A new paradigm: The End of Centralized Energy Generation

In general, things that don’t make sense don’t continue to do so. They either have to change or die away. It is an extension of Darwinism. In today’s world, centralized generation of energy is making less and less sense than it did a hundred years ago. It is predictably and poetically going to go the way of the dinosaurs from which it gets its fossil fuels.

At the turn of the last century, large coal powered electric plants with their economies of scale made sense. No one then conceived that the power grid would ever be as expansive as it is now. Electron production has been inherently costly, especially if you factor in the environmental costs, which were not even accounted for until the last few decades. Converting coal (or natural gas or radioactivity) to electricity is a poor business model; believe it or not, it takes 700 pounds of coal to generate the power to run a single 100watt light bulb for a year!

The average US home consumes a pile of coal 7 times the size of the actual house every single year, just for the electricity it consumes.

Pushing electricity through power lines more than a few miles results in drastic transmission losses. The costs to mine the fuels from the ground, and erect the transmission lines (at over $1million per mile) compound the problematic costs. Overall, it’s a business model that makes no sense. We are just used to it and simply pay the monthly bill to our providers.

To make matters worse, as we have witnessed, a small terrorist action can easily cripple substations across the country, causing massive and nearly irreparable damage. Our legendary power grid may represent just a few percent of the national GDP, but losing it could cause us a 100% loss in GDP in a matter of days or weeks. A large solar flare or Electro-Magnetic Pulse (EMP) from the atmospheric detonation of a nuclear weapon would likewise cause the system to shut down instantaneously. We are precariously close to something along the lines of the zombie apocalypse.

The alternative is to generate power closer to the fuel source and/or closer to the customer and, ideally, to do both at the same time.

Distributed energy generation means to have many more, but much smaller, power plants located closer together. These may feed into the national grid, but make more sense to be isolated micro-grids or even single customer providers. As such, the users will be virtually immune to catastrophic shut-downs.

Solar, wind and biomass can all be harnessed on a micro level, and they are all essentially free after the capital costs are incurred. The capital costs of a typical thermo-electric plant is about $3000 per kW of capacity. Our alternative methods of doing the same thing are now within spitting distance of matching and even beating these costs. In fact, converting waste into energy, although not nearly as sexy as the others, has the added benefit of eliminating waste that would otherwise be buried, with its own high monetary and environmental cost. Methane and CO2 escaping into the air from waste dumps will last for hundreds of years, the environmental effects compounding exponentially.

The costs of generating power locally, even at your own backdoor have plummeted over the last 10 years. More and better ways of producing electrons, syngas, biogas and liquid fuels will continue to drive down the costs, someday making electricity itself almost free.

The Leap Frog Advantage: Emerging economies in nations with little or no investment in infrastructure; power plants, transmission lines, distribution lines, substations, transformers, repair crews, etc. will leapfrog into this new energy model the same way they jumped into cell phones. It took just 5 years for almost everyone in South Africa to have a cell phone from the day the first towers were erected. They skipped the high costs of installing phone lines across the country and into each home. Be prepared for a change the balance of power in our current economic model. These emerging nations already blessed with abundant cheap labor will now have cheap energy to go with it.

The turn of the 21st century is not unlike the turn of the last century in the USA. Many fortunes will be made and many more will be lost. Just ask the ghosts of the guys who made horse drawn carriages, buggy whips and oil lanterns. Evolve and adapt or perish.

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