Drug Lords of American Energy
Americans are addicted to energy. Energy is the drug that powers our lives. As electrification, computerization, home automation and the “internet of things” continues its inexorable progress, we become ever more reliant on energy to function. Is this a positive or negative path for society? One could argue both sides effectively, as there are societal benefits and detriments to our technological dash into the future. However the issue becomes starkly negative when we look not at the drug itself, but at the drug lord and the manufacturer of the drug.
The electric utility industry is a dominant drug lord of energy. For many years, there has been what is known as a natural monopoly in electricity. A natural monopoly exists in an industry where it is most efficient for production to be concentrated in few firms rather than in a competitive market with many players. This natural monopoly forms largely due to the extremely high capital costs for entry into the market. The electricity grid has extremely high initial creation costs, barring entry. After the initial capital costs are amortized, large producers have overwhelming cost advantages over new entrants. In the electricity market, there are a small number of regional firms that control the majority of electricity generation and transmission. Each firm has a virtual monopoly in their respective region, with the entire system being more accurately described as an oligopoly.
The actual manufacture of the drug, or generation of electricity, predominantly comes from fossil fuels in the US. In 2014, approximately two thirds of energy generation came from coal and natural gas, while one third came from nuclear, hydropower and renewables. This energy mix is changing rapidly, but fossil fuels still make up the majority of energy generation.
Burning fossil fuels to generate electricity has massive negative impacts on the environment, the economy, human health and life on our planet. Climate change from the emission of greenhouse gases is one of the most destructive impacts of fossil fuel use, one that is substantially altering our world in a dangerous and deadly manner. For the minority who continue to deny climate change, the negative effects of coal, oil and natural gas go well beyond climate change. Air pollution, water pollution, ocean acidification, fossil fuel price instability and spikes, national security risks, human health disasters, risks to food supplies and many other impacts are very real consequences of fossil fuel use.
Our addiction to energy has been controlled by powerful dealers and dangerous drugs for decades. However in recent years the power has begun to shift. Renewable sources of energy such as wind and solar have come down dramatically in cost. In 1977 the average global price of installed solar was $76.67 per watt. Today it is $0.60 a watt, and installed prices are continuing to drop. Many parts of the world have reached grid parity, where the cost of electricity from solar is equal to or less than the cost from fossil fuels. In a recent publication from Deutsche Bank, a solar analyst predicted that 80% of the global market would reach solar grid parity by 2017.
Solar is disruptive to the monopoly of the current electricity industry in multiple ways. When it comes to generation, solar power can replace coal and natural gas at competitive costs, without the dangerous and destructive side effects of burning fossil fuels. This puts the fossil fuel industry at extremely high levels of risk, as their product becomes uneconomical and eventually obsolete.
Powerful drug manufacturers that they are, the fossil fuel industry has been fighting back for decades. Powerful lobbying organizations such as ALEC and EEI were created to manipulate political processes and protect fossil fuel interests. Massive political campaign contributions have hacked American democracy, with politicians dancing on the marionette strings of the energy cartels. Climate denial organizations were created to lie, distort, obfuscate and confuse the public about the realities and risks of climate change. The largest and most powerful energy corporations in the world have immense resources, and will subvert the renewable energy revolution at every opportunity.
Renewable energy technologies, particularly solar, are also highly disruptive to the transmission and distribution of energy. Rooftop solar is known as distributed generation. Rather than homes and businesses being slaves to the massive regional energy grid, they become independent power producers. With the emergence of intelligent microgrids, smart grids and single customer microgrids, people are able to disconnect from the monopolistic energy dealers. As energy storage technologies improve, including the recent introduction of the new Tesla Powerwall, individuals can begin to completely disconnect from the energy grid and have absolute energy freedom.
This is the ultimate existential threat to the energy drug lords. A decentralized, distributed energy system can completely disrupt the world’s largest industry. Energy is estimated to be worth over $6 trillion dollars globally, with rapid growth anticipated as the world continues to modernize and attain a higher standard of living. This dwarfs any other industry.
The energy dealers are working to protect their markets and profits by influencing policy and attempting to create protectionist legislation to block solar energy adoption. The Koch brothers and their utility counterparts are attempting to make it illegal to detach from the grid, charging solar customers grid fees, reducing or removing feed in tariffs and net metering, making third party power purchase agreements illegal, and other strategies to protect their oligopoly. This fight has been going on across the US, with the state of Florida in the midst of one of the largest battles between the energy utilities and solar power proponents.
Our addiction to energy may be growing, but we are refusing to buy from the drug lord. We are refusing to use dangerous and destructive drugs. As we transition to alternative, renewable sources of energy, individuals can choose a safe and responsible source of electricity. A source of energy that is reliable, clean, and less expensive over time. As decentralized, distributed power reshapes our electricity distribution model, individuals will gain energy freedom for the first time in modern history. The current masters of the electricity grid will fight the energy revolution, but they will inevitably lose. The intelligent, forward thinking organizations will join the revolution. The remainder will go extinct.