Traditional economics, as the discipline largely responsible for guiding decision makers in government, has several flawed attributes that make it especially dangerous as an ideological framework for the renewable energy transition. It places the environment in black box — an exogenous externality in most models — supposedly unrelated to market fluctuations. The misconception arose at the dawn of the industrial revolution, a time when Western civilisation first believed humankind, through the power of technology, could subdue the rough edges of the natural world.
In reality, environmental and energy processes play the driving role in economic activity. Value, as money, circles through the economy unscathed but the scarce minerals and fossil fuels it represents have linear lifespans governed by the laws of thermodynamics. Everything — 9 to 5 jobs, flat rate energy bills, three car garages — is organised according to the misconception that fossil fuels will always be around to provide energy exactly at our convenience. The challenge of embracing renewable energy is just as much mental as it is technical. It requires ditching the dominant industrial cognitive paradigm that still persists in an age where the transition away from fossil fuels use is imperative.
Historical energy systems, including those found in nature, were entirely reliant on the natural flows of solar, wind and water, not artificial stocks of coal and oil; this temporary burst in energy consumption and economic growth will soon level off as civilisation, willingly or unwillingly, shifts to renewable resources. The coming transition’s success requires integrated solutions that reorganise economic activity to maximise the strengths and minimise the weaknesses of solar, wind, and hydropower.
The key to maximising our return on sustainable forms of energy lies in wielding the powerful force of emergent behaviour, a characteristic of the natural world fundamentally beyond our understanding and empirical ability to harness. How do schools of fish and flocks of birds move in synch? How do the biosphere and weather patterns influence ecosystems? How do ant colonies communicate? Scientists have theories, but in reality, complex systems with infinite variables are impossible to quantify; we can only recreate and harness their benefits in select cases. Some examples: the mysterious efficiencies of the market Adam Smith identified and dubbed the ‘invisible hand’, the organic evolution of language, and Internet memes, etc. We don’t know how emergent behaviour works, but we know the way to cultivate this precious resource is to decentralise power, control, and decision-making.
The primary challenges of integrating renewables and economic activity are weathering variability and adjusting to decentralised generation. Any sustainable economy needs cheap inputs of electricity from solar, wind, geothermal, tidal and hydro, which are all ill-suited for powering an industrial economy and will only be more strained as heating and transportation becomes electrified. Undoubtedly, technical innovations are needed to boost output and provide storage solutions, but reorganising the grid to accommodate the peculiarities and limitations of these resources can also address these challenges. This requires introducing a level of complexity into the system that would overwhelm any centrally planned entity; we must make each node on the grid a connected, autonomous actor with the goal of coaxing out emergent behavior and natural order.
By exposing consumers and prosumers to the risk and reward of a wholesale electricity market based on the variable rhythm of natural systems, existing digital technology can sync energy consumption with the biophysical world and mimic natural communication systems. If all items using and producing energy are connected to one network, in an Energy Internet, then the profit motive can direct actors to operate in the interest of the overall system by coaxing out the most efficient use of each type of generation, storage, and demand response. This profit motive will further develop IoT products and generate a technology cluster of co-innovation as the market incentivises improvements distributed energy resources and demand response agents.
Decentralising decision-making creates scalable, reconfigurable, and self-organising information and control infrastructure with precise responsiveness. Grid operators can’t always adjust a Nest thermostat when the grid is strained, but an autonomous unit governed by a set of smart contracts can shut down once market prices exceed the owner’s preference. Home battery systems can soak up power during the day and offload electricity at peak evening hours to garner profit for owners. These IoT and grid asset devices are better capable of self-optimising in real time to ensure efficient performance while integrating energy in all forms, taking advantage of peak renewable flows, and reducing overexposure when the sun is not shining and the wind is not blowing. We need products that enable users to outsource thinking, set preferences, make money for their users.
"The primary challenges of integrating renewables and economic activity are weathering variability and adjusting to decentralised generation."
By gradually and smartly exposing everyone to wholesale market risk, we can begin to optimise our lives around renewable energy and provide people with the opportunity to participate in optimising electricity in the whole system. The fossil fuel age allowed societies to stifle the volatility of natural energy systems — the full return to renewables will require shaping economic activity around their characteristics and using digital technology to embrace stressors. We have to soak up electricity when it is plentiful and become hyper efficient when it is expensive. As the nervous system of the economy, this digital grid can form a natural, emergent order and ensure our energy use is optimised with the environment, not lead to its demise.
Kyle recently graduated from Boston College with a degree in International Political Economy. He enjoys writing about complexity theory, biophysical economics, and the intersection of renewable energy and blockchain technology
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