Hollowing out the Power System
Technology is displacing the fossil fuel energy system. You can see the first signs of this in the electrical power grid.
The power grid we currently use is massive, centralized, and very industrial. Also, it’s becoming more important by the day because we’re moving towards a system based on electricity rather than the direct use of fossil fuels. Simply, as the economy becomes all about moving information rather than moving physical objects, electricity becomes dominant over the direct use of fossil fuels.
Despite this, the power grid is ripe for displacement by new technology. Here’s why.
For those of you not following the solar energy market, you are in for a surprise. Solar panels have already gotten so easy to install, it’s now possible to DIY the install. This is due to micro-inverters that turn solar panels into safe, but bulky, electrical appliances. Appliances that could be plugged into wall outlets if zoning regulations caught up with technology.
This ease of installation, in combination with falling hardware costs (ongoing and inexorable as tech advances), means that a DIY solar panel installation can provide internal rates of return on the investment that exceed 20% over the life of the system. Further, given the reliability of the technology, it’s an investment that can provide you (and your family) with all of the electricity you need for life and a potential source of income.
The end result is that locally produced solar power is now the most economical way to produce electricity there is. This suggests it’s not a question of IF locally produced solar will become dominant, but WHEN.
From all indications, this displacement is going to be fast.
This roll-out is going to displace the energy landscape by:
- Displacing centralized energy producers. Jobs, plants, vehicles, etc. along the entire supply chain evaporate. In anticipation of this shift, the biggest producer of US electricity is now trying to become a finance company, by closing plants and leasing rooftop solar installations to homeowners.
- Turning the grid into a peer to peer energy exchange, where the grid operator charges a fee for managing the network.
- A growing number of energy independent households. Households able to produce all of the electricity they use and many that are able to sell their excess energy to produce income.
By the way, the cost advantage of house based solar IS NOT due to government subsidies. If our highly regulated power utilities actually paid home producers the price they they pay the big producers, particularly during peak usage periods, the economics would be even more favorable than subsidized prices. This “slight” of hand between government and regulated company just slows things down.
PS: Displacement is an interesting term. In common use, it’s used to describe moving something physically out of position or removing someone from a job or political office. That use makes sense in this case: technology is making it possible to remove a job/industry from the economy.
PPS: IF you really want to set yourself up, finance your own DIY solar install. Don’t lease it. If you do, you will deeply regret the expense over the long term as the economy shifts. It’s a great place to invest your retirement money. The UK’s Minister of Energy estimates that the typical return on a professionally installed solar panel system there, is 5-8% a year (much better than a pension).