All Clean Energy is Local

Technology tells you what you can do; economics…what you should do; politics...what you will do.  Approximate oracles surely, but what are they telling us about our energy future these days?

In general, technology is telling us we have a proliferating number of new and excellent tools with which to change our energy infrastructure for the better.  Listening more closely, it is telling us that innovation has never been easier, but to stop looking for breakthroughs.  Energy breakthroughs these days are manifested by tipping points, not the brilliance of Nobel laureates. The apparent "aha!", on closer examination, usually turns out to be the product of twenty years of tenacity and scraping for funding, followed by a stroke of luck in the nick of time to head off a technology venture's imminent collapse.

In general, economics is telling us that today's costs and revenues are more valuable than future costs and revenues.  This is not new.  But it does tilt the energy playing field strongly in favor of "business as usual".  Discount rates (the percent an asset’s value is expected to decrease with each passing year) are used to determine just how little value current assets will have in ten or twenty years.  They are set[1] according to guesses based on perceptions of risk.  As a result, private sector investment decisions mostly turn on what income spreadsheets say will happen in the next ten or twenty years.  Thus, quite literally and to quote David Freeman, “according to present worth economics, the planet is not worth saving”.  Our children and grandchildren may disagree, but currently the economists and MBAs are having the last word.

Which brings us to politics.  Generally, in governments organized around the notion of representation and votes, politics is telling us is that it is confused,  In politically-driven decision-making there is no need for discount rates.  The present worth of a decision is its value in the next election, and determining this value, to say the least, is not an exact science.  Politics at the level of national and regional economies favors also favors "business as usual" in energy decisions. This partly explains why the US has long lacked a coherent energy policy and, arguably, still does.  "All of the above" is better than picking winners and losers, but we are approaching a default outcome of picking losers as consequence of not picking at all.

Our debates about the size of government budgets and the efficiency of government services evoke a feeling that both sides are right.  At the global level we live in a world of pervasive fundamentalism, whether it manifests itself as a presumption of exceptionalism, a demand for debilitating austerity or a war to enforce religious beliefs.  It strains credulity to imagine the necessary levels of coordination, cooperation and integration to prevent economic exploitation of the poor by the rich, let alone change energy habits sufficiently to address climate change.

At the national level, we see the contrasts between state capitalism, regulated private capitalism, and no capitalism at all.  In each of these models there is both hope and despair.  State capitalism practiced in China is both solving and creating enormous problems at a speed and on a scale that is breath-taking.  Regulated private capitalism, as enshrined in US economic theory , is a tale of regulatory failure resulting from the regulated eventually gaining control of the regulatory process.  No capitalism at all is a road to nowhere or worse, as the example of North Korea attests.

At sub-national levels, we begin to glimpse hope for the future.  For example, US states have sufficient resources and organization to tackle problems that local communities have in common but lack the ability to efficiently solve.  It is a habit of organizations and institutions to deal most collaboratively and effectively with organizations of comparable size.  So, in matters of energy policy states like California focus on incentivizing and standardizing the business activities of their large regulated utilities.  To the extent that large energy grids and large facilities are the core of a state’s energy infrastructure, this can work.

But as we come to grips with the fact that people and small organizations are increasingly making the decisions that drive energy and environmental outcomes, we find that states are ill-equipped to understand and regulate local decision-making.  As the pace of technology change accelerates, massive long term infrastructure investments by huge for-profit corporations become increasingly risky and out of touch with the energy usage and investment decisions increasingly being made individually and locally.

Local energy initiatives can thrive on local insights, investment and accountable oversight.  As supra-national, national, and sub-national agencies and institutions continue to focus on goals and efforts matching their scale, a growing share of local energy infrastructure development and environmental stewardship work and investment will fall to local jurisdictions and individual energy users.  In this trend there is hope for an integrated energy strategy where, for example, the US and California do what they can. 

What they can do is wrestle with the economics and infrastructure of inter-state and intra-state commodity flows, grids and related infrastructure.  Meanwhile, local jurisdictions serve as stewards of the rest of the strategy, and the infrastructure that touches local business and individual lives.

In this model, all clean energy is local… or will be.

-- Gerry Braun

©2013 The IRES Network

[1] …when they are set rationally...