Chris Cook -

I assume this term 'energy vector' that you use is just a fancy way of saying 'energy form'. (Strictly speaking energy is usually not a vector quantity as it generally has no directional component, as least in the way it is being used in these discussions.)

In my view, the analogy of energy as currency can only be taken so far. On any given day you can convert your dollars to yen and then back again within losing more than a relatively trivial amount in fees. However, energy conversions are far more dissipative, often resulting in well over 50% of the initial energy input being lost. For example, if you go from electricity to hydrogen and then back to electricity again, you will probably loss well over 70% of the initial energy input required to produce the electricity in the first place. Keep doing conversions like that, and you will have next to no energy left.

For this reason, one does not 'simply' convert electricity into a transportable fuels such as hydrogen, hydrocarbons, and ammonia, as none of the conversion processes are simple and each entails huge losses of energy. I recognize that it is often worthwhile to suffer such losses to improve the 'form value' of the energy (that's why we have electrically powered hair dryers rather that coal-fired hair dryers), but that is another matter entirely.

Thus, the conversion of electricity into transportation fuels must be viewed more in terms of a business venture rather than something that can happen automatically just to get your energy into the right 'currency' so it can be traded globally.

Having said all this, I fundamentally agree that our currency badly needs to revert back to a type based more on something real. What that should be, I am not smart enough to say. However, it seems to me that one based solely on energy is highly problematic.

That is, after all, what a reserve currency is all about?

Certainly a reserve currency shouldn't play favorites. The status of the dollar as a reserve currency works in favor of the US, inasmuch as they can "print" reserves for their own use. I understand the monetary arguments that are made in favor of using gold as a reserve currency, but most of those boil down to "countries can't just 'make' it, they have to 'earn' it through production of goods and services." Gold served fairly well as a reserve currency but not without some problems. IIRC, major gold strikes -- the conquistadors reaching South America, the gold rushes in California and Alaska -- were all accompanied by bouts of global inflation. And periods when new technology allowed production of other goods to increase much faster than the gold supply seem to have resulted in crashes of one sort or another. In addition, other uses for gold don't destroy it -- most of the gold shipped back by the conquistadors is still in "circulation" as bullion or jewelry or electrical contacts today. I would like to hear more arguments for and against a reserve currency "backed" by something whose other uses effectively destroy it. Not in a thermodynamic sense, of course, but in a practical one.

As we have seen here in many discussions, electricity is convertible into energy vectors such as hydrogen, hydrocarbons or ammonia. The US could simply convert and sell these... Besides, China would not wish be capable of redeeming its Units [based on electricity other than for current consumption and would prefer to hold them in reserve for use in exchange for something else she needs.

China is, in fact, in rather desperate need of electricity; Three Gorges, doubled coal production, and 30+ nuclear reactors planned or under construction are clear evidence of that. Electricity in North America is convertible to forms that could be transported to China, but at fairly miserable efficiencies. And turned back into electricity there, but again at fairly miserable efficiencies (eg, 60% for a combined cycle gas-fired plant).

It is fairly easy to argue that in developed countries, with one large exception (transportation using current technology) and a few small ones, most of the value of the heat-content of fuels, measured by the value of goods and services produced from it, is delivered through the electricity that the fuel can generate. And as is often pointed out here, much of the transportation could be electrified. This would seem to imply that kilowatt-hours are a more natural basis for the reserve, and would play no favorites between natural gas or hydro or solar or uranium. Could your proposal work if the resource "backing" the reserve currency were megawatt-hours generated?