solar proliferation, which speeds up the ‘learning-by-doing’ process that brings down costs.
By way of summary, SolarCoin offers an added reward that can increase the number of solar electricity systems built. As solar expands as a source of electricity, the price of a solar system in dollar terms goes down, further accelerating investment.
This positive feedback loop may strengthen the boom in solar installations that is already underway. In 2013, total installed capacity of photovoltaic systems in the US increased by 41 percent. According to Solar Energy Industries Association President and CEO Rhone Resch, more solar generation capacity has come on-line in the US over the last 18 months than the previous 30 years combined.
As more electricity is generated from the sun, less is needed from fossil fuels. Hence, increasing the rate of new solar investment also speeds up the decarbonization of the electric grid and protects communities from the harmful effects of burning coal and natural gas, in terms of both local air quality and global climate stability.
Researcher Carol Olsen of the Netherlands’ Energy Research Center offered some concrete numbers in a New York Times article: “Compared with electricity from coal, PV electricity over its lifetime uses 86 to 89 percent less water, occupies or transforms over 80 percent less land, presents approximately 95 percent lower toxicity to humans, contributes 92 to 97 percent less to acid rain, and 97 to 98 percent less to marine eutrophication,” which is the excess release of nutrients that harms freshwater ecosystems.
We can agree that solar panels make electricity with a smaller environmental trade-off than burning fossil fuels, which still accounted for 68 percent of world electricity generation in 2011, according to the International Energy Administration. Since SolarCoin has the potential to accelerate the shift toward solar, it seems clear that the digital currency will contribute to human and ecological well-being as it scales up.
Yet as we look at the way that SolarCoin drives the uptake of solar technology, an equity issue emerges. The currency is granted to the residents of a dwelling with a solar system and owners of large solar installations, which implicitly penalizes everyone who doesn’t have a roof or yard for panels nor enough money to invest in a solar project.
The next post in the series will explore SolarCoin’s implications on inequality and wealth distribution. Stay tuned!