This is the sixth post in the Electricity-Backed Currency blog series — check out the SolarCoin page to learn the basics and link to the first five posts in the series
Originally posted at Triple Pundit on June 24, 2014
Our energy systems must transition away from fossil fuels to avoid catastrophic climate chaos. What’s more, this shift to carbon-free energy has to happen fast — even more quickly than the rate at which renewables are currently replacing oil, gas and coal.
SolarCoin is a novel strategy for accelerating investment in solar power. If it scales up — meaning that people begin treating SolarCoins as money — then it could work toward achieving the clean energy economy we need to save the climate.
But it’s not inherently socially equitable. In fact, as I show in SolarCoin and social equity, part I, SolarCoin has the scary potential to contribute to accelerating the growth of wealth inequality.
There are two ways to be eligible to claim SolarCoins: you can have a roof or yard with solar panels or you can own a solar project with capacity greater than ten kilowatts (kW). (The cutoff was set at 10 kW to distinguish household solar systems from commercial arrays.) Each megawatt-hour (MWh) of solar electricity generated earns one SolarCoin.
Beyond claiming SolarCoins for generating electricity, there’s a third method for getting some of the digital money: you can trade for them in online currency markets.
All three ways to acquire SolarCoins for your digital wallet present substantial barriers to the poor. People with no roofs, no yards, no access to credit, and no dollars to trade (nor experience using the interwebs for currency exchange) stand to benefit most from holding SolarCoins, especially if they get them while they’re cheap and the currency gains value in the future. Yet society’s least wealthy populations have scarcely any chance to put up solar panels, own a solar power installation, or trade for SolarCoins online.
Fortunately, there are ways to increase access to SolarCoins through each of these pathways.
For residential solar systems (under 10 kW capacity), SolarCoins are earned by the resident of that property, not the owner of the solar panels. This way, the solar leasing boom gets SolarCoins into the hands of all the people using that power, instead of just piling up digital money in the coffers of companies like Sungevity and SolarCity that put panels on homes and rent them to the residents.
Each solar generating facility has just one ‘claimant,’ yet it is plausible that multi-family dwellings with rooftop solar could split SolarCoin claims. If apartment communities team up to lease solar panels, they can share the revenues from selling power and the earned SolarCoins.
Also, granting SolarCoins to more people increases the value of the digital currency (think about how the value of US dollars is supported by its worldwide acceptance as valuable money). A new currency only works as useful money for transactions if lots of folks have it and businesses accept it, which will be the case if they can use it to reward customers, pay employees, or buy inputs.
So with policies that facilitate multi-family solar projects, a growing number of people can become residential solar electricity producers. These groups can earn SolarCoins, which in turn benefits the entire SolarCoin community by increasing its exchange value. But only the wealthy can own large solar installations, right?
Community solar projects extend the opportunity to own a share of a large solar power installation to a wider population — those with roofs unsuitable for solar because of shade or unfortunate tilt; renters and condo-dwellers who don’t control their roofs; and those who can only afford a small investment in solar. Below I propose a new way to spread SolarCoin-earning investments to even more people, but keep in mind that the same benefits apply to any community solar project that decides to split SolarCoin revenues among those who share ownership.
Mosaic, a solar project crowd-funding platform, helps address unequal access to solar investment opportunities. The minimum investment to finance a Mosaic project is $25.
Here’s how Mosaic works: A ‘borrower’ seeking to finance a solar energy project uses Mosaic to connect with investors looking for a steady return. After the installation starts producing electricity, the revenue from selling that power pays back those who invested in it, plus interest.
SolarCoins could provide extra incentive to invest in solar power for anyone with $25. The borrower of a Mosaic-funded installment (who owns the array) could claim SolarCoins for the megawatts of electricity produced and then distribute them to investors in proportion to their share of the project’s up-front costs.
This way, Mosaic investors would earn a rate of return and SolarCoins. Three main benefits would arise from this arrangement.
First, everyone who loans to Mosaic projects would get a bigger reward. Beyond the fixed monthly payments that return their principle investment plus interest, Mosaic investors would be paid in SolarCoins.
Second, people without large sums of money to invest could earn SolarCoins for their ownership stake in large installations. Finally, growth in the SolarCoin economy means growth in the money value of SolarCoins.
A mutually beneficial partnership between Mosaic and SolarCoin would mean additional incentive to join both communities — the former could promote more returns to investors, and the latter would see an increase in value as more people hold and transact the currency.
But what about rich folks’ inherent advantage in accumulating SolarCoin through online currency trading? Anyone can turn dollars into bitcoins into SolarCoins, so people with lots of dollars can pile up stacks of digital money.
This problem is a harder nut to crack — it’s difficult to dream up any new currency that doesn’t favor the already-wealthy. But one invention exists that allows anyone with web access to get some SolarCoin in their digital wallet, for free.
Third-party charitable faucets, like this site, give away small amounts of SolarCoins in order to grow SolarCoins’ value as a means of exchange by spreading the currency into more hands. From a social equity standpoint, faucets give cash-strapped regular Joes and Janes the chance to take part in this new social economy.
Yet plenty of room for innovation remains in the quest to grow the SolarCoin community with less bias toward well-off people. What if we could each receive one SolarCoin for signing a petition advocating progressive legislation that favors low-carbon energy (or burdens fossil fuels)?
How about everyone with zero dollars invested in fossil energy companies gets ten SolarCoins? Poor people would be able to cash in immediately, and folks with investment portfolios would get a SolarCoin bonus for joining the global movement to divest from dirty energy!
Money for good
These ideas barely scratch the surface of possibility for digital (and physical) currencies to make our money economy more socially just and environmentally mindful. And remember, strategies for getting a new currency into more people’s hands can increase that currency’s value, as long as its supply remains reasonably scarce overall.
Thus, for the SolarCoin community, measures like a reward for divestment are not only progressive but self-interested. The same can be said for partnering with Mosaic or creating multi-family collectives to help more people become solar power producers.
In summary, growing the SolarCoin community to include people who can’t get solar panels easily will not only offset or reverse some of the currency’s built-in unfairness; it will also increase its value — which in turn drives investment in solar power.
The next post in the series will explore one more way that cryptocurrencies like SolarCoin promote social equity and benefit some of our society’s hardest-working and least-compensated members. Stay tuned!