Credits for energy use aimed at conservation

Energy credits envisioned by Masdar Institute may help users become more aware of their energy consumption, and therefore end up using less.

As we move to renewable energy, there will be a need to make users more aware of their consumption. How much energy does it take to power a television, make toast or drive to the mall? Few have much of an idea, although most people, in most countries, perceive energy to be cheap.

Currently, the way we pay for our energy spares us deep thought about the total cost (monetary and environmental) of our lifestyle. It is easy to simply pay the bill at the end of the month and not wonder about our energy habits. Nor do we worry about running out of energy. Unfortunately this abundance is illusory; in the relatively near future, the peaking of fossil fuel extraction capacity and of the concentration of atmospheric greenhouse gases will force us to all limit carbon emissions.

My team of researchers at Masdar has drawn up a new energy credit system that leverages two crucial aspects of energy - its central role in all human activities and its sustainability limitations.

Energy credits - "ergos" - are issued by energy producers and allocated based on a subscription system. These credits can be redeemed in transactions involving an energy component, such as electricity and water consumption, transportation, cooling and heating, directly equivalent to the electric or thermal energy required for the service.

The supply of ergos is based on the supply of energy - so they are limited. They will be tradable, either with a smartphone app or by pre-programmed instructions. This allows energy to become tangible, and yet still fungible.

Any time a user wants to do anything that uses energy, their ergo account is debited. If a user runs out of credit but wants to keep using energy, her smartphone automatically buys more on the spot market from residents who have more than they need.

When demand is high, the cost will rise. When it is low, the price will remain stable. This provides a financial motive to be more cautious with energy use.

The system's novelty lies in the way it discourages speculation. While other carbon credit and carbon tax systems have a large focus on monetising carbon or energy, ours aims to prevent speculative trading by giving ergos an expiry date, and by insisting that purchased ergos are immediately redeemed for an energy service.

At the same time, ergo futures and ergo pre-allocation support healthy, long-term investment in energy infrastructure. Essentially these mechanisms allow investors, large energy consumers and producers to rationalise their investment in future renewable energy capacity installations.

The system has two ancillary benefits. It can easily be used to support renewable energy targets, and it can be used right across the energy supply chain - so no other fiat currency is needed.

As well as the protocols for the ergo system, researchers at Masdar Institute are working on the delivery methods.

Smart devices should make it easy for users. They can be programmed to warn a user when she has nearly run out of credits, and can automatically buy more.

Systems like the one being developed at Masdar could be of great benefit to any country or community looking to bring about the changes in individual behaviour needed to spread sustainable practices, and especially renewable energy targets. It could not only be a part of the UAE's own strategy to reduce its carbon emissions, but could also be farmed out to other countries grappling with energy wastage.

Dr Sgouris Sgouridis is an assistant professor of engineering systems and management at the Masdar Institute of Science and Technology