Energy as Currency

I know that this may seem like a bizarre concept to most people, but the only real currency is energy.

Money was invented to symbolize material objects because it was far easier to use coins and paper to purchase a home than to trade horses to do the same. Our money used to be connected to rare metals such as gold and silver to create a perceived value, but even that has changed. Money today is simply an abstraction. Not much more than a bunch of numbers on a computer somewhere.

But what are we really trading with money? Energy.

Labor is human energy to build things and do things. Oil is used to move things and make things.Electicity does the same. Even food is caloric energy. So in the end the only real currency is energy. Oil wells are a way to almost literally pump money out of the ground.

There was the mention in some other discussion threads that PV (Photo Voltaic) technology does not have a net possitive energy effect. That is to say that the amount of energy required to produce them exceeds the amount of energy they will produce in their average lifetime. (I'm not qualified to validate that position one way or the other). However, any sustainable technology will need to be net positive.

There is a simple "Cash Flow" principle in business that works something like this. If I spend $1.00 and make 90 cents, with a net loss of 10 cents with each trasaction, then it will be difficult for me to stay in business very long. However, if I spend $1 dollar and get $1.10 in return then there is no limit to how many times I can do a transactions and my business will boom. Cash Flow does not make people rich, Positive Cash Flow does.

How soon do all of these new technologies pass the break even point? How long does it take for wind mills to pay for themselves and start to produce excess energy? Because the sooner a technology overcomes this threashhold the faster the industry can expand. We have to be able to explain to people how we are going to stick money in their pockets and how soon that will happen. At that point
we will have their undevided attention. We need to be able to take complex data and candy wrap it so that the average person can grasp it quickly.

Some people would say that this number is embeded in the price, but many companies and some governments try to defy the laws of the universe by coming up with number schemes that create the illusion of positive cash flow. So I don't rely on that. We also can't hide a loosing formula forever, even if it looks good on paper. It will catch up to us. There has been a lot of proof of that over the last couple months.

Help me see this as a business executive would. Give me what I need to go to my (Hypothetical) Board of Directors and say to them "I have an idea that will make our company a lot of money for a very long time".

Please share your thoughts and ideas.

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Replies to This Discussion

Permalink Reply by F. Andrew Pickens on December 20, 2008 at 11:15am: Andrew, We think so much alike. There is no real value in our monetary system just the agreement/perception of value.
Long term ROI is the only sustainable way to go, and even that has a "life". As technology shifts, we (unlike the auto industry) must shift as well. Unwillingness to remain on the "cutting edge" will leave anyone in the dust.; ▶ Reply to This

Permalink Reply by Jim on December 20, 2008 at 11:21am: I like your thought about an executive going to his board of directors. How bout saying. I have an idea that will save us a lot of money so we can make as much money while spending less. And that way we can charge less than our competitors which will bring us more business. .; ▶ Reply to This

Permalink Reply by Fred Mars on December 20, 2008 at 11:55am: The context of money is the cause of all the problems we face in the world. It is the method that the "haves" rule the "have not's" in the world. The sad truth is that it is the illusion of scarcity that perpetuates the myth. Let's look at it from the perspective of needs versus wants.

We all need to eat and have clean water to drink. Basic for our sustenance. But since the feudal system of land ownership, the farmers paid the land barons high rents and taxes so the earnings they receive from the fruits (and vegetables) of their labors ar meek, while the land owners receive the rewards.

In a perfect world, money and ownership would not be part of the reality, because they are hindrances to freedom and prosperity. They allow only those who have the wealth to control those that do not.

The myth about energy is the same. In our modern technological dependent world, we are told that we need to replace oil with other fuels to gain independence from foreign oil. We are told that the costs of producing alternative energy resources are so high that your return on investment will not be realized for many years. We are told be the power industry that wind power is intermittent and not a reliable alternative because the power utility cannot switch from wind to other sources fast enough to prevent brownouts or complete outages. And solar energy costs more to produce than the returns would benefit.

Smoke and mirrors is what that is all about. There are many companies that say they have "breakthrough" products, and all they need is capital to take their designs from the CAD station to production. I recently found a company called Solar Turbine Group that has put together a system (for undeveloped nations) to produce heat and electricity.

Please take a look at what they are doing and see if it is not a good idea. They are using auto components, so if the auto makers fail, these folks will still be producing auto parts that will be used in alternative energy systems. A PP member and friend sent me his company's solar/wind products catalog from Florida, and he has turnkey systems installed for under $30k for homes and small businesses.

To me at least, the main reason that more investments aren't made in alternative energy is simply a matter of "staying the course" and not fixing the broken system. I say broken system because while the oil industry is reaping enormous profits, everyone else is suffering the high energy costs.

Electricity does not require fuel to be produced. That is a myth and it needs to be busted. It will be difficult to create a new energy paradigm when the oil and power industries keep flooding us with propaganda and FUD. I remember folks taking an alternator or two and using wind to spin them (sometimes through a gear box) with a DC to AC inverter, and producing enough electric for their vacation home in the Pocono Mountains. Today you can purchase a complete system under $5,000.00 that generates enough electric to keep your home in power and sell a little surplus back to the grid.

My concept is to produce combined solar and wind systems along with battery/capacitor storage. This way, when neither sun or wind is producing enough energy for your requirements, you have a cushion before you have to buy power from the grid or use a fuel generator.

I can put together a team of engineers tomorrow to produce viable clean energy solutions for everyone, and at affordable But none of has the capital to start up, unless we stop paying our mortgages and rents, or not feed our families for a few months. That is why I joined the Pickens Plan. It was my intention to create the group and attract the funding from among the T. Boone crowd that has money to invest.

I have also put together a plan for moving autos into the electric power space, deploying small VAWT along the nation's interstate highways to produce electric from wind. A wireless induction power system that can power vehicles as they are moving along the roads. All of the technology is current, no sci-fi stuff here, my friend. And I do not need or want a multi-million dollar compensation package. Just a good living for me and my family, and treat the engineers with the same respect. Can the company make millions? Yes, it will make lots of money. But again, I feel that here in America, that profit margin can be kept at a minimum, while sales outside of the US will provide the higher profits.

As Nikola Tesla dreamed, free energy for all, humanity free of dependence on fuels for power. Electricity distributed via wireless transmission, just like radio and television. Tesla built it over 100 years ago, and J. P. Morgan destroyed it and made it difficult for anyone to reproduce what Tesla did. But Morgan and Edison are dead too, so why do we still follow their lead?

Follow (hire) me and I will set you (energy) free!

Fred Mars
The only reason people get lost in thought is because it is unfamiliar territory; ▶ Reply to This

Permalink Reply by BurgessKJ on December 21, 2008 at 10:42pm: Well said. I second this motion, and carry the action to the Board.

Give me every number your Chief Finiancial Officer pays in electricity, R&D, technology upgrades, architectural hyper-efficiency, general engineering or other 'overhead' costs, and many of the forward thinking people here in the Pickens Plan will find savings, and even POSITIVE ROI (return on investment). Any honest eco-friendly or energy-efficient system engineer can.
Unfortunately that very board you're selling to Andrew, is composed of executives who have spent their entire careers (the 'Me Generation') finding ways to make short-term profit for stockholders, instead of improving 'real' corporate value, and re-investing in their employees, technology, or infrastructure.

Every ounce of value the 'haves' have squeezed out of America has been at the behest of mergers & aquisitions, and a coordinated effort to sell-short stocks, for unbalanced short-term gain.

The Boardrooms of America are filled with Million Dollar Bonus Platinum Parachute executives, and have little current interest in long term goals.

Now, if stockholders, and family or employee-owned companies were capable of being convinced by an alternative energy elevator pitch, then I would be all about crunching the numbers for you.

Each small step in the correct direction will require hard facts and figures. Those can only be obtained with inside corporate information. Are you willing to build teams who can do this?

I can, and there are many out here who can too. Are you ready to turn HR on their head, and try this?
HIRE US, AND WE WILL BUILD THE FUTURE TOGETHER.

Now all we have to do is find a way for HR to actually HIRE US, and remove the past layers of 'me generation' middle managers. Most of them don't do any of the actual work anyway, and treat technologists & engineers like disposable commodities. Maybe that's because they know we could actually threaten THEIR jobs, if allowed to work 'for' these corporations, instead of just 'with' the current herd mentality.; ▶ Reply to This

Permalink Reply by Andrew Little on December 22, 2008 at 5:40pm: Wow! You really covered a lot of ground in this response.

You are absolutely correct that we need to be able to walk in with the ability to answer the questions in a way that will get them to say Yes. And we need good data to do that. And you have to have inside connections to do that.

However, the currenct American (Big) Business culture is not the world business culture and it is not the culture that made this country what it is today.

There was a day in the United States where top companies hired for life. The companies stood behind their people, and the people stood behind their companies. That was when we were the quality leaders of the world.

In the 1960s a new business model emerged, sometimes called the New York management model, which treated people like a commodity. Basically they wanted to hire people for the job at hand, and once they had outlived their usefullness they discarded them like you would an outdated tool. This was the begining of the end for American Big Business. There is a lot of complex interplay behind the scenes that make this business model look attractive, but in the long run it must colapse, just like the stock market did.

I think this has turned our entire business culture into what I like to call the "Neurotic America". We are all so afraid of loosing our jobs, including the executives, that we make decisions at work that appear irrational to the outsider. That is because we are constantly in survival mode and we really can't make long term strategic decisions.

However, there is some hope.

1) Not all companies are traded on the stock market, and many that are not are long term thinking companies.
2) Not all capital is leveraged through the stock market. So there is investment capital available if you know the old school ways of finding it.
3) Most of the invovations in our country have come from cottage enterprises. Steve Jobs (Apple) started in his garage, as did many of our most prominate business leaders.

Our task is to connect the people with the sound engineering ideas, that have a sound business plan with those with the capital to launch their businesses. This will take people from a lot of disceplins working together for the common good. This will require real leadership. We have a lot cowboy gusto and youthful energy, and we ned to turn that into products that everyday people can understand and afford.

Those are just a few of my thoughts.; ▶ Reply to This

Permalink Reply by Andrew Little on December 20, 2008 at 12:04pm: So I walk into the office of the President of XYZ company and I ask him:

"Jim, If I could show you a way to print money that was completely legal and would be good for the our country and for the envisonrment, would you be interested?"

Do you think I would have his attention at this point in time? You betchya! Un-De-Vided!

Then if I could show him in 2 or 3 minutes just exactly how he could start printing his own money (producing energy) I'm sure we would be able to get him to take some action to start making it happen.

For most businesses this would only result in a significant savings, and that in itself is a compelling sales pitch. However, if there were a way to sell the excess energy produced, then for some companies it would indeed be a money generating machine. (Byproduct) Then our President (Jim) would go dancing and humming into his Board of Director meeting to tell them that not only had he found a way to eliminate their energy bill, but he was pretty sure he could make a little on top of that.

If we could help get laws passed that would force the energy companies to buy back energy at the usage rate (which varies throughout the day) then there are some scenarios where private individuals and companies could make money while at the same time taking care of their own energy needs. Sort of like the stock market where you buy low, hold it for a while and then sell high. You make money on the difference. This would incent the Capitalists to jump into the market in a big way, which is what we need in order to get the infrastructure up and running.

They Win, We Win. :-); ▶ Reply to This

Permalink Reply by BurgessKJ on December 21, 2008 at 10:44pm: Google is already doing this. Use their example in your elevator pitch.; ▶ Reply to This

Permalink Reply by C H Fisher on December 20, 2008 at 3:32pm: Indeed money represents energy. Power is energy and everyone quite readily accepts that money is power. QED

But you made me realize one thing that escaped me before: That old second law of thermodynamics obstinately asserts that everything runs down--entropy. That's sort of bad news. Money (energy) and entropy (disorder/death) are enemies. And therefore, there will ultimately be no money anywhere! (chuckle, chuckle, hick-up).

All kidding aside, I agree that tying money to energy commodities is a great idea. Then when energy is produced at over 100% efficiency, money will be everywhere. The cosmos will drown in money. But again I jest.

Really this time, all kidding aside, I think my dollar bill should be exchangeable for a specific amount of energy that only an act of "we the people" could vary. No inflation without representation!

Could that be our battle cry? NO INFLATION WITHOUT REPRESENTATION

And gimme a dollar's worth of heat, please... I'm freezing.; ▶ Reply to This

Permalink Reply by Andrew Little on December 20, 2008 at 5:08pm: In Germany during the Second World War it was cheaper to wallpaper your house with the currency than it was to go out and buy wallpaper. With the way the Fed is printing money right now we could be getting to the same place.

But I suspect that your car will get the same gas mileage and your house will require the same amount of energy to heat or cool. So, yes indeed, energy is a more predictable and inflation proof currency than money.

And the people who get extremely frugal with it's use and develop ways to produce more than they use will become wealthy.

So we need to develop means to store (bank) and transport it so that it can be handled like currency.; ▶ Reply to This

Permalink Reply by Fred Mars on December 20, 2008 at 6:35pm: This argument has been used before. "It's dead, Jim." Ideally, we all create energy and offer the surplus. Barter it if you feel we must base everything on some form of commerce. And many states do currently have laws that require the power utility to but back green energy. In some states it's called "Net Metering" and depending on the specific state's rules, either get credit or get the check every quarter, year, etc.

I just viewed a page that is showing a really interesting alternative. Solar roadways at SolarRoadways.com. More energy than we will use for the next 25 years, all from the sun.

Oh and the second law is flawed, but I really can't get that deep in this context. Suffice to say that just because there is a lack of understanding of the principles, does not negate the existence of another energy source.; ▶ Reply to This

Permalink Reply by Tim Boyd on December 21, 2008 at 10:21pm: Andrew, I agree with many of the analyses concerning the long term energy value of the standard photovoltaic installation, that the energy required to make the solar panel exceeds the energy it will provide in its service lifetime. This is because its service lifetime is too short. It slowly fails then you throw it away. That is why I am thinking towards simple solar concentrators and heat engines coupled with user servicable photovoltaics. People will have to learn to do simple maintenence on their own system, sort of like adding oil to the car. Solar energy is always out there (gonna last for another 4 billion years) and with improving engineering techniques, improving materials and the thoughtful use of the junk in any junk yard coupled with ever increasing computer power, these do it your self systems can happen. These systems are what I am designing now.

Please talk to me; ▶ Reply to This

Permalink Reply by Fred Mars on December 22, 2008 at 8:19am: Here is an excellent solar unit that even uses auto parts, so when the US auto makers go belly up, the parts makers will survive a bit longer and have time for a transition to electric power.

Solar Turbine Group; ▶ Reply to This