(thoughts provoked from here)
Ask economists about the shutting down of eight nuclear plants, and many would tell you that the German is heading for trouble. Indeed, “wholesale electricity prices have jumped approximately 10 percent since the eight nuclear plants were shut”, and ironically, “the decision to close the nuclear plants has increased reliance on coal-fired power plants”. While renewable energy has been at the focus of research ers for decades, the consensus is that it is not yet a competitive alternative to fossil and nuclear energy. Whether it will, and when it will become an alternative, is unclear to many. In the time of economic turbulance, the German, an industrial country which depends heavily on a reliable source of energy, forced itself to go for renewable energy by all means. The story would be less surprising if it happens in Soviet or China, where the political will can dictate any economic action. So in this case, we can reasonably ask, ‘Why?’.

Economic-wise, German is doing well compared to its neighbors. It is easier to borrow capital, and attract talents. In short, it is a good time to make long term investment. But why on renewable energy?

The extraction, transportation, and use of fossil fuel pollutes the Earth that is home to us. Oil is expected to last about 43 more years, natural gas 61 years, and coal 148 years. Notice, however, the cost of extraction will increase while the quality of the sources would decreases in time. The dependence on fossil fuel leads to huge coorporation that benefits from the economic activities linked to it, and huge military coorporation that is needed to protect those economic interests. In short, fossil fuel polutes the Earth, creates bad coorporations, bad politics, bad wars, and would finally be depleted.

So it makes sense that one makes long term investment on renewable energy. However, the upfront cost is so high as described above that economists and politicians would often deny the funding of research that engineers and researchers asked for. Even if a viable alternative source is found, it takes time for the society to adjust its processes to quit its addiction to fossil fuel. Kudos to the German politicians that took advantage of the public sentiment after Fukushima nuclear accident to bring about this radical plan.

Here I want to argue that the plan is not as risky as it sounds. The reason nobody do this before the German is simply because of politics: the bad coorporations and bad politicians resist any change that affect their economic interests. The grand plan of the German should then not be seen as a big bet, but a major triumph of good politics. The rest will go down as a major leap forward by the German economy and society.

1. Eliminating fossil fuel requires energy saving
Knowing that it would take a while for renewable sources to become competitive, it is clear that saving energy is equally important. This is not a straightforward task, but clearly doable. The technology and know-how to do this is also marketable to other countries, whether they still use fossil fuel or not. In the US, IBM is working in this direction with certain deals with the government.

2. The technologies required to save energy will serve to develop more technologies
IT will play a central role in balancing energy generation and consumption, as a huge amount of data is generated from many components of the grid. Once the data is there, it will be the source of further innovation. Individual users can contribute to that innovation process, in contrast to the current centralized energy management process.

3. Renewable energy promotes democracy
Under the current system of energy management, the people don’t have their choices. Electricity companies have a template contract that everyone has to agreed with. Those large coorporations, oil companies and electricity companies, are then major players with competing economic interest against the people. The large amount of capital required by their operations would also allow them to affect decisions made by governments, to the point of conflicting people’s will.

Generally speaking, there are technologies that favor democracy, and technologies that do not. Fossil energy, nuclear energy, biotechnology all favor big players, and inevitably remove power from individuals. Renewable energy, IT, 3D printing, … are among the technologies that return the power to individuals. The world as a whole would develop according to the dynamics among these technologies.

4. Democracy promotes growth
As many more parties are involved in energy generation and management, the process has to become more transparent, with more information to empower single individuals. Those information (data) can then be used to promote innovation. Everyone can then contribute to the grid: new practices/services to save electricity, new pieces of software for automation, new electricity appliances, etc.

In conclusion, I believe that as long as the politics play out right, the German is going down the right path with tremendous benefit to their economy and society. This blog post is therefore a prediction that would be revisited by the upcoming turns of decades.

Advertisements