"TVA will sell less electricity in 10 years than it did 10 years ago. That is bonkers."
Why is this so crazy to imagine? There are so many drivers to increased energy efficiency. LED lightbulbs, LCD TVs instead of monitors, vastly improved efficiency standards/technologies for various appliances, fact you can do loads of stuff with a smartphone instead of watching a giant TV, etc etc, huge fall in heavy industry, small scale solar/wind generation actually appearing as a reduction in demand on the grid instead of 'increase of supply and corresponding increase in demand'.
I'd actually say it was more crazy if we expected it to continue increasing thinking about current trends, and I've heard this story of the utility death spiral for about 5 years so I don't think it is a sudden problem.
I'm not sure that's entirely true, especially for domestic energy consumption. 10 years ago, I had a CRT TV, incandescent bulbs, and a washing machine that was probably about an F on the EC's ratings. At work, I used a computer with a big CRT screen (actually, maybe just an LCD by then) and a processor that used about 40W just sitting there. And 20 years before that, my parents also had a CRT TV, incandescent bulbs, and a similarly inefficient washing machine. These were likely a LITTLE more inefficient, but nothing much.
Now I have an LCD TV that uses well under half the power of a CRT, LED bulbs which use about 5% the power of incandescents, and an A-rated washing machine that uses about a half the power of the old-fashioned ones. At work I use a computer with an LED-backlit LCD monitor and a modern processor that idles at practically nothing.
For most people who had "all mod cons" 20 years ago, they're using less electricity today than they were then.
Electric cars are the one wrinkle, and I think they will drive electricity usage upwards. Other than that, though, domestic use is declining for the middle class, and commercial and industrial use are too in many cases. An awful lot of electricity usage 20 years ago was essentially waste, and we're getting quite good at eliminating that.
Electric cars create synthetic electrical demand, since they displace oil demand. It's still energy demand. (The switch from oil to coal vs solar vs hydro vs wind is interesting, but the top-line "electricity demand" number means very little.)
You're right that it is still energy demand, and you're right that it's substituting oil for electricity.
But I don't know what you mean by "synthetic" since charging an EV is very much a real load, which is exactly why utilities should be the biggest fans of EV's. It's a no-brainer... "hey utilities, you know how demand for your product has been stagnant or falling? Well here's a product that can steal gasoline's market share, makes up about a third of your consumers' consumption, AND is cheaper to operate for your consumers."
Utilities should be the biggest champions of EV's.
Home appliances have made tremendous advances in the last 50 years in terms of efficiency. A lot of this drive was simply to cut manufacturing costs. Refrigerators in particular have made considerable advances almost every decade.
In the last 30 years the regulations around water consumption have driven rapid development in dish and clothes washer technology which has also improved their electrical efficiency.
The efficiencies we see today in desktop and server CPUs were less intentional and more a bi-product of the performance goals. Modern Intel CPUs have their origins in the Centrino mobile platform of the early 2000s, a variant of the P3. The Netburst CPUs of the time eschewed efficiency for speed and so P4 chips were very hot and inefficient, when Intel hit a ceiling with TDP and clockspeeds they had to reevaluate the situation. With Centrino, Intel's mobile CPU, they were trying to make the most power efficient CPU they could and concluded that the faster the CPU could complete it's workload and power down, the more battery could be saved. The end result was a very powerful and power efficient CPU. Intel found that with a few tweaks Centrino could outperform Netburst at a lower clockspeed and with far less power consumption.
Just the switch to smartphones alone is incredibly impressive on efficiency. For average users + average US electricity rates, you're looking at $0.05 to $0.10 per month in cost.
Nationally, every hour people are using their phones, instead of watching TV, playing a gaming console, or using a traditional computer, is a big savings.
Simple explanation: Jevons paradox is an observed correlation that has held true for certain notable industries at certain periods of history, but is not a law of nature. Demand for anything is neither infinite nor infinitely elastic.
But more specifically in the case of electricity: there is no demand for electricity, and never has been. The actual demand is for what electricity can do. If the slope of the energy efficiency gains of electrical goods is steeper than the slope of the induced demand for those goods, there's no reason why more goods demand (in accordance with Jevons) shuldn't result in less electrical demand (seemingly contrary to Jevons).
But (manifestations of easily usable) energy should be the most vulnerable to Jevons effects, because it has so many potential uses that that any increase in efficiency will flip some marginal case into profitability. Ditto for lower prices.
The problem is that energy as energy gets cheaper, it becomes an increasingly marginal part of cost of what uses energy.
Eg., let's say you've got some good/service, of which energy is 10% of its lifetime operating cost. If you drop the cost of energy by 50%, then that's only a 5% cost decrease for the good. In order to generate a Jevons rebound from the perspective of the energy supplier, that 5% decrease in price would have to increase demand by more than 100%. Seems unlikely.
It was a different story back in Jevons' day, when energy was a genuinely significant component of the overall cost structure of a LOT of things. But in how many goods and services is that still the case? As the cost of energy decreases relative to other cost components (like labour), you'd expect the Jevons effect to produce diminishing and eventually negative returns, no?
You might want to reflect a bit more closely on what Jevron's paradox actually is. It is not related to the cost of the final product.
Take air; it is essentially infinite and free. We use vast quantities of air in every aspect of our life. We use it in cars, in households, in computing, we breath it, we rely on their being a few km of the stuff above us to maintain pressure, etc. It is so abundant it gets a bit silly to talk about how essential it is to our way of life. Use of the stuff is almost certainly growing exponentially with population.
Believe it or not, but raw electricity is more useful than air. Humans would happily use vast amounts of electricity 24x7x365 our entire lives if it is available. As price goes down, usage should be spiking. Rather than Jevron's paradox being broken it is much more likely that some combination of
> [Jevons Paradox] It is not related to the cost of the final product.
I don't believe that's correct. From the Wikipedia article:
"Goods and services generally use more than one type of input (e.g. fuel, labour, machinery), and other factors besides input cost may also affect price. These factors tend to reduce the rebound effect, making the Jevons paradox less likely to occur."
So the rebound effect is explicitly related to price elasticity, with the critical term being "price". If the cost of an input contributes less and less to the price of the final output, why would one expect it to have any effect?
> Humans would happily use vast amounts of electricity 24x7x365 our entire lives if it is available.
I really don't see any evidence for that statement (and indeed the parent article is providing clear evidence to the contrary). Humans want their needs attended to, and to the degree that electricity correlates to that, they'll have an appetite for electricity. To the degree that it doesn't, they won't. Nobody actually wants to use vast amounts of electricity simply for its own sake. Moreover, there are human desires that are inversely correlated with electricity usage, such as quiet, dark skies, etc. One would expect those desires to exert a downward pressure on electricity demand even if it were completely free.
It seems obvious to me that what is happening here is that in essentially any good or service you can name, non-energy costs (labour, materials, land, etc.) are becoming a much more significant component of price, both due to decreasing energy costs and increasing energy efficiency, as well as intrinsic rises in the cost of labour and materials. This in turn limits the ability for the cost of electricity to significantly stimulate or repress demand. Seems pretty straightforward.
The last device invented which is used by almost any household and consumes non-negligible amount of electricity is home PC. Which will turn 40 years soon.
In the meantime, even older devices, invented earlier, such as fridges, washing machines, etc. became much more efficient.
Naturally, the average amount of consumed electricity goes down.
If someone invents a a robot which will clean my apartment, do dishes and iron my shirts, and double my electricity bill, I will buy this device tomorrow.
Unforunately, for the last 30 years we made no progress in inventing something that can consume non-trivial amount of electricty and bring non-trivial value to an average household.
There are however a number of innovations that are poised, or could potentially be poised, to increase electrical demand, from electric vehicles to interstellar laser propulsion. But in every case I can think of -- with one exception -- the cost of electricity isn't a significant barrier to their mass adoption. Which is why in addition to falling electricity prices not stimulating the consumption of existing goods, they also aren't stimulating the production of new goods.
The one exceptional use-case is crypto mining, which obviously does elastically respond to falling energy prices. But it's an unusual kind of demand in that in places where the electricity is higher than some threshold value, demand for this will be zero. Also, fucking hell, what a stupid use-case. Can we think of nothing better to do with our resources than come up with new ways to put a price on scarcity?
I think cloud computing deserves a mention. An increasingly large part of each person's demand for computation is satisfied by servers in AWS, Azure, Google, etc. due to the increase in popularity and complexity of online services. Depending on whether the technology sticks, Blockchain (PoW) could also drive a significant increase in energy.
Good point. For a number of years every few years there have been something that requires a lot more power. Offhand I can think of e.g. heating, fridges, televisions, microwaves, cooling, PC desktops and consoles (over many generations).
If you could drive the unit costs of electricity low enough for it to be cheaper than natural gas for heating, you could see major growth from that.
Obviously, not likely to happen anytime soon, but if the cost-reduction progression of renewables continues, it could become viable in the medium-term.
Currently it's far more expensive to heat with electric than natural gas, so most people with access to it don't use electric.
> Humans would happily use vast amounts of electricity 24x7x365 our entire lives if it is available.
That assumption could be false, though.
I only want to fill my house with a certain amount of lumens before it starts hurting my eyes, and it only takes a certain amount of electricity to produce those many lumens. Maybe I could get a bigger house, but that ends up being limited by housing costs instead of electricity costs, so the cost of houses limits how much electricity I burn on lights.
Or maybe TV's? Sure, a bigger TV would eat more electricity, but I can't afford an infinitely large TV, so the price of TV's limits how much electricity I use. Computers are the same way TV's are.
I guess your second bullet point is true? Electricity costs are falling, but the total cost of doing stuff with electricity is going up because the gadgets are getting more expensive relative to how much power they pull.
Good point; perhaps it is not efficiency then but outsourcing of light/heavy industry (simply meaning while TVA et al demand is falling, Chinese power demand is growing even more rapidly), and the fact there is more supply in the form of unmetered local solar/wind generation which looks like a fall in demand on the grid but actually isn't. Interesting.
Energy is the principal or a major secondary input into food, transportation, housing, consumer and industrial goods, et cetera. In other words, just about everything we spend money on. So unless we start seeing a major drop in the demand for currency, I don't buy this argument.
Everything we spend money on is being manufactured more power efficiently, is more power efficient on its own, and grid demand drops as adoption of new efficient gadgets and individual solar expands?
At home we went all LED lights. My office followed suit. Even my city swapped the night time street lights
Sadly we had almost every appliance in the house die in the first 4 yrs we owned it. But they’re all new efficient models now
Fewer desktops, more tablets and phones. Our big TV is only on 3-4 hrs a week (but it too is a more power efficient model)
A lot of effort has gone into battery storage and efficiency this last decade.
A lot of energy is spent on things like transportation and heating though.
At some point, the rooms you occupy and the time you occupy them hits a ceiling. I'm not going to heat my room above room temperature, I'm not going to be in my room more than 24 hours in a day, even if energy efficiency made it as cheap as my current pattern of heating.
Similarly, there is a ceiling as to the amount of time I spend traveling in a certain day, I wouldn't drive to another country on a 5 hour trip on a daily basis for a better job, even if energy efficiency made it as cheap as my current travel pattern (1 hour a day).
That probably wasn't always the case, but there are indeed diminishing returns to spending money. Just look at Bill Gates' energy expenditure. It's waaaay higher than any of us in absolute terms, but relatively speaking a fraction of ours.
So I think the intuition you responded to is probably pretty solid. The other intuition I have, which is very much related, is that our gdp growth is increasingly service-oriented. i.e. it's not just that industries get more efficient, thereby seeing gdp growth and energy consumption decouple. It's also that the relative share of our gdp is possibly moving away from energy-intensive industries, which aren't really growing much at all, to low-energy intensive industries. With agriculture and manufacturing being quite energy-intensive compared to services industries like education, legal services, finance (ignoring proof of work) etc, a deindustrializing economy should also fuel a decoupling of energy consumption and gdp growth.
Finance consuming ever greater proportions of our GDP probably helped keep that in check https://www.bis.org/img/speeches/sp081119_g3.gif (if your rent doubles and home insurance goes up, your electricity consumption does not go up).
Similarly, offshoring of manufacturing likely muted the demand for electricity too.
I intuitively agree with you. However, the decoupling that's observed can partly be explained by lag. For example, a farm might have diesel powered equipment, tractors, etc. that last 10 years. Eventually they might switch to electric equipment. However, the innovation isn't stagnate, so its holding consumption constant. What the electricity is used for is actually changing as new uses become economically viable.
Economic inequality means that the average person can't afford to keep consuming as much energy as in the past, meanwhile the wealthiest people have saturated demand, they have everything they can imagine wishing for.
Jevons Paradox is not an immutable natural law. It's does not even have any predictive power. It's just a notice of an interesting thing that can happen but the naivest interpretation of microeconomics assumes it's impossible.
Silicon lithography has to hit a wall way before single atom sizes. For a start, silicon semiconducting is a probabilistic effect and only happen on populations.
Photons at usable frequencies are much larger than atoms. Just notice that lithography is currently moving into what they call "extreme UV" (and most people call X-rays) because the UV photons are much larger than the features of current top of line chips.
>For a start, silicon semiconducting is a probabilistic effect and only happen on populations
Is that a fundamental theoretical limit like the uncertainty principles or is it a matter of engineering advancements to figure out how these forces work? I can imagine carefully positioning two atoms (maybe moving?) to obtain similar effects.
I would guess that Jevon's paradox doesn't exist for many domestic applications. Most people have all the lights, washing machines, etc that they need. Making lights more efficient won't make people buy more of them.
I would argue LED lighting does increase the demand for all sorts of lights rather a lot. It is due to increased efficiency, but that is not directly what creates the demand. The increased efficiency means light bulbs are no longer a fire hazard, allowing lights to be strewn just about anywhere and left on indefinitely.
Just because it’s LED doesn’t mean it doesn’t use any power at all, so it’s still a waste of energy.
Every light in our house is LED and I still teach my kids about not wasting energy and turning things off when not in use.
Maybe it’s because I grew up with incandescent bulbs, but I can’t stand the thought of random lights being left on for no good reason, even if it costs 40 cents a year to keep lit.
EDIT- ADDITIONAL THOUGHT
I was going to add that it’s not like I went around my house adding lights that didn’t exist, but as I think about it... The house I grew up in was built in the early 70’s and every room had a single ceiling light that had two bulbs in it. The hallways had 1 or two ceiling lights.
My current house, built two years ago has 8 can lights in the living room, 6 cans in the kitchen and 3 pendants over the island, 8 in the dining room, etc... So maybe you’re on to something with the thought of putting in a lot more lights than we used to.
> Maybe it’s because I grew up with incandescent bulbs
It is soooo that. When I bought my house 8 years ago I immediately had to replace some incandescent bulbs that shared a circuit with the microwave because the power consumption was tripping the breaker. And then I had to do the math to figure out when it was cost-effective to replace everything with LEDs. So I've become extremely cognizant of what things consume, and exactly what that costs...
Now I've got everything automated with LEDs and presence detection and schedules to turn things off when people aren't around or shouldn't be awake. Yet, lights needlessly being left on still bothers me.
There were less lights in poor homes. The more affluent homes had suspended lights with multiple bulbs. (I am not sure how it is called in English). I recall that a lot of homes got more light bulbs and ornaments through the century, as they become more affordable and more hype.
The increase in count came with a decrease in power. The typical 100-150W bulb got replaced by multiple 30-50W bulbs, they do not consume significantly more in aggregate.
> Every light in our house is LED and I still teach my kids about not wasting energy and turning things off when not in use.
Are you certain that it's wasting energy, though? You have to account for the time spent actually turning the light off, as well as for the psychic cost of having to think about whether to turn it off or on.
I'm reminded of one of my old offices, where some office busybody turned off the lights in the bathroom. They were fluorescent and took awhile to brighten up, so of course this meant that one would enter a darkened room, turn them on, and then slowly get some light. Was it a huge deal? No. Did it make our lives worse than just leaving the lights on? Yes.
> Maybe it’s because I grew up with incandescent bulbs, but I can’t stand the thought of random lights being left on for no good reason, even if it costs 40 cents a year to keep lit.
At 40¢/year, leaving it lit costs .11¢/day, or .0046¢/hour. At any reasonable rate for your time & mental energy, it makes sense to just leave it lit.
> They were fluorescent and took awhile to brighten up, so of course this meant that one would enter a darkened room, turn them on, and then slowly get some light. Was it a huge deal? No. Did it make our lives worse than just leaving the lights on? Yes.
LEDs don't do this. At absolute worst, you'll have a fraction of a second before they light up at all, but once they light up, they light up immediately.
That's true to an extent, but if you had 16000 lumens previously, using about 1000W, you probably don't _want_ ~100,000 lumens now, just because it uses the same amount of power. That's far too much light.
Perception of brightness is not linear. The human eye response is not linear. So x10 the luminous flux (power output) will be perceived as brighter but far from x10.
not in their home, but I can see many more historical and institutionnal buildings being illuminated, commercial use also. It may still not amount to 10x though.
Do you mean fluorescent bulbs? They do not use neon, but rather use mercury vapor. The UV light from the mercury excites a fluorescent layer on the inside of the tube, causing broadband emission of visible light.
In support of your argument, just about every damn device these days is covered in LEDs that run 24/7. Look around your house at night. Microwave, electric kettle, stove, phone chargers, smoke detectors, routers, modems, electric toothbrushes, and that's just what I remember off the top of my head.
Yes, not exactly the same as LED light bulbs, but illustrates the point. LED's are cheap and the power is a rounding error, so they go in everywhere.
(This is infuriating to me because I would like my house to be dark at night)
I'm gonna have to call you on that one. Even high-end brand LED bulbs are so much more cost efficient than incandescent bulbs, it's the rational act to immediately replace nearly every single incandescent.
Whether you're interested in saving energy or saving money, you should remove and smash your incandescents.
A bit less than two decades ago, when I was still living with other (post-graduate) students we got a flyer which announced a low price for Compact Fluorescent Lighting compatible with our rented house. We went into the living room where there was a whiteboard, and worked out the TCO of these more efficient lamps over their lifetime compared to just the ongoing cost of our incandescents (since we had these already we didn't need a total cost).
We then immediately set out to purchase an entire house full of CFLs. They were still going years later when we split up and each took our share, I still have one somewhere, maybe in my living room.
Personally, the reason I don't run out and replace all my existing incandescents is because I don't want to waste perfectly good bulbs; I would rather for them to reach EOL and then replace. The energy used to create a good is usually significantly more than the energy the good itself uses. I'm OK paying a little more for the energy used by the incandescents when it's overall less wasteful.
More than 99% of the total lifecycle energy of a incandescent is in its use.
Let's just repeat that.
More than 99 percent of the total lifecycle energy of a typical incandescent bulb is in its use. That includes raw materials, manufacturing, and transport.
> The energy used to create a good is usually significantly more than the energy the good itself uses.
Not when you're talking about a cheap consumable product which mostly converts power into heat. A 75W bulb is about $2.50/yr worth of energy consumption per hour of daily use at $0.09/kWh. An LED equivalent is +/- $0.35/yr at a cost of $3-$6.
Maybe 5%-10% of my home's bulbs weren't worth replacing out of cycle, but LEDs are so cheap and the overall savings so high that it's not even worth thinking about.
But I'm not concerned about the money, I'm concerned about the wastefulness. The existing bulbs are completely functional until they reach EOL, at which point they will be discarded into landfill. The less frequently things are replaced, the less waste ends up in landfill (and is consumed in initial production).
We can readily quantify how 'perfectly good' incandescent bulbs are no longer perfectly good in terms of energy consumption costs, to which you might also factor the environmental and health impacts of consuming more energy than you could be.
But quantifying the wastefulness of prematurely sending them to the landfill is much more difficult. We can suggest that LEDs longer expected lifetime is another benefit to the environment but that is equally challenging to quantify for the premature replacement scenario.
I think the grandparent is saying there's a limit to the number of additional efficient light fixtures one would add with promise of low runtime costs because of higher initial fixture, bulb, and dimmer costs for LED.
I haven't found an LED yet that works in my dimmable ceiling fixture, where I can dim it to the lowest possible level and get a pleasing light. The incandescent gives a very dim, warm orange glow which is great for movie watching or other mood-setting purposes. The LED still emits a rather harsh and not-as-dim light even if it's rated in the warm spectrum. Have you seen a solution for that?
For our hallway, rather than buying an LED lamp that's compatible with a dimmer, we bought one with built-in dimming. You flip the wall switch twice and it goes into a dim warm orange "nightlight" mode. Flip it twice again and it goes into full brightness daytime mode.
LEDs are terrible with dimmers. They flicker, and they have bad response curves to the dim-level. Yes, there exist properly dimmable LEDs, but buying 5 different bulbs to find one that works negates the savings.
This isn't the LED's fault. It's the fault of the fact that dimmers are awful designs. They feed a nasty chopped-up waveform to the fixture that has RMS voltage proportional to the desired power output. Aside from the fact that it has a bad power factor, it's more or less okay for plain old line voltage incandescent lights. For LEDs, several things go wrong. First, LEDs want DC or high frequency PWM. The driver is given a nasty waveform at 60 Hz. So the driver needs to rectify that waveform to DC, filter it, and then decode the waveform to dim the LED as the user requested. This is a big hack and doesn't work all that well. Second, modern power supplies aren't resistors. Supplying them with input power with rapid voltage swings is not so great. Third, the dimmers themselves are usually wired in series with the bulb without access to a neutral wire, and incandescent dimmers expect to draw their own power using current through the bulb. Given that LED drivers are highly nonlinear, this makes it very awkward for the dimmer to power itself. "Dimmable" LEDs will intentionally leak some current to power their dimmers. High-end dimmers in newer homes will have a neutral connection.
If you can find a "ELV" or "reverse phase" dimmer and you have the wiring for it, you can at least avoid the inrush current problem.
An anecdote: I have a fancy computer power supply that buzzes rather loudly when the lights are on. This is presumably because the lights are drawing a big inrush current spike 120 times per seconds due to dimming.
To top it off, LEDs have much higher frequency response than incandescent bulbs. This means that, unless you drive them with clean DC or with a very high-frequency PWM input, they'll flicker. (Not the kind of flicker you're talking about -- the kind you're seeing is the system malfunctioning. I'm talking about the kind where it flickers as designed and someone waved their fingers and decided it was hard to notice.) There's a new standard called IEEE 1789 that describes what levels of flicker are likely to be harmful (causing low productivity, headaches, general crappy feelings, etc.) and what levels are very likely to be safe. Very few LED drivers meet this standard so far. At least California has imposed a less stringent but still helpful for Title 24 compliance [1] for the last couple of years.
(This is extra nasty given that incandescent bulbs don't actually produce light proportional to the power with which they're driven.)
Ok, but the dimmers worked fine with the incandescents. Your post gives a lot of reasons why the high-efficiency of LEDs comes at a cost of lower flexibility to adapt to important use cases.
I just saw some 2700K bulbs in Poundland (£1~=$1.38), at a selection of power levels. Not sure what the brightest was, might have been 60W equivalent?
I deliberately got a dimmer model because I wanted something to encourage my mum to sleep more; due to Alzheimer’s she has no idea what the time of day is any more, and has developed a fear of the dark and only sleeps with the light on.
You don't, not yet anyways. But if that 100w bulb is on 3-hours per day and you want a 1-year ROI, your replacement budget is probably in the $8-12 range.
They certainly _were_ expensive, but these days reasonable quality LEDs seem to be a similar price to reasonable quality incandescents. You can still get very cheap incandescents for less than any LED, but you probably don't want them; they won't last.
My local utility has an online store for customers with amazing deals on LED lightbulbs (not as cheap as normal bulbs, but not as high as you see at a Home Depot). I've replaced every bulb in my house.
Prices are plummeting though. I can get a software-dimmable app-controlled LED (Philips Hue) bulb for cheaper ($10) than the serial-replacement incandescents it replaces. It's to the point that I'm bummed I can't find any more standard-size bulbs to replace, and they're not making candelabra etc type Hue bulbs yet.
Hue and IKEA have E12s. The Hue E12s are available as white or color, but they're terribly expensive and never seem to go on sale. The IKEA E12 is only $7, dimmable but not color temp, and will pair directly to a Hue hub.
As I commented in other thread, your argument about people having all they need could be re-phrased as a "lack of innovation".
Last thing we have invented which consume electricity is home PC. And it was 40 years ago. Without this invention we probably observed the declining demand much sooner, but hey, large monitor and good graphic card and latest 3D shooter, this stuff rocks. But before we invented home PC, people "had everything they need", they were just unaware of 3D shooters, and your argument was as valid as today.
For the last 20-30 years we had no other inventions which can convert electricity into value. And older inventions, such as fridges, got more efficient.
> Making lights more efficient won't make people buy more of them.
Yes it does. I personally added a bunch of lights I would never have added if they were inefficient. But because lights are so cheap (it's barely worth my time to turn it off, although I still do it), I added a bunch of them.
I'm still spending less on lighting power than before though.
> Jevons paradox(1) has previously ensured that increased efficiency resulted in increased demand.
I've always been confused with the labelling of the observation that the common shape of demand curves means lower price (all else being equal) leads to greater market clearing quantity as a “paradox”; what else would you expect?
That being said, all else has not been equal over time. Note that what has dropped is consumption of utility-supplied electricity; part of this may be drop in demand for electricity (use efficiency would seem to spur demand with more utility for each unit consumed, but it may suppress it if it means that the point where you hit steeply diminishing returns is hit faster), but an important part is the deployment of customer-owned generation capacity that is a direct substitute for utility-supplied electricity can be expected to hit consumption of utility-supplied electricity hard. And no one has ever labelled the effect “new perfect substitutes reduce consumption of the substituted good” a paradox.
Jevon's paradox isn't really a paradox, its just a description of differing results for differently shaped demand curves. If you have a relatively flat demand curve, then a small shift in price yields a lot change in quantity demanded.
I think price has gone down far enough that the shape of the demand curve has steepened. As consumers, there just isn't much we can do with a lot of extra electricity, so even if the price drops a lot, we're not going to consume that much more.
The article only refers to electricity demand in the US. World demand is stil growing, and I think the energy system is most properly viewed as a global one.
I would be interested to know whether the embedded energy consumed by the US has been growing or shrinking. (To calculate this you would add in the energy used to make American imports.)
- Data centers are ridiculously efficient. The latest generation of data centers from the big cloud providers have PUE in 1.07 territory, which would've seemed like pie-in-the-sky ludicrousness even 10 years ago. Every CPU cycle that's done in a data center instead of on someone's client machine or on-prem server is a decrease in power consumption.
- 3D printers don't use very much power, and in any case, while 3D printing is going to be an ever-bigger deal in manufacturing, the 3D printing at home fad has already crested and is fading away, like 3D televisions. There's not going to be one in every home.
- Electric cars will indeed increase power consumption, but mainly when they are plugged in for the night, where there is already a lot of wasted power from e.g. nuclear plants that can't scale down at night. The total increase in necessary generating capacity and infrastructure upgrades won't be as big as you think.
> the 3D printing at home fad has already crested and is fading away, like 3D televisions
I too am skeptical of 3d printing but I don’t think you can write it off just yet.
It may be true that we’re seeing the crest of the 3d dot matrix thing. But if you include all “arbitrarily programmable assembly robots” then I think we’re just in the prelude.
The data structure for 3d printing is the “thingiverse” and I don’t think we’ve seen the end of that yet. I can imagine for example a small kitchen robot with reservoirs for some staple foods, and an app where you browse dishes that can be cooked for you. Or write your own.
I would consider that 3d printing.
Similarly 3d TV is alive and well in mobile VR. And it will see huge growth this year with the advent of $200 high quality stand-alone headsets.
You can argue these things are “not the same” but the vision is the same, only the form factor is different.
Data centers are ridiculously efficient. The latest generation of data centers from the big cloud providers have PUE in 1.07 territory, which would've seemed like pie-in-the-sky ludicrousness even 10 years ago. Every CPU cycle that's done in a data center instead of on someone's client machine or on-prem server is a decrease in power consumption.
<<
Do you know what is the global consumption of energy of data centers in 2016 ? It is same as consumption of energy of global aviation. Think about it, the energy consumed by Data Centers is equal to all commerical planes world wide flying.
(source: realclearnergy podcast)
They may very well be efficient, that is shit load of energy and that is point.
Energy consumption of data centers as of 2016 shows they are a major component of total energy consumption and therefore worth watching. It doesn't imply how that will affect _growth_ in energy usage over time. You have to look at change over time taking into account demand, supply and efficiency together in an analysis like this http://www.datacenterknowledge.com/archives/2016/06/27/heres...
> Do you know what is the global consumption of energy of data centers in 2016 ? It is same as consumption of energy of global aviation. Think about it, the energy consumed by Data Centers is equal to all commerical planes world wide flying.
Does the global aviation cost comprise just the cost of flying planes, or does it include the cost of maintaining mainframes for flight bookings?
Also, how does the consumption of power by data centers compare to the consumption of power by all consumer PCs/workstations? That's kind of the comparison we're looking at here.
> "Data centers are ridiculously efficient. The latest generation of data centers from the big cloud providers have PUE in 1.07 territory, which would've seemed like pie-in-the-sky ludicrousness even 10 years ago. Every CPU cycle that's done in a data center instead of on someone's client machine or on-prem server is a decrease in power consumption."
Those PUE statistics are self reported and aren't very accurate. I've seen them done and they are more marketing/PR fluff than actual conditions of energy conversion efficiency. Nobody in the actual field treats them as being accurate.
Maybe the new things that people would spend electricity on now that it’s cheaper haven’t reached the mass market yet. I’m thinking mostly electric cars, because I live near Tesla, but I am sure there are other opporunities for greater electricity usage around the corner.
Are we doing less though? Because of efficiency gains we may be doing more work with less electricity so while the outward demand numbers are less that amount of work being done is increased.
I do know on a personal scale that LED lighting lets me have far more light hours for an incredibly lower bill. If anything I leave lights on more now. I even ran over a thousand feet of Christmas lights because their cost was so much less than before (like 12/15 to 1)
The efficiency of the devices people use has been increasing but the prices of electricity have been rising during the same period so efficiency from the perspective of the consumer is not increasing.
The mechanism by which increasing efficiency would increase consumption is lower prices and if that is missing then consumption won't increase.
Jevon's paradox probably only applies to some types of power usage. Industrial consumers will certainly consume more if its cheap, but a more efficient toaster doesn't mean I'll get two toasters, or toast more often. I already have more toaster capacity than I'd ever need.
And once again fucked incentives are at risk of screwing us over. In fact the article notes exactly that two-thirds down:
> To be clear: For both economic and environmental reasons, it is good that US power demand has decoupled from GDP growth. As long as we’re getting the energy services we need, we want overall demand to decline. It saves money, reduces pollution, and avoids the need for expensive infrastructure.
> But the way we’ve set up utilities, they must fight that trend. Every time they are forced to invest in energy efficiency or make some allowance for distributed generation (and they must always be forced), demand for their product declines, and with it their justification to make new investments.
> Only when the utility model fundamentally changes — when utilities begin to see themselves primarily as architects and managers of high-efficiency, low-emissions, multidirectional electricity systems rather than just investors in infrastructure growth — can utilities turn in earnest to the kind planning they need to be doing.
edit: replaced expectations by incentives which is what I meant
That's a bizarre gripe. Everywhere I live, utility companies beg subscribers to use less power, because they want to keep output within the hard limit of their current (ha!) capital outlay, in the face of population growth.
When the drought was at its worst here in CA, there was a concern that LADWP would have to jack up their rates because people were doing such a good job conserving water. They have lots of fixed costs (salaries, pensions, infrastructure improvements) but their incoming $ is tied pretty tightly to consumption
My water bill is always something like $50 for various "service fees" and surcharges, and $30 for water. EBMUD even charged me $36 to set up an online account with them, so I could have the privilege of using autopay.
When I moved to LA in 1990, we were in a drought and DWP did raise it's rates to both accommodate for and encourage lower usage. After the drought though, oddly enough they didn't go back down...
My local water district here in NorCal raised it's rates 2 years ago during the height of the last drought as well...
Don't know about US or the developed countries, but these times are a boon for the African nations, India and several others. Energy-efficient electricals alongwith improved Solar facilities are going to have a significant impact on the economy for these countries. It's still gonna take years, but I can't wait to see the world getting over the oil/coal economy!
The biggest problem isn't really lowering overall consumption but lowering peak consumption. There's typically enough capacity during the night, but not on summer afternoons. Some power companies will pay you to install a device to cut off your AC for ~15 minutes during peaks (controlled by them, of course).
Nest has a program that gives the power company a small amount of control, in return for which you get a bill credit (and a free or discounted Nest).
And, of course, there's peak pricing, which is more what you're suggesting. But power companies are a regulated monopoly, so there are typically restrictions on how much they can increase the price. If they can lower peak consumption within their regulated prices, they can defer on infrastructure investments and thus save money.
Paying to turn people's A/C off for 15 min is more efficient than having a bank of generators used for 15 min, 2 days a year. If it works, it's much preferable.
We'll see about getting screwed. It seems to me the most effective way to get households to use a lot more electricity is to encourage them to get electrical/plugin hybrid cars.
TVA has essentially made home solar financially untenable in the areas they serve. If you want to use grid tie solar, you must sell all the electricity you generate to TVA at wholesale cost and buy it back at retail.
And that just encourages development of an automatic switching system such that power generated on site is always used on site. It never goes out to the grid until after 100% of local demand is met, and all local storage devices are topped up.
And that, in turn, would encourage those customers to just go completely independent from the grid and either find some other flexible use for excess power or shut down excess production.
Pretending that local power is using grid infrastructure does not make it so. People can and will disconnect from the grid to disprove that lie.
I'm surprised this area of smart switches aren't more available or popular.
I've done a small amount of research because I could not find a smart charge controller with AC inputs and I was considering making one with a Raspberry pi.
> People can and will disconnect from the grid to disprove that lie.
More and more municipalities are making this illegal. To protect their utilities, they require that you tie to the grid and sell all electricity you generate to the grid and then buy it back for more.
Can confirm...when I was living in AZ the main argument against net metering is that the Utility company would suffer...nevermind the fact that solar users would benefit, the state legislators and ACC (Arizona Corporation Commission) always sides with the utility company.
Well.... they've made grid-tie solar untenable, but off-grid solar is becoming more viable with products like the Tesla Powerwall. Costs aren't low enough to make it financially viable for most people, but for new construction that faces high costs to run utility power, it can already be cheaper.
By discouraging grid-tie solar, utilities may be shooting themselves in the foot as off-grid becomes more affordable.
Assuming a normal electric consumption, an off grid solar system costs $30-40k more than grid tied. Furthermore, the batteries won't last forever. (That's assuming electric cars, heat pump, basically an all electric household.)
To be clear, the law is such that you can't use any of the electricity you generate while it's still "yours." You have to first sell it to TVA (and get paid X) and then buy it back from TVA (and pay X+Y.) In other words, you have to pay $Y to use your own electricity.
That's not what the linked article says. The linked articles says that if you want to feed the grid, you're only going to get wholesale prices, while having to pay retail for the energy you consume from the grid. It's a rule of accounting.
If you don't want to eat the premium, don't feed the grid.
That is, consume your electricity before it ever hits the meter(s). Presumably the real issue is that typical consumer systems aren't designed to function the way you'd want to avoid the TVA accounting rules.
If you are generating 5kw and using 4kw only 1kw gets sent to the grid. So you are not selling those 4kw at wholesale prices and buying it back at retail. Only the power that is time shifted gets this treatment.
You are free to buy batteries to do your own shifting. Also remember that wholesale costs typically just account for power generation, while retail costs also account for grid maintenance. An owner with solar is benefiting from grid maintenance, so it makes sense that they contribute.
Now from a societal perspective you may want to subsidize solar. But it certainly isn't "unfair" to buy power at wholesale and sell it at retail.
Unfortunately this is not the case! TVA has a "sell all buy all" rule, that if you are connected to the grid and generate 5kw, you are required to sell all of those 5kw to the grid (at wholesale price). Then you buy back the 4kw you use (at retail price). It doesn't matter if you were only using your own generated power, you still pay. Crazy! I didn't believe it the first time I read it either, but that is really the law they adopted.
All the rule does is prohibit net metering. If you never sell your power on the grid it's irrelevant. So you're free to use your 4kw directly.
Presumably this is a hassle because most equipment is designed for net metering where the system is setup to feed all generated capacity to the grid and consume all energy directly from the grid. So without net-metered billing, to avoid paying the retail premium you'd probably need a very expensive system that eliminates the cost effectiveness.
In fairness, AFAIU most utilities despise net metering. From their perspective they're the ones getting screwed, and the TVA billing system more fairly compensates them for infrastructure costs.
Even crazier. In France, the setup is similar: you sell all your energy to EDF, and they sell it back to you. I don't know if that's still the case, but a few years ago, the KWh you pay to them was cheaper than the KWh you sell.
If the selling and the buying happens at different times, then that doesn't seem so crazy. The real cost of electricity is dependent on supply and demand - which varies with time.
In certain parts of USA demand is especially high when the sun is at it's peak and most places on earth see low demand in the middle of the night.
According to the link sent by eppp TVA doesn’t allow net metering.
Edit: I got the terminology wrong. I agree that expecting net metering (“free” time-shifting) is not reasonable. And it seems that in addition to the “sell all, buy all” solution it is also possible to sell (or buy) only what remains after (or is required for) local consumption.
https://www.tva.gov/Energy/Valley-Renewable-Energy/Dispersed...
Net metering is not the same thing as only paying for what you use. Net metering means you could push 4 kWh during the day and draw 4 kWh overnight and get metered as zero consumption from the grid. This pushes a storage and distribution cost onto the utility and its other customers. Paying you at wholesale for the daytime push and charing you at retail for the nighttime draw moves those costs back to you.
What others are saying above is that you could generate 4 kWh during the day and consume it on premises, i.e. with air-conditioning or other day time appliance use, and still have zero consumption from the grid. This is also the point of the powerwall and any other on-premises energy storage.
That's true when you're using the power as you generate it, but when you sell it back to use later, you're essentially buying power storage. Efficient power storage is harder than efficient wheat storage, so they're not very comparable.
This seems the most fair way to handle power that is not generated by the utility. If the consumer wants to cut themselves off the grid and have enough extra solar panels and batteries to be self sufficient, that should also be allowed.
You mean they don't allow rich solar panel owners to get their grid battery subsidized by poor folks who lack the capital for their own solar?
This is a good thing. No power company should be forced to pay retail for power. It is a regressive tax on those that can least afford it. I don't think it was inappropriate to offer to get the industry off the ground, but it's quickly approaching the time to do away those subsidies - especially those that come directly from other rate-payers.
Nor should the power company force customers to buy the power that they generated themselves at the utility's price.
They already paid the capital costs for generating their own power. You want them to pay again? For the transmission lines and peaking plant that they aren't using?
Certainly, when the net usage is negative, the utility should pay only the wholesale cost of that portion of production in excess of local usage. When the net usage is positive, the customer should pay the retail price of that portion of usage in excess of local production. But it is nonsensical for the customer to sell the power they generate at wholesale, and immediately buy it back at retail. Immediate use should not be metered in either direction, and time-shifted use should account for peak vs. off-peak.
Otherwise, all you are doing is forcing the customer to use bigger batteries to route around your obnoxious local generation policy.
That "grid battery" is actually the natural gas fuel supply at the peaking plant that does not need to be used to supplement the baseline plant. Fuel that stays in the tank instead of being burned is the best "battery" we have right now. If you encourage people to use their own redox reaction batteries, you're lowering the efficiency of the entire system, and everyone loses.
>Self-Generation
The electricity produced serves the facility’s needs first. Any excess electricity is delivered to the power grid without payment. If the facility needs additional electricity, it must be bought from the local power company.
>Self-Generation and Dispersed Power Contract
The electricity produced serves the facility’s needs first. TVA purchases any excess electricity that is delivered to the grid. If the facility needs additional electricity, it must be bought from the local power company.
>Dispersed Power Sell-All Contract
All of the electricity produced and delivered to the power grid is sold to TVA. The facility buys all of its electricity from the local power company. (Two meters—one for electricity purchased by the customer from the local power company, and one for electricity generated by the customer and sold to TVA—are required.)
So no one would ever choose option 3, and no one would choose option 1, unless the installation was so small that the capital cost of the dual-channel meter would never be recovered. If it were truly the customer's choice, this would not be an issue, because the customer should always prefer #2 to #3.
So what does TVA do (if anything) to get customers to pick #3, or force them into it?
Also note that net metering is not an option. #2 uses a dual-channel meter to track outgoing power separately from incoming power. Net metering is not necessarily the optimal metering solution, either, but TVA doesn't even offer it.
Hmm, I think you may be confused/arguing against a strawman here, but I'll bite.
> Nor should the power company force customers to buy the power that they generated themselves at the utility's price.
No one is forcing customers to do this. I'm not sure where you get that from? If you are using more power than consuming, it does not leave your local premises. Only the excess power you are not using at that point in time is being sent. That's kind of the point of net metering.
> Certainly, when the net usage is negative, the utility should pay only the wholesale cost of that portion of production in excess of local usage.
Which is precisely what they do. Some are forced to pay retail - which was a temporary subsidy both to spur solar development and honestly was adopted largely due to billing convenience if nothing else 20 years ago. Easy to just let a meter spin backwards and bill/pay based on those numbers vs. developing entirely new billing software but everyone knew at the time it was temporary and financially nonsensical.
> When the net usage is positive, the customer should pay the retail price of that portion of usage in excess of local production.
Currently the case.
> But it is nonsensical for the customer to sell the power they generate at wholesale, and immediately buy it back at retail.
This isn't the case anywhere I've heard of, and definitely not the TVA. Even the linked article very clearly describes the situation as net metering as defined everywhere else. Customers are not sending all their generated power out their meter, then putting load on the "grid" on another meter back in. That would indeed be absurd.
> Immediate use should not be metered in either direction, and time-shifted use should account for peak vs. off-peak.
Completely agreed.
> That "grid battery" is actually the natural gas fuel supply at the peaking plant that does not need to be used to supplement the baseline plant. Fuel that stays in the tank instead of being burned is the best "battery" we have right now.
Yes and no. You might be surprised solar load does not match up nearly as well with peak power demand as is reported. This of course is a fine point to debate, and generally is in your favor.
My main point is that power companies being forced to operate a free battery for rich solar customers is immoral when think of who is subsidizing that free battery. Rooftop solar may be about the least valuable form of power to a power company as they can do nothing to schedule production, and the rest of the rate-payers shouldn't be forced to pay retail rates to the rich few who prefer to save $15k on a local battery pack so they don't need the grid battery at night.
I don't think we should force folks to require battery packs, but I also know that the financial incentives are currently lined up to have us end up with a bunch of rich folks paying nothing for power with solar systems, and a bunch of poor renters paying for 100% of the capex on things like the nuclear baseload plants so the solar folks get power at night.
"Thus, any grid-tied solar system within the TVA region must have dual metering, one to measure power coming off the grid, another to measure power going to the grid. The arrangement with TVA is likewise “buy all, sell all” in that you have no choice but to sell all the power you generate to TVA, then you buy back whatever you actually consume."
> Customers are not sending all their generated power out their meter, then putting load on the "grid" on another meter back in. That would indeed be absurd.
That is exactly what the linked article claims is happening to TVA customers: "Thus, any grid-tied solar system within the TVA region must have dual metering, one to measure power coming off the grid, another to measure power going to the grid. The arrangement with TVA is likewise “buy all, sell all” in that you have no choice but to sell all the power you generate to TVA, then you buy back whatever you actually consume."
How is it crooked? The utility company pays to builds and maintains the grid infrastructure with the expectation they can use the infrastructure to sell power to consumers.
One person selling back some unspecified amount of solar with questionable reliability, without the utility company having any say when the power is provided, isn't exactly a very useful thing for a utility company, so it's surprising they even pay the same wholesale rate.
Why not get a basic battery system and use that to power some loads in your house, instead of buying power from the utility company for those loads?
You're not allowed to use the electricity you generate. _All_ power you produce is sold to the utility at wholesale. _All_ power you consume is purchased from the utility at retail. Two separate meters.
Wait what? How? Is this a Tennessee specific thing? This seems absurd and impossible to enforce.
If I hypothetically spend a couple hundred bucks on a solar panel, 12v lead acid battery, and basic 12VDC -> 120VAC inverter, put those items on a wagon, and drag it across my yard to use power tools where an extension cord won't reach is the power company going to arrest/fine me? Is it only illegal once I use the batteries/inverter under my own roof?
If i understand the article correctly, it's illegal when you wire it to the grid. So, powertools and a battery will be fine. i suppose you could have a big switch outside your house that lets you pick local generation or grid generation, ala a datacenter failover switch.
But nobody wants that. Really, i don't think many people care about selling the power back either. But they've made it already, why waste it? What people want is i'll make the first 5 kwh, and i want to buy any extra from the grid. And i don't want a big switch system for each light in my house. Which seems very normal and sane.
Oh, that's exactly what I want, and have been researching for myself. I'm taking it even further and planning on being able to switch individual circuits between battery and grid.
If that idea is dumb somehow I'd love to know more resources about why. From my perspective it's a better solution than grid tie, but I value resiliency and reliability as well as pure cost alone. If I still lived in a city where the power literally never went out for years at a time, then having a local backup would not be really attractive.
And considering the regulations, it seems like the system I'm considering would also be able to basically satisfy the desire for "i'll make the first 5khw". Select a circuit that draws at least 5 kwh/day, run it off batteries until the battery bank voltage drops below a threshold, and then switch over to the grid.
I’m not an electrician, and that’s who you should talk with.
However, it’s way easier to just trip a breaker when the power goes out. The whole neighborhood is drawing from your battery, breaker flips and you are done.
A single meter tie is simple. You use what you generate. Any extra makes the meter run backwards. You draw more, you pay for it. The infrastructure probably can’t handle whole neighborhoods doing this.
IMHO, they should charge a flat monthly fee for the option to connect.
If there's an electrical link between your system and the public grid, you're playing by the grid's rules. If you don't want to play by the grid's rules, you can't connect to the grid in any way.
p.s. Even if buy-all-sell-all doesn't make sense, requiring your electrical setup to meet grid standards does make sense. It's be surprisingly easy to cause a blackout, or to kill yourself, by messing it up.
It’s up to the states to decide I guess. In my state, the local power company lets you use what you need and then sell what you don’t use at whole sale rates.
They will send you a check if you produce more than you consume. I’m not sure if you had to pay for the meter but they would install one.
PG&E here in Northern California does offer net metering -- sell to them when the sun is up and buy back at night, guaranteed a wash in $$. Good deal for us.
This could be because of the Commerce Clause in the Constitution. It basically regulates all commerce at scale in the US of A. I bet TVA took its position because of Roscoe Filbrun, a wheat farmer with a similar argument in 1942. This is a really great piece on it if you're interested.
Back in the 1980's, Amory Lovins, of the Rocky Mountain Institute, would say that the easiest way to "expand" energy production by 25%, was to deploy existing high-efficiency technology.
I saw him present with the head of a power company in Iowa. As they said, one might think this was bad news for the power company and that they would fight it -- more power equals more revenue. However, some of that power is very expensive power with low margins -- quick but costly production to meet demand peaks.
With deployment of high efficiency devices, those peaks declined. Other means of shifting consumption, such as "cooling rooms" that run at night, building ice or other thermal sinks to drive cooling during the daytime, also helped.
The utility had lower absolute demand, but flatter demand for which they could better plan and produce, at lower production cost. So, the efficiency push ended up being a plus for the utility. They were busy distributing then-new compact fluorescent bulbs and the like, as part of public outreach.
We don't face the exact same scenario, now. But, institutions can either get with the program, or get left behind.
(Or, they can try to "capture" and monopolize the system. Such as the Koch brothers with their "clean coal" and all; not wanting to lose their sunk costs and anticipated earnings.)
One thing I don't support, is the existing entities that have dragged their feet also using their assets and momentum to take over the... "next generation" energy system. I'd rather limit the perpetuation of their mindset and behavior. Some conservatism, especially in large, essentially public and critical endeavors, is good. Distorting same to meet personal goals, is not.
They've already bought a large battery - bolted under their electric car. Perhaps one day our cars will drive us into work, we'll plug into the grid there (or have it drive itself home), and home solar will talk to the grid and tell it how much to,charge our car during the day. Then we'll go home and run our house off the car battery overnight, making sure to leave enough battery power to get to work the next morning. Or party on Friday night because it was sunny and we have a couple dozen extra kilowatts that don't need to be saved for commuting in the morning!
Some energy sources will be low directing certain times of the day, and others will be high, causing it to mostly average out.
And for the stuff that doesn't average out, there is peaker plants.
Things could be further made better using varying electric pricing, such that when energy is plentiful it is cheap, and when it is scarce it is expensive.
Agreed - quite a lot of the power from my solar panels is currently being fed back into the grid but this will change in a few years when I replace my hybrid car with a full electric. Electric transport is definitely the main source of growth in electric power consumption.
This is one of those cases where I wonder if the traditional Chinese Healthcare Payment Model might be something that could be applied to other industry sectors.
That is: traditionally in China, you paid the doctor when you were well. When you were sick, treatment was offered without payment. The alignment of incentives is for patients to be healthy (or, for the cynical amongst you: for the doctor to be able to credibly claim this).
If various services were offered not on the basis of inputs consumed (as with electricity), but on the basis of outputs enabled, this dynamic would change.
For employees, this is the difference between measuring based on hours worked (or worse: present), and on deliverables achieved.
There's some complications to this: piecework payment is something that's long been criticised (Adam Smith argues against this in Wealth of Nations, 1776), largely in that it tends to overwork, even in the absence of overt coercion. Prices ultimately are meant to cover costs of provisioning, and there's the need to see that those costs are met. Measuring what is directly transacted is easier than measuring either complex inputs or often-at-a-remove outcomes (Smith also discusses the former, the latter is the topic of many decades of Monitoring and Evaluation theory and practice).
I totally agree with the sentiment here. If the utility is public, it exists to serve the people electricity, all of the people, whatever their needs may be. So it seems like the fair thing to do is for the utility to charge the rate it needs in order to maintain and upgrade its equipment. Then just divide that into the total usage and make the people pay the total adjusted for their individual use compared to the average.
California actually changed the incentive structure for PG&E to deal with this issue. One of the reasons California has had flat demand despite growing a lot.
There's no good reason for networks or last mile infrastructure to be privately run in the first place because competition does not come about naturally. The incentive of a private owner will always be to sit on the network and collect rents and spend as little on maintenance and infrastructural investment as possible.
Which is why any service or utility required to maintain the standard of living and comfort we all expect should be tightly regulated or non-profit in nature to remove the incentive to extract the most profit while providing the lease service.
Is that because the product is 100% fungible? Electrons are electrons and there’s no such thing as “better electrons” once you hit a certain quality threshold?
I’m trying to understand why your characterization doesn’t apply to, say, programming talent. Once I have stable of coders working for me, what’s my incentive to do more than the bare minimum of maintenance work for them, and just collect rent on their productivity?
To me, it seems like you’re just describing capitalism: cash seeks rent.
I think the usual argument is that utility companies tend to be natural monopolies due to the extremely high cost (relative to the size of the market) of installing infrastructure to every single building.
That's monopoly in action. Given right-of-way exclusivity, there's little reason to endure the enormous costs of upgrading. Were other companies given opportunity to compete, you'd see a lot more improvements in shorter times.
...hence the explosion in wireless technologies: multiple providers can easily cover the same areas, and must compete with improving services. It's almost to the point of overtaking wired services in both data rates & cost (just get those monthly data caps up and I'll switch).
>It's almost to the point of overtaking wired services in both data rates & cost (just get those monthly data caps up and I'll switch).
The data caps can't be removed. Wireless has much lower bandwidth limits overall--the spectrum would be saturated if everyone decided to move to wireless. It can't happen with current technology.
Data caps are equivalent to an horribly designed token bucket, where the tokens are all added at once at the beginning of each month. Using a proper token bucket policer/shaper should be much better at preventing spectrum saturation.
Still won't be enough to move everyone to wireless. We won't be able to replace more than a small fraction of our wired bandwidth with wireless anytime in the foreseeable future.
I think your statement is true only if you consider the area covered by a single tower to be fixed.
If a given volume of space can only handle so much bandwidth over the EM spectrum, it seems the logical solution would be keep the range smaller and put antennas (with wired backhaul) in more places. Similar to how wireless companies do a lot of special capacity work in large stadiums, etc. [1]
Of course, as the range decreases and the number of towers increase, the cost dynamics start to resemble the same last-mile cost problem more and more, but at least:
- you don't have right-of-way problems (presumably any company can lease EM spectrum)
- You can choose the areas install more shorter-range towers based on demand
What you're describing would increase bandwidth. It's basically the plan for 5g.
However, it still won't come close to replacing wired bandwidth. There is a limit to how low you can reduce transmission power and still get blanket coverage therefore there is a limit to how close together these towers can be without interfering with each other, and a corresponding limitation on bandwidth for a given area.
You'd need to move the towers down to something close to the range of Wi-Fi to provide enough bandwidth to come close to working. And at that range you basically have all of the exact same problems of wired internet.
>you don't have right-of-way problems (presumably any company can lease EM spectrum)
You still have significant right-of-way problems because you still need to provide the wired backhaul for these towers. Unless you want to piggyback on the existing wired infrastructure--in which case you need to pass laws to force existing providers to let you use their pipes.
Wireless internet isn't a solution to the problems we face with ISPs. It might help to provide some limited competition, but the physical limitations prevent it from replacing wired internet.
> You'd need to move the towers down to something close to the range of Wi-Fi
It's my understanding that LTE and 5G are designed to scale such that the density of cell towers matches the density of the population. Thus in rural areas you have fewer high powered tower and in urban centers you would have many low powered micro towers.
> You still have significant right-of-way problems because you still need to provide the wired backhaul for these towers.
In downtown Atlanta they have ground level LTE installations with wireless backhauls at heavily traffic intersections attached to the street lights.
>It's my understanding that LTE and 5G are designed to scale such that the density of cell towers matches the density of the population. Thus in rural areas you have fewer high powered tower and in urban centers you would have many low powered micro towers.
None of what you said is wrong, it's just not enough.
5g is still under design. It's just a specification for minimum speed, latency etc...
The most likely way to accomplish it is through small cells operating at very high frequencies (milometer wave). The problem with high frequencies is that they don't penetrate obstacles. They require direct line of sight, A canvas awning would block the signal.
For 5g to operate at the desired speeds in high density areas, you'd need them on every street corner, and you'd still need lower frequency higher powered transmitters to act as a backup in the very likely scenario that you aren't in direct line of sight of a millimeter wave tower.
In rural areas you could just use the lower frequency higher powered towers. However, the farther from the tower you get the lower the bandwidth. Combine that with the higher noise floor you get at lower frequencies, and the fact that transmitters cover a circular area and you need a large amount of overlap.
In either scenario, rural or urban there is no good way to replace wired access. Although it would be more likely in very rural areas.
In urban areas as I've already said, the tower density needs to be so high, that you lose the advantages that people are hoping will make wireless more competitive. At that density you have all the exact same problems that lead to a natural monopoly.
>In downtown Atlanta they have ground level LTE installations with wireless backhauls at heavily traffic intersections attached to the street lights.
This doesn't solve the right of way issue at all. If you've already got to the street corner, you've already solved the right of way issue.
Getting from the road to houses isn't the difficult part. Homeowners will grant you access, they want access. It's getting to
the street corner that's a problem.
One of the primary focuses of 5G is to reduce latency and LTE has reduced latency tremendously.
My personal experience looking over test logs on my phone is that LTE averages ~40ms with a low of 25ms and a high of 80ms. My home internet averages ~16ms with a low of 12ms and a high of 44ms.
Gaming is one of the few things where you can really tell the differences between sub 100ms latencies and so for most people wireless internet is more than sufficient.
> Can you say, briefly, what you mean by "pure capitalism?"
> To me, pure capitalism would be laissez-faire, within the context of a rights-respecting society.
I mean withOUT the context of a rights-respecting society. The capitalism that we have only respects the rights of others when compelled to do so.
> Sometimes, companies respond by innovating solutions that deliver more value at a lower price.
Yes when there's competition or the consumable isn't a necessity. In many municipalities it's a legal requirement to have running water and/or electricity, particularly if you have children or the elderly in the house; which means not buying is not an option. Utilities are commodity service providers; Southern Company's electricity is no better than Duke Energy's. They do not have any competition because markets have been carved out and consumers do not have a choice. They mostly don't develop the delivery technology, they just purchase it from others (e.g. GE).
With all that in mind, what is the motivation to innovate? So that the customer will be less angry at you as they write you the check each month?
What's the motivation to reduce costs? Lower costs might drive up demand which might put additional strain on infrastructure (look at the issues in Australia) and drive up maintenance costs. Lower costs might also require additional capacity which means capital investments.
The best place for a utility is to convince to you use as little as possible while charging you as much as possible in static fees each month.
Seemingly everybody has their own definition of capitalism. Everybody also thinks that right thinking people share their definition and people who don't are Just Wrong.
It makes arguments about it a little pointless because six different, intelligent people are arguing about capitalism are usually arguing about six related but different things.
That's why it usually makes a bit more sense to argue with language that has a tighter definition - like "monopoly".
I would argue that it is. When a business is operated for profit and individuals are incentivized by profit then tactics to capture and hold market share are going to be used.
What better way to maintain your profits than to have the government preventing others from competing with you.
It's all quasi-privately run in the US. They aren't expected to compete because like said it isn't natural. But governments are generally incompetent at building and maintaining power grids.
In the past, investment was been encouraged by allowing these companies a set rate of return on capital investments, but allow no profit on expenses. Thus, the energy company would get 10% return on any investment. This actually lead to over-investment in infrastructure--called gold plating. You need a new power tower? Build it as expensively as possible, with all the bells and whistles.
Now, there are newer forms of price regulation designed to eliminate gold plating.
>The incentive of a private owner will always be to sit on the network and collect rents and spend as little on maintenance and infrastructural investment as possible.
Governments have exactly the same incentives. And the results are clear. US public infrastructure is fucking terrible.
Puerto Rico is one example of public energy company. Didn't do so hot.
> In the past, investment was been encouraged by allowing these companies a set rate of return on capital investments
I've worked on so-called "cost plus" government contracts before, and the results were astoundingly bad. As a curiosity, what's your take on "cost plus", but with the "plus" being fixed profit on the initial bid instead of on the final invoice. The contractor will still be made whole on all of their costs, but there's a reasonable incentive against prolonging the contract indefinitely (i.e. the fixed margin)
> Puerto Rico is one example of public energy company. Didn't do so hot.
To the north, Saskatchewan has a 100% government-owned power company (SaskPower), and the result is generally quite positive. We have a land mass of 251ksqmi (approximately Texas) but only around 1.1M people. Agriculture makes up a significant chunk of our economy, and one of the big picture benefits of SaskPower is that urban and rural rates are approximately the same, even though the marginal cost of adding a new rural customer is waaaaay bigger than that of an urban customer. Our rates (once factoring for currency conversion) are pretty similar to Texas ($0.11USD/kWh here vs $0.08-0.09 there).
>governments are generally incompetent at building and maintaining power grids.
When you strip out the market discipline imposed by competition, governments are usually more efficient than equivalent private sector operations.
Privately run monopolies are - similar to governments - only kept in check by democratic accountability. The difference with a privately run regulated monopoly is that that democratic accountability is one step removed.
As you said, it's quasi private - because the system would collapse under the weight of unchecked rent seeking behavior if it weren't heavily regulated.
>Governments have exactly the same incentives.
Believing that elections and power seeking does not motivate government decision makers is an odd opinion.
I love the "(and they must always be forced)". Very naked display of political power, that. It's very far from obvious that forcing utilities to subsidize others is a good idea.
It is neither a "naked display of political power" nor "forcing them to subsidize others".
The utilities have been granted a monopoly by the govt, and in exchange, are subject to regulations. If anything is a "naked display of political power" it is the granting of a monopoly.
The reason the monopoly is granted, is that it is most efficient as a society to have a single successful power distributor than to have multiple failing ones with redundant infrastructure (power poles, lines, etc.). And, for monopolies, to regulate them to reasonable profits instead of allowing any winner of the failing competitors to establish a rapacious monopoly.
With new developments in rooftop solar and batteries making it economical, it is sensible that these distributed modes be supported, and the system migrated towards distributed power. I've always wondered why this wasn't done sooner as a civil defense measure (as the interstate highway system was built as a defense measure, to transport troops to either coast in 24h). As such, they are only being forced to subsidize their customers' ability to either generate power or live at greater efficiency.
That the last-mile costs are so extreme that utilities must be monopolies is not obvious either. We've built out the last mile in the U.S. many times over for many things, and where we've allowed it (as opposed to preempting it a priori) we've had competition (e.g., cable). Even where we don't have direct competition, we do have indirect competition where consumers can vote with their feet (e.g., power rates vary regionally).
Obvious or not, at the time the monopolies were granted, that was the assessment.
And yes, in dense areas, we may have two cable competitors who've both built out the Last Mile. But it is not everywhere, and there are many areas where there is zero build-out, and the only service you can get is DSL on old copper maintained by the TelCos.
Moreover, the monopoly system for Electrical and TelCos was adopted requiring them to provide service to ALL, both the highly profitable dense urban neighborhoods and the massively unprofitable rural areas with one farm every several miles. See the Rural Electrification Act of 1936.
The fact that it was done this way pushed the US very far ahead in the world, providing both electrical and telephone service almost everywhere.
The fact that the Internet was NOT done this way puts us somewhere out the top 25 in Internet service.
Central planning will create a disaster when completely relied upon, but completely avoiding it will also create a disaster. Some things work as a system and society with a measure of applied foresight.
My local utility charges users $5,000 per installed pole for last mile connection. I've priced poles and wire, they are turning a hefty profit for last mile connections.
How many people does it take, and how much equipment? If they're using contractors and have to, say, hire a crane, things can add up pretty fast.
That doesn't mean that they're not necessarily price gouging or making a profit, but often things like poles and wire are a small part of the actual cost of installing infrastructure.
Energy investor here. This has very little to do with "energy efficiency" and more with the de-industrialisation of the US economy, and a shift to a more service-oriented one. A services-based economy is less energy-hungry, resulting in the decoupling of GDP growth and energy consumption.
Industrial sector primary energy demand barely declined, from 24.84 quads in 2007 to 24.5 in 2016. That's less than the decline from the residential sector, 11.43 to 11.00.
It's energy that is dissipated without providing energy services. For example, electrical transmission line losses and the less-than-100% efficiency of heat engine electrical generators both contribute to rejected energy. Those numbers can't be directly compared between the 2007 and 2016 charts. LLNL changed methodology for reporting them in recent years. The input primary energy numbers can be compared across the whole time frame, though.
People really gravitate toward the flattering interpretation, don't they? If electricity demand is down, it's because of something we're succeeding at (energy efficiency). If jobs are going away it's because of our success at automating the work.
The flattery comes in when, rather than attributing the fact to the real reason, you chalk it up to our awesome success at automating people out of jobs (a constant drumbeat in the press lately). Now, like magic, instead of having a failed economic policy on our hands and people justifiably upset over it, there's nothing to blame but the steady, noble, and relentless march of Innovation and Progress, and better get with the program, people!
It's not really automation, it's more outsourcing and competitive advantage. In fact, automation could theoretically make production more viable, which would bring electricity demand back up.
Then there is also the move of energy intensive industries to abroad. Those that needed huge amount of energy, like Datacenter from Amazon, Google, Microsoft and Apple are setting up JV or their own solar farm. More people going off grid.
Efficiency has been increasing but overall residential and commercial electricity usage is till increasing (very low rate) but industrial usage is actually declining.
Americans expect all major public companies' growth to continue indefinitely because financial advisors have told generations of people that their life's savings is guaranteed to grow on a steady curve forever as long as it's in the stock market, and they leverage their wealth accordingly, because it's the "financially sound" thing to do. This is why any time a major public company can't continue increasing profits, it becomes a national crisis and the government has to step in to save them.
I once remarked to an older family member (Boomer generation) that no investment is ever "guaranteed" to make money, and they corrected me immediately, appalled that I would even say such a thing. "Guaranteed" investments are the common sense of their generation. I invest prudently in funds that grow modestly but stably; of course my investments are going to keep growing. Why wouldn't they?
Why wouldn't they indeed. Isn't the point of a fund to have consistent "infinite" growth? Companies fail all the time, but the job of the fund manager is to anticipate or mitigate those losses with new companies/investments.
>This is why any time a major public company can't continue increasing profits, it becomes a national crisis and the government has to step in to save them.
This is completely false. Where in the world did you get this idea?
"Any time" is hyperbole, but the bank bailouts and car manufacturer bailouts were major lessons for me about how American society really works.
I also hear this kind of sentiment a lot in the Net Neturality wars. "The cable companies can't make money off of TV anymore," therefore, the laws of society have to change.
Theoretically, in the steady state where revenue and profits are fixed, the stock price wouldn't go up but you could reinvest the dividends. Whether this is a good investment depends on the profit margin.
In the real world, the average lifespan of a company in the S&P 500 is under 20 years. [1]
> "The average age of a company listed on the S&P 500 has fallen from almost 60 years old in the 1950s to less than 20 years currently,"
The reason for that is there have both been a lot of mergers and a lot of new companies that have gotten huge in a small amount of time, especially in tech (Google, Amazon, Facebook, Netflix, NVIDIA, etc).
I've heard this story of the utility death spiral for about 5 years so I don't think it is a sudden problem
5 years is sudden in the utility world. Building a new power plant is a huge project that takes a lot of planning and economic forecasting to budget correctly. Do it wrong and you can waste astronomical amounts of money and bankrupt your energy company.
"Think for a moment about why a big utility like TVA (serving 9 million customers in seven states, with more than $11 billion in revenue) sets out to plan 20 years ahead. It is investing in extremely large and capital-intensive infrastructure like power plants and transmission lines, which cost billions of dollars and last for decades. These are not decisions to make lightly; the utility wants to be sure that they will still be needed, and will still pay off, for many years to come."
Utilities and the financial firms that invest in them need some certainty regarding long-term demand in order to justify huge loans. For 100 years, the trend was increasing demand. Bucking a 100-year-trend requires re-thinking some fundamental assumptions. Also, financial firms probably gave out loans 10 or 20 years ago / utilities accepted loans that reasonably assumed increasing demand.
I have argued exactly this to a number of people that would consider themselves "environmentally conscious", even bringing graphs along. They've -all- said, "that must be wrong, we have so many more devices now."
The huge fall seems to be from 35 quadrillion BTU all time peak around '97 down to around 33 quadrillion BTU today. They predict a 0.7% growth rate in the future based on the consistent increase since the '07 recession.
They expect commercial to keep growing, with the death of brick -n- mortar retail and general economic decline for non-elites, that sounds unrealistically optimistic.
HVAC, appliances, and “other” are the major drivers for electricity consumption in commercial and residential customer bases. In industry, 50% of the power is consumed by machinery.
I wonder if the decrease in lighting (driven by LEDs) is offset by the increase in electronics in commercial and residential sites.
My perspective just from being around a good while is savings from LED lighting have been more than offset by excessive gratuitous use of lighting. Dramatically so.
No one can build anything at all, even a few paving slabs, without adding "lighting as a feature". Often with colour or brightness cycling effects. This is usually broken a couple of years later.
Once businesses turned lights off outside business hours and left a little security lighting. Now everyone lights up the window, sign, and usually car-park, to daylight levels. Even solicitors, and doctor's surgeries. Larger franchises especially annoy by adding a 30' pole with a sign on top. With illumination more suited to anti-aircraft searchlights. It's become an arms race.
As a kid, street lights were turned off late at night. I think 2 in 3, but it's a distant memory now. I lived in a major city as a child.
I'm with you. I'm amazed how quickly the concept of "My business has to have a presence at night" has become some kind of non-negotiable rule. Exactly how much business is driven by 3AM drivebys? But, the costs of all that lighting is suddenly a lot lower than it was before.
The switch to better streetlights is good, but the sea of commercial lighting seems like an unaddressed issue.
Better streetlights are OK to a point. Endlessly upgrading lighting such as has happened here seems pointless. I miss the stars. I don't even live in a major city any more.
I don't need major road level lighting if one of a tiny number walking at 3am. I don't mind some gloom between lights. I don't mind in the car either when there's few around. I have lights on the car. If I feel unsafe at 3am, chances are I will with or without floodlighting and get a cab anyway.
Sure illuminate the city centre around where clubs and restaurants are kicking out, or during winter rush hour, but the rest seems light for the sake of light.
Commercial and domestic electronics are also getting a lot less expensive to run, though. An office full of computers uses far less power to run the computers these days than 20 years ago. Of course, it also takes much less power to light it, and likely also to heat and cool it (there've been substantial improvements in HVAC).
> LED lightbulbs, LCD TVs instead of monitors, vastly improved efficiency standards/technologies for various appliances, fact you can do loads of stuff with a smartphone instead of watching a giant TV, etc etc
It's not this. We are getting bigger tvs. Bigger monitors. Residential sector energy use is increasing.
Commercial/Industrial sector uses most of the electricity.
The decline is a reflection of the stagnation of commercial businesses/industry in the TVA area.
It is nonetheless a very surprising result - the world GDP has also risen 50% in that time frame (edit: not really an exactly fair comparison to the TVA). Have we really truly offset our usage to -10% in that time frame? What is the right basis of comparison? Specific products like Teslas, shitcoin mining and much more can rebut your examples qualitatively. It would be really interesting to see a more rigorous study on this demonstrating what is going where from when.
100 megawatt per hour is a rate of increase of power that means the total amount of energy proportional to the square of the time. I find it unlikely that a reasonable sized vehicle could sustain that rate of increase for long. After ten hours, the power would be 1GW, which would be sufficient to make the vehicle glow quite brightly. The vehicle would have used 5GWh of energy, the equivalent of 50000 battery packs of a Tesla 2017 Model S 100D.
I don't think what you are typing means what you think it means.
Is it just me or is the obvious biggest problem in capitalism that you always need to have growth? It looks to me that in a naive approach I would like to build a constant profitable company that pays me rent like money that is predictable. I don't need investments that constantly grow in profits. Therefore flat demand is imo not a problem but the desired state. Finally a stable system is found.
You're conflating Wall Street and public companies with capitalism. Thousands of small businesses provide excellent livelihoods for their owners with predictable stable income as you suggest. Until the media started harping about VC and the "tech boom" in 2001, most businesses were started with the specific goal you mention.
Stable profits in boring domains isn't sexy though, which is why you don't hear that narrative very often.
> Until the media started harping about VC and the "tech boom" in 2001, most businesses were started with the specific goal you mention.
Approximately 98%-99% of all businesses started in the US every year, still fall under that banner. Half a million new businesses are started each year, 1%-2% of those are traditional venture capital backed (averaging the per year figures since ~2006).
Interesting point of view. I've never thought about it this way, that you would count the normal middle class companies as a legit element of capitalism as well and not just people who try to survive in a ridiculous system.
Also great account name I have to say. That shows class and style.
"Capitalism" is such a general term I find it hard to know what exactly you mean. A liberal or free markets based economy doesn't need growth at all. The problem is that a lot of companies and a lot of state-run institutions (pension funds, etc.) have had the default assumption that the economy will always be growing (mostly due to population increase). But that trend is now reversing in a lot of countries, where populations have started to shrink and societies as a whole (not just the economy) will need some time to adjust to this.
Is Calvinism the idea that Calvins should govern the flow of all resources?
No, capitalism emphasizes individual sovereignty over property, voluntary transactions, crowd-sourcing in determining the value of goods and services, and some related implications. All functioning societies have these things to some degree whether they like it or not.
"Capital" is generally defined as something like "productive output reserved for future productive capacity". See for example most of Schumpeter.
"Resources" would be any factors of production. Traditionally these are land, labour, capital, and ... well, things vary, but "entrepreneurship" is what the page I'm looking at argues for:
Answering your question: "capital" is a subset of "resources". "Resources" are a superset of "capital".
The question of what ought to be considered as factors of production is ... an interesting one. The list largely comes from cost accounting, and economists picked the items which dominated the cost-accounting sheets, which was pretty much "labour". Capital and other elements were added later. Much of the foundations of this seems to come from Alexander Hamilton Church[1]
Among the interesting alternative discussions I've run across of factors of production comes from Count Leo Tolstoy, in What Shall We Do Then:
What's the goal of your question? Are you asking for the common and accepted definition of capital, or for any possible definition.
Language itself is a common set of symbols and pointers providing for a shared set of mental models amongst various actors. Generally the most common definition should be the guiding one, much as the most preferred medium of payment becomes a de facto currency (and for many of the same reasons).
If you want a standard definition of capital I'd suggest looking at those provided by a source such as Investopedia or leading economics texts, probably Paul Krugman or Gregory Mankiw's, though there are many, with one fair list at Reddit's /r/Economics: https://www.reddit.com/r/Economics/wiki/reading. Otherwise, you might hit up DDG for econ 1 or econ 101 syllabi and recommended readings.
If you're looking for the broadest possible set of definitions, well, there are many, with varying levels of acceptance, but the answers probably aren't particularly useful.
Another possible angle would be to ask what I personally think about factors of production, and what they are. My thoughts are in flux. And, as a Space Alien Cat, they frequently have little or no real world significance or impact.
Steve Keen, though, is doing some very interesting work, in and since Debunking Economics, and I'd strongly urge following him. Among other elements, he's looking at the role of energy in economic production (he's one of numerous people to have done so, over the past century or more, though the idea's never really caught on, far the worse reflection on the economic orthodoxy than the notion itself).
I've been looking at the question of what technology itself is, or more specifically, what its mechanisms, of which I've identified roughly nine: fuel and fuel-based systems, energy transmission and transformation, materials, technical knowledge, scientific knowledge, information, networks, systems, and hygiene factors. (Concept still under development, some discussion at https://dredmorbius.reddit.com) It's recently occurred to me that virtually all of these are factors of production, though they're not all the factors of production.
There's the question of what labour itself is, and what its components and mechanisms are, and how they've changed. It's useful to keep in mind that until roughly 1800, a tremendous percentage of actual motive force was supplied by human or animal muscle. And our sense of what these contribute has changed markedly. The present formulation of labour does have many elements of capital to it, and that's reflected in extant terminology (e.g., "human capital" and "intellectual capital"), so your observations have some validity and currency.
As noted above, much of the mainstream factors-of-production has far more to do with tracking payments than functional mechanisms. I see considerable room for refinement.
Perhaps a better term is that it's the ideology where 'capital' and 'resources' should flow through supply and demand with some additional rules such as private property and being able to organize into corporations.
I don't know all the economic reasons for a 2% inflation rate. But one of them is to disincentivize the hoarding of currencies and making investments in assets like bonds, treasuries or equities more appealing. So you probably want some amount of inflation to always remain.
But at the same time value is the intersection of supply and demand. All else equal, an increase in the supply of money does decrease the value of money. Granted, all else is rarely equal.
since it's paid content. Does the book also talk about why people believe in it? Because that it's an illusion is not something I would need to be convinced about. I have more problems following the imperative that there always needs to be an unsustainable amount of growth and why people happily sacrifice stable huge profits just to fake a little more growth.
How does the fact that banks hold a fraction of their assets in a central bank put pressure on companies to grow exponentially? I'm curious, I don't understand the connection.
> How does the fact that banks hold a fraction of their assets in a central bank put pressure on companies to grow exponentially?
That is not what I would understand by the term "fractional reserve banking". Rather, fractional reserve banking refers to a system where banks do not hold enough liquid assets to cover their obligations. Central banks are completely irrelevant to the concept. The location of a bank's assets are also completely irrelevant to the concept.
But unfortunately? Without safety measures like the Fed enabling such, economies have a history of imploding every fifteen years or so on the basis of insufficient currency circulation. Oh wait, that's where we are today... Carry on!
Commodity-backed currencies also have a problem - they implement their own fractional reserves as economies do grow. When they shrink? End-users learn to trade in the notes for the commodities, shrinking the pool of currency in circulation.
Fractional reserve banking is one part of it, but the really horrible things occurred when we left the gold standard so almost unlimited debt can be created. People started investing in stocks instead of bonds, which is probably part of why Glass-Steagall was repealed.
Growth doesn't seem to be a prerequisite for capitalism. Rather, it's a shortcut, a cheat, that hides or forestalls your sins and indiscretions.
Picture a MLM or Ponzi scheme- as long as growth is maintained, the problems can be swept under the rug, and you don't have to go to the trouble of running a sound business.
(I'm not calling capitalism a Ponzi scheme, it's just a good illustration)
John Kenneth Galbraith introduces the idea of the "bezzle" in The Great Crash: 1929. That's the apparent increase in monetary wealth created by ... "creative accounting" and/or other means.
“We’ve had 125,000 generations of humans, but it’s only been the last eight that have had growth,” Victor told me. “So what’s considered normal? I think we live in very abnormal times. And the signs are showing up everywhere that the burden we’re placing on the natural environment can’t be borne.”
The Do the Math blog is interesting because his core assumption is that growth in energy consumption must keep up with economic growth, and therefore economic growth will run into the physical limits of energy consumption. As the Vox article shows, this is an erroneous assumption (you even see a bit of leveling off in the graph he posts).
I don't know what it is, but there seems to be a whole genre of physicists jumping into a field their unfamiliar with and trying to crunch numbers to prove the experts wrong without ever bothering to learn the fundamentals of the new field.
You also "need" to have growth because the population grows. Simply, if GDP or energy use is flat, that implies lower GDP or energy consumption per capita. The latter may be explained by efficiency, but the former would imply reduced standard of living.
There are plenty of companies that don't grow and just pay dividends. Companies go out of business all the time too. Looks like capitalism isn't just about growth is it.
Capitalism - An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
Doesn't say anything about growth. You're just conflating the two.
Yes, way back in the 1600s, Mr. Capital wrote as much.
Less sarcastically and more substantively: there's no such thing as orthodox capitalism requiring growth or any such thing.
Capitalism is what you get when a) you have private property, b) freedom to trade property, goods, and services (labor). Everything you associate with capitalism is either a consequence of this or of not-capitalism market distortions (which we often fail to recognize as such, and then we associate them with capitalism).
Growth will stop when people stop needing, wanting, or being able to afford growth. Clearly, we're very far away from that: clearly people worldwide want the standard of living we have in the U.S., but the world is far from being there. So we have some growth left. Clearly, too, there is a limit to demand for growth, and we see this reflected in fertility rates the world over.
If you're aching to put an end to growth then I counsel patience: we're on our way.
Back to what is capitalism... I talked with an economist friend once who told me that "we need to develop an alternative to capitalism". My answer was: "well, given that capitalism is what you get when you let people be free to own and trade, what freedoms do you propose to deny people?!". Oddly my friend did not challenge the premise of my question (see below)... Instead he admitted that he hadn't thought of it that way. Sadly we never discussed it again.
Many here at HN (and elsewhere) don't see capitalism this way. They deny the premise that capitalism is just freedom. But... where is the force being applied (by whom and to whom) to make capitalism what it is, if capitalism isn't freedom?? (I'm not referring to regulations here, or laws against crime for that matter. Socialist countries, for example, apply lots of force or threats of force to get people to do what is expected of them -- this is what I'm referring to.)
Do you have a source for a definition of capitalism? It's definitely not like Marxism -- one man's idea. Capitalism really is an evolution ("what you get when ...") of Dutch and British economics of the 17th century or thenabouts through today. The key characteristic is: private property and freedom to trade (goods, property, services).
Yes there is not "one" definition of capitalism, but yours (private property + freedom to trade) misses some characteristics (for instance: capital accumulation).
> Capitalism really is an evolution ("what you get when ...")
"is an evolution" is not the same as "what you get when", I agree that the current system is an evolution of the 17th century, but "what you get when" would mean this is the most likely evolution, which is not obvious.
> Capitalism is what you get when a) you have private property, b) freedom to trade property, goods, and services (labor). Everything you associate with capitalism is either a consequence of this or of not-capitalism market distortions (which we often fail to recognize as such, and then we associate them with capitalism).
If you give people property and trade they will trade in the hopes of growing their property. So it might be part of the official definition or not, it's what will happen every time you start a system with these rules.
> we're very far away from [needing, wanting, or being able to afford growth]
Far away from wanting? agreed. Far away from being able to afford faking it? I think you are not watching politics, but the risk level of reaching that end are increasing yearly.
> They deny the premise that capitalism is just freedom. But... where is the force being applied (by whom and to whom) to make capitalism
You just mentioned two rules. private property and freedom to trade. These must be enforced by law, police and military if necessary.
If you don't enforce property rights people will grab whatever they can carry. You wouldn't like that friends visiting your home for a football match and one leaving with the tv and another leaving with the couch (and another leaving with your girlfriend).
Being born in a socialist country I can tell you that the average person in such a country doesn't feel a force applied to them either. The same way you feel that capitalism is "just the way things are" such person would feel socialism is "just the way things are". The problem is that both sides have a distorted view about the other side.
For instance when I hear the word capitalism I don't think "freedom to do what I would naturally do", I think "strongre people making weaker people's life harder, monopolies, exploiting and lying to each other". When I hear the word "socialism" I think "helping each other, giving up a few unhealthy personal desires to give everybody an equal chance". The same way you feel police stopping people from stealing being a naturally good thing I feel police stopping people from their greed and selfishness being a good and natural thing. Someone who hurts the community by putting himself first needs to be punished. That's very natural thinking to me and nobody needs to force me to think that way.
It occurs to me that growth has one unmitigated good- attaining critical "threshold" economies of scale.
Semiconductor technology would still be exotic, expensive, and immature if not for massive economies of scale. It is only through wide application & corresponding broad demand that modern semiconductors are possible.
> Is it just me or is the obvious biggest problem in capitalism that you always need to have growth?
Need and want are different things.
> I don't need investments that constantly grow in profits.
Until your rent increases or inflation makes your money less valuable or you have a child or you incur some unexpected expense.
Most people don't like living paycheck to paycheck because its stressful. Large businesses are no different. But just because they don't like something doesn't mean a capitalist economy is going to bend over and hand them something. Unlike a planned economy where two year plans forced wasteful industries to continue wastefulness.
You need general economic growth, in general. You don't need growth in _all_ things; periodically, industries decline or become entirely obsolete. Capitalism survived, say, the decline in the demand for horses.
It's not "capitalism".. it's publicly traded companies. That's the root of the issue. Stockholders demand their stock increase in value, otherwise there was no point in buying stock.
Does capitalism require growth? Moreover, is growth bad? Don't forget that GDP growth is not the same as growth in resource consumption. Eg. Amazon's kindle allowed far more books to be published while using far fewer natural resources.
good point, utilities essentially get gov't approval to spend money and receive a return on that investment of 5-10% (depending on performance)...its a consistently profitable yet low-growth model and perhaps nothing wrong with it if not for them being investor-owned.
Most of those people are still relying on the stock market to sustain exponential growth.
If my investment strategy is based purely on dividends, then it's true I do not require share prices to grow.
But if I am going to grow my portfolio be reinvesting my dividends, then I need more shares that I don't already own to be created so that I can buy them, which means the total market cap of companies will have to have increased.
And, after I've grown my portfolio, I'll be looking to reinvest a correspondingly larger quantity of dividends, so that market cap will need to have grow by a correspondingly greater amount.
If you want compounding returns, whatever form those returns take, you need sustained exponential growth in the economy.
The "growth imperative" is ... complicated. I wouldn't put the cause / blame / credit / fault entirely with capitalism, and I'd specifically exclude fractional-reserve lending[1]. At the same time, there is a clear tendency for a growth-at-all-costs mantra. Seems to me there are several dynamics at play.
1. Given growth, redistribution is not as urgent.
2. Redistribution is politically exceedingly unpopular ...
3. Most especially with those who have the most wealth to redistibute. As Adam Smith wrote in one of his briefest sentences ever ...
4. "Wealth, as Mr Hobbes says, is power."
5. There's a great deal else that becomes more convenient in a growing economic domain, a topic also discussed at length by Smith (Wealth of Nations, book 1, chapter 8, on wages, particularly as concerns England, the Colonies, and China).
6. Though that argument largely boils down to the fallacy of consequences: "The alternative to growth is too horrible to consider, so we won't consider it." This bodes poorly.
There have been a few fairly long-term stable or negative-growth regimes. The Indus River Valley civilisation(s) seem to have been particularly equitable (archaeological evidence shows little diversity of housing stock or personal chattel property), and the Byzantine Empire effectively went through an extensive period of de-growth successfully, if not entirely happily.
Growth as a present economic mantra seems all but ubiquitous. You'll find it held as sacrosanct by voices as diverse as Milton Friedman, Paul Krugman, Thomas Piketty, Lawrence Summers, and Christine Lagarde. It's the fundamental axiom of both hard-left and hard-right economic theologists (what they preach is not a science). See Mauricio Schoijet's "Limits to Growth and the Rise of Catastrophism" particularly for reflections on this: https://www.jstor.org/stable/3985399
________________________________
Notes:
1. Brief counterargument: Fractional reserve + fiat currency + at your option any of a) a strong bankruptcy law / process, b) a gradual devaluation of all debt, including perhaps c) a gradual devaluation of all paper currency[2], and/or d) a periodic debt jubilee (see Steve Keen) would allow for a FR banking system without the spectre of debts-in-perpetuity.
2. China instituted this, historically, by requiring regular stamping of paper money. The stamps cost money, and this effectively became a tax on cash holdings. Other mechanisms might be instituted. Remember that money is not wealth, but rather is tokens of wealth. See generally Richard von Glahn, Fountain of Fortune: Money and Monetary Policy in China 1000-1700 (1996).
There's a difference between what people want and the whole of "reality"; in a real universe, growth will never be limitless, no matter how much people want it to be.
What seemed absent from the article is the effect of flat revenue on both their ability to make bond interest payments (pay down debt used for legacy transmission infrastructure), and the potential of higher interest rates on rolling debt (like utility bonds.)
Debt could make utilities catastrophically vulnerable to disruption from sustainable players and battery makers, whose business models do not need to factor in those same debt/infrastructure costs into their energy prices.
Not only would it be cheaper than grid power, the utilities will have a structural pricing disadvantage because they need to incorporate their debt and increasing interest rates on older debt into their cost model.
Question is, what is the "it," that forces this change? Graphene capacitors?
Interesting how uber exploited a similar dynamic with taxis, where medallion debt was a significant factor in cab ride prices. It suggest debt markets might be a place to hunt for disruption opportunity, where carrying costs create a structural price disadvantage for incumbents.
One problem is that it is hard to capture the quality of debt: Did a company buy up competitors that turned out not to be worth the price? Did they invest in infrastructure, which seems like good debt, but nuclear reactors have turned out to be albatrosses. You see much of the same thing in telecom. In both cases the customer is at least semi-captive, and can be fleeced to pay for mistakes.
So straight shorting debt play, you would need that level of resolution. If you are looking to fund disruptive startups to leverage a structural pricing disadvantage that results from incumbents costing model, which has exposure to multiplying interest rates and flat revenues, the quality of the debt doesn't so much matter.
I'm imagining things like, "3d print me a small refinery," or "blimp-drop me a sawmill in shipping containers," or "rent me a seed mill on a flatbed," "build me a foldable certified meat processing plant," or "create a new tractor platform with an open multi-tool interface." etc.
> the effect of flat revenue on both their ability to make bond interest payments
If your revenue is flat you had no business selling a bond.
The purpose of a bond is to buy a jump in regular revenue. If the jump doesn’t happen you default on your bond. Or you sell assets and eat the cost and try again with a better plan.
This isn’t really true. You take out a bond because you think you can make more ROI than the interest rate. Utilities in particular take out bonds to build power plants and hope to generate more profit than the cost of interest. The operate on long time scales (10 years or more) and depend on predictable demand to make their model work.
If we are in a world of rising interest rates, it suggests upward cost pressure downstream of companies who exploited the low interest rate environment to load up on cheap debt.
Hypothesis would be companies and sectors with highest debt to income ratio would be most vulnerable and point us in the right direction. A quick google search showed utilities were indeed the ones with highest debt ratios, followed by "industrials."
If this were all true, might also suggest that merely equity financed companies could exploit that structural differential.
It's part of the reason I am still a tesla/musk believer, as I think this is his underlying play.
At this point “it” is here. All that’s missing is sales and maintenance infrastructure. Maybe some product-level design and engineering. Basically, Tesla’s business model.
The conversion to LED based lighting really is the only thing that crushed Jevon’s paradox. Other energy efficiency standards were incremental improvements.
LED and its mass adoption was an 80% drop in energy consumption if you kept using the same amount of lighting.
It’s really, really hard to spend 4-5 more on lighting. Instead of the usual 4 hours of lights, you’d have to keep them on for 16-20 just to break even. So even if you kept lights a little longer, it was still a small blip in total energy.
So really, the LED really is the game changer that it was touted to be.
Another thing that breaks Jevon’s paradox are technologies that automate conservation. My company moved to a newly-constructed office building, and all the lights in conference rooms turn off automatically if there is no-one there. A neighbor is installing the same type of tech in his house (he's admittedly an early adopter/gadget lover, so he isn't as concerned with the payback period). I can only see this trend accelerating as the tech cost falls.
>A neighbor is installing the same type of tech in his house (he's admittedly an early adopter/gadget lover, so he isn't as concerned with the payback period).
My parents used to apply a same kind of solution for our own house. It's called 'turn of the lights when you leave a room'.
I'm surprised this article doesn't mention General Electric, which has taken a series of financial hits lately due in large part to sagging demand for its power generation equipment.
I was wondering why this decline in demand was so apparently devastating, since it normally wouldn't be unless a company had a very large debt load. And here's the reason:
"They can’t make money selling electricity; monopoly regulations forbid it. Instead, they make money by earning a rate of return on investments in electrical power plants and infrastructure."
Ah, so their entire business model is structured on ever-expanding capital investments, not the sale of the actual product. That sounds curiously like the description of a Ponzi scheme, especially considering you can't have perpetual, uninterrupted growth forever - at minimum the country has a finite amount of resources.
Don't worry about the utility companies - they're already looking for ways to monitize you even more.
At ReInvent, there was actually a utility mouthpiece touting how they were interfacing with Salesforce to make more money out of you by running deep learning on everything they know about you to create proactive and individualized "sales opportunities".
"Your refrigerator/TV/hot water heater seems to be inefficient. We're offering a sale on those right now..."
"You appear to have a water leak. Want us to send out a technician to do a full workup?"
"Hey, you seem to really like American Football. Want to buy these three premium channels that offers even more?"
Lol, I'll believe it when I see them execute on this strategy. Utility companies are not known for employing talented innovative thinkers, those people tend to flock to opportunities in other industries.
It sounds to me like Salesforce was able to sell this utility on an a vision that the utility is unlikely to execute on.
> Lol, I'll believe it when I see them execute on this strategy.
Some are, already, executing on some form of this strategy.
My residential electricity supplier sent around letters last year to every account offering what amounted to "water pipe insurance". Mind you, this was the "electric company", offering "water pipe insurance" but the deal was that for some "low monthly payment" amount (I forget now how much) they would cover the costs of fixing a leak between the locality water meter (installed street-side) and the pipe that entered through the wall into my basement to supply the house.
The letter was full of scary sounding things that /might/ happen, and of the huge sums of money a leak might cost to repair, should one occur (this figure I have some recollection of, their claim was that it was on the order of $3,000-$4,000 to repair).
I read it over, scoffed at most of their scare tactics, and recycle binned the letter. But I did wonder just how many folks would ultimately sign up for the "insurance".
The reason that pipe is particularly dangerous is because it is before your house pressure regulator (so it is at mains pressure) but you are still responsible for it. In addition, it is the most prone to failure as your house settles independently of the mains. But yea, like any insurance, if you can afford the $3-4k of repairs without having to skip meals, you probably don't need it.
Edit to add: my source is that this happened to me, it was enormously expensive to repair. I still wouldn't get this insurance though.
Are they a cooperative who has the interests of its own users above profit? Are they receiving money from another entity to do it? Were they forced to do so in order to maintain their monopoly?
And if it's none of the above - it's just good people - then that's f'ing awesome. I wish more were like that.
It's a municipal utility chartered to serve the public not profit from them. And they don't want to make risky massive capital expenditures on another discrete block of capacity.
I think demand is far greater than what is currently visible, but the price is still way to high.
I'd move to electric heat in a heartbeat, but it's 2-3 times more expensive than coal, natural gas or oil (those are the most popular choices in Poland). If the price was 1/3rd of current, tens of percent of all citizens would move to a different heat source, using a lot more energy than they do now.
So it's just a price problem. Make it cheaper (maybe renewables will) and the demand will come quickly.
In Seattle, the local utility raised rates too aggressively, which caused many people to conserve more energy or switch to gas for heating. Then, the utility had to raise rates again to make up for falling revenue. This, obviously, will cause further conservation by consumers.
It's sad from an environmental standpoint, because in Seattle most of our power is hydro, which is much better for the environment than natural gas -- but that's what people are moving to.
Electric heat in the form of heat pumps is fairly competitive (certainly not 2-3x). You are correct that running an electric current through a resistive wire is not an economical solution.
Certainly. I heat a small flat (~35 m2) using just a AC unit and it works great: low costs, very comfortable. The only problem is increased dryness of the air.
But for a bigger place the setup is costly: you either need a couple units or a proper design, otherwise you'll end up with a only a portion of your home warm. Plus, AC units are still significantly more expensive than just a "trash-burner" type of furnace that is the most popular.
Electric heat should be the cheapest form. That would end a lot of air pollution that is a very serious health risk in Poland.
Look for the most efficient heat pump. As I understand, the co-efficient of our heat pump is 2. (Geo-thermal is 4.) Electric heat is 100% efficient, wood up to 75%, gas heat up to 70%.
Modern gas furnaces can achieve over 90% fuel efficiency.
So for resistive heating (where electric tops out at 100%), it's likely that a home furnace is converting more of the fuel into heat in the home than the combination of the power plant and electric heater.
An easy gut check for this is how much cheaper natural gas is to heat with than resistive electric. As a sibling comment says, a heat pump really improves the numbers for electric.
Right, a coefficient of performance (COP) of 1 is equal to 100% efficiency. A heat pump typically exceeds that, so your COP 2 heat pump is 200% efficient (useful heat divided by work required). If an electrical joule cost the same as a natural gas joule, the heat pump would definitely be more economical; but in real life it's not so straightforward.
If you're running your electric heating from a natural gas-fuelled power station, which has an efficiency somewhere along the lines of 40% (if you're lucky), then using a heat pump with a COP of 2 means you are heating your home with 80% efficiency. Modern gas central heating systems can be >90% efficient.
Alternatively, if you go by the relative price of electricity compared to natural gas, typically electricity has three times the price for the same amount of energy. In that case, you would need a heat pump with a COP of >2.7 to make heating cheaper than using a gas burner.
Such heat pumps do exist now. The benefit is that if/when the electricity grid transitions to renewables, you are sorted.
you can go as high as 4 in most heat pumps. Obviously, it strongly depends on the outside temperature. But if it's above 4 degrees C, you should be fine.
We have electric heating in our house, I'd never buy a house with it again. Not only is it expensive but it doesn't work very well, I need to adjust the temperature on it for tomorrow, not today.
The grid needs new investment for decarbonization to occur. If the power companies are making less from generation we'll have to fund it through some other means.
Cryptocurrency mining is about to consume more electricity than home usage in Iceland.[1] I assume it's similar in other places that have cheaper electricity.
Seems that power companies should encourage consumers to mine Bitcoin. Problem solved.
> Seems that power companies should encourage consumers to mine Bitcoin. Problem solved.
Blockchains will likely continue to generate considerable demand for electricity for the foreseeable future.
Blockchain firms can locate where energy is cheapest. Currently that's in countries where energy prices go negative due to excess capacity and insufficient energy storage resources (batteries, [hemp/graphene] supercapacitors, water towers).
With continued demand, energy companies can continue to invest in new clean energy generation alternatives.
Unfortunately, in the current administration's proposed budget, funding for ARPA-E is cancelled and allocated to clean coal; which Canada, France, and the UK are committed to phasing out entirely by ~2030.
We can be a bit more precise than that. In the US, each 1% shift in Vehicle Miles Travelled will increase electricity demand by 0.25%. This is a BFD, but even a 100% conversion to EVs would only increase demand by 25%, not 100% ("double"). I haven't done calculations for other countries.
There's a DoE paper from about 5-7 years ago that shows ~80% of light vehicles could move over to electrification, and if charged at night during off-peak, no additional generation capacity would be required.
1) The key word there is "capacity." The energy still needs to be generated.
2) Coordinating EV charging with grid dynamics is a hot topic, but getting 100M vehicles to charge largely at night is not on anyone's roadmap for the next decade.
What has to be coordinated? People drive to work, park, drive home, plug in, and the car minimizes charging fees. I assume there are already APIs in place to get spot prices.
This is one of the reasons I'm confused that the coal industry isn't pushing EVs as hard as possible. A huge surge in electricity demand from EVs is one of the few legitimate reasons I can think of to halt the trend of shutting down coal plants, at least in the short term (though coal's still screwed in the long-term as it should rightly be).
A lot of the coal plants that have shut down were not competitive on a cost basis (i.e. they were losing money because they were selling electricity for less than it cost them to make it). Churning out more expensive power would not make them competitive again. The coal industry really should have bought all the solar/wind companies 10 years ago to stay in business! Many nuclear plant have the same problem of high fixed costs.
More EVs certainly provides more electricity demand. Increasing demand could increase prices, but also would increase the incentive for building out more solar and wind (which have low fixed costs and now provide electricity at rates lower than coal or nuclear plants). I certainly could be wrong, but I think we would see a surge in solar/wind installations and not a big enough price increase to make coal plants competitive.
1. gas requires some energy to extract, refine, transport, sell . With electrical cars, demand for gas will go down, so anything that depends on gas being sold will also go down, which, in turn, will result in even less demand for the electricity.
2. It makes more and more sense to get solar panels on your roof, especially with electric car in the garage. More panels means electricity surplus.
3. electric cars have less parts and last longer, which means less manufacturing, less mining, less transportation and that will result in less demand for electricity.
My firm’s factory switched to LED lighting in 20016 and, as projected, we’re already in the black. Provided MTBF rates are as expected, we’ll be in the black permanently. We’re saving up to 60% of our lighting costs (including capital expenses).
This will hurt the poor terribly. As those utility companies keep making less profits, the service they do provide will get worse and worse, and the only people who will be relying on those services will be people who can't afford their own solar panels and batteries.
The utility companies are already calling this out as an issue. As their rich (and more consuming) customers go solar, they are having a harder time providing service for their poor customers. Their fixed costs are getting split amongst an ever shrinking group of people, meaning the rates for those who can least afford it will keep going up.
This is why most utilities push for laws that force people with solar to continue paying into the utility system.
Doesn't the existence of alternatives mean utilities have an incentive to keep service decent? I mean, sure, there are those who can/will go solar at one end, and those who can't/won't at the other. But somewhere in the middle lies a threshold.
This is one of the fundamental problems with our model of capitalism (which is based upon money that can be created out of thin air): demand, want, need, greed all must go up for it to work. Everything has to inflate, whether it is natural or artificially.
(Not advocating for the gold standard -- but something must change)
I don't think it's as straightforward as more demand. One generation provider offers free EV charging on weekends[1], which shifts some charging to an offpeak time.
Another confounder is that EV's can be used as storage devices dumping power back to the grid[2].
A "free" incentive is completely orthogonal to the demand required. The electricity during that free EV charging period on weekends must still be produced and is part of the aggregate demand.
That evens out demand, but doesn't eliminate it. That's like evening out a 20ft wave down to a tiny wide swell vs the sea itself rising 10ft. We'll still need to double base generation.
Exactly what I came here to say. As electric cars become more common I wonder what that will do to demand. I can't imagine that in a future where almost every vehicle is electric that the demand will be offset by LED lightbulbs.
What tends to happen is that people look at the energy going into motor vehicles from oil products, and they assume that translates into the same amount of electrical power.
But actually an internal combustion engine is ludicrously inefficient, whereas an electric motor is not. So shifting to electricity saves loads of power, that's not why we're doing it, but it's why their intuition ends up wrong.
Yes, this was a really strange omission as was the threat of any stronger regulatory controls on fracking for natural gas. Both could change the landscape heavily again in the next few years.
I'm pretty sure that you're joking, but it reminds me of the story of Microsoft (I think) running heaters in a datacenter to meet one of the technicalities of a power purchase agreement. I cant find a link right now (PR people have probably worked hard to obliterate it from the internet), but from what I recall, MS had a long-term power purchase agreement with a local utility that had both a minimum and maximum energy usage threshold for some time period. Facing contractual penalties if they did not reach the minimum, they essentially ran heaters outside the data center to use some extra energy. This was 10 years ago or so. I'd like to think that if this were today, someone would be willing to swoop in and use all that power to mine some bitcoins.
It was tongue-in-cheek, but I wouldn't be at all surprised to see someone do it. It's a pretty obvious way to cash in on cheap power if you can get access to it.
What effect would it have on the Bitcoin difficulty algorithm if mining capacity went way up during nighttime and down during daytime? Super slow block times during the day?
The term of art people in these HN comments are looking for is "Energy Intensity" -- the amount of energy required per dollar of GDP. Like many factors, it has been dropping. Here's a quick intro:
As I've argued here previously (https://news.ycombinator.com/item?id=16209310) the plunging prices of photovoltaic panels will result in plunging energy prices, starting in the early 2020s. (They're already exerting some downward pressure, but so far it's only in limited areas and for marginal capacity.) Perhaps in Tennessee these plunging prices will not result in increased demand, due to poor planning and institutional inflexibility, but in many places in the world they will.
So the statement, "TVA will sell less electricity in 10 years than it did 10 years ago," seems very dubious. It's predicated on electricity generation continuing to cost the same as it has for the last half-century or so, modulo minor improvements. But at this moment we are seeing the beginning of a dramatic disruption in those prices. So this is a pretty bad way to make that prediction.
It seems a lot more likely that the plateau in electrical energy demand in the US from 2005–2025 or so will turn out to be temporary, not a "new normal".
The article doesn't go into details about the causes of the drop in demand, but it does say that ...
> "Thanks to a combination of greater energy efficiency, outsourcing of heavy industry, and customers generating their own power on site, demand for utility power has been flat for 10 years, and most forecasts expect it to stay that way."
So the drop in demand may be being driven by things other than cost, meaning that a continued decrease in cost may not result in increased demand.
The drop in demand is certainly driven by things other than the cost of energy, because energy has gotten mildly cheaper over the last ten years, during which time the demand has stayed the same.
You could argue that those factors, whether they're outsourcing of heavy industry or whatever, will prove stronger than the dramatic decreases in energy prices brought by photovoltaics. But that doesn't seem very likely, because photovoltaics are dropping in price about 30% per year, while whatever forces are limiting demand for electrical energy seem to have been just sufficient to keep energy demand increase down to 1% during 2006-2016 (the last ten years on the graph), almost exactly counterbalancing a 14% increase in GDP over the same period. That is, they're pushing down electrical energy demand by about 1.3% per year. So if the long-term price elasticity of energy demand is somewhere in the neighborhood of -0.8, which seems like a reasonable guess based on a cursory glance at the econometrics research, we would expect energy demand to grow by about 25% per year once photovoltaics are the marginal source of energy — or 24% if whatever mysterious anti-growth figures this article is about continue to operate in the same way.
Now, you could argue that maybe the elasticity isn't -0.8. Maybe it's -0.2 or -1.2. But to suppose that a sudden and sustained 30% yearly drop in the price of energy would be wholly counterbalanced by whatever has held energy consumption constant over the last ten years requires the wholly implausible assumption that the absolute value of the elasticity is smaller than about 0.05.
You might argue that photovoltaic modules aren't really dropping in prices 30% per year. The old page at https://www.solarserver.com/service/pvx-spot-market-price-in... shows the historical price history from PVXchange from May 2009 (€2.62/Wp in Europe) to May 2017 (€0.45/Wp in Europe), and PVXchange's current prices http://www.pvxchange.com/priceindex/default.aspx?template_id... are €0.37/Wp in Europe in the "mainstream" division. Averaged over 8 years and 7 months, that's a 1.88% price drop per month, which works out to 20% per year (not 23%, as you might think). But much of that 20% was in the 2013–2015 price plateau, during which time the prices remained almost unchanged, and which seems to be over. Now, shipping volumes are way up, and so we should move much more rapidly down the learning curve. So 30% is, if not an open-and-shut prediction, at least a plausible one.
We aren't seeing these demand-stimulation effects yet because, although photovoltaics' growth and price reduction is exponential and rapid, they're still only a tiny percentage of the overall marketed energy supply, and we don't have grid-scale storage online yet. That's why it will take until the early 2020s for these effects to become dominant — maybe even later in the US.
Related - we seem to have passed peak stuff
- “Britons, too, have reached Peak Stuff, having reduced the annual use of material from 15.1 metric tons per person in 2001 to 10.3 metric tons in 2013.” It's all quite good for the environment and the like.
Electricity prices, and the cost share of the economy, are also finally flat to declining. Competition can be a beautiful thing.
"Less than four cents of every dollar of U.S. consumer spending went to gasoline, electricity and natural gas last year" [it was 50% higher in 1960; 100% higher in 1980; it's essentially the lowest cost levels in 60 plus years]
Some demand may be levelling off. We've had energy efficiency pressures for a while, and we knew there are all sorts of low hanging fruits. This is a good thing.
That said, I don't like the efficiency/austerity focused approaches to carbon reduction. Subsequently, I don't like a lot of price-based approaches to reductions like cap & trade or carbon taxes, particularly in the EU where I live.
I don't like them for a few reasons: protectionism & other hijackings, price flexibility of demand, the regressive burden on poor people... But for here, I'll stick to the implications of reduced power consumption.
The link between GDP & energy use is very long term. Efficiency can be an effective equivalent of volume but that can only take us so far. With lots of caveats, political perspectives and such.... I am still in favour of economic growth, technological progress... I think without exponentially increasing energy consumption we are contrained. I want a future with more transport, more computing, floating buildings, exotic new materials, space travel. These will require energy.
To take an analogy from cars... The EU has put a lot of effort into energy efficient cars. Light cars with small efficient motors. Hybrids, less driving.... This can get you some reduction, lets call it 50% for the sake of argument. Once you reach that point, there are no more gains to be made. Most "experience points" we've accumulated on the way are not very useful past this point and you need to pretty much start fresh.
Electric cars OTOH...These bottom out at 0. IE, when we get to the point where ICEs can be banned, we're at 0-emissions directly from car motors. Still need to deal with grid and manufacturing (probably the same ways), but vehicle emmisions is solved.
Said another way, electric cars are en route to the finish line. 700cc hatchbacks are a detour. I think it's smarter to invest in the path that leads where we want to go, at least now that it has become obvious.
I think most of us, particulalry those of a radical bent, are naturally dicotomous thinkers. My greeney college friends 15 years ago took the problem to be "too many people, too rich." That wasn't crazy, but I think it was essimistic.
TLDR. The old equation was
People X Wealth = energy consumption = emissions:
I'm skeptical about disentangling wealth/gdp from energy in the long term. I'm optimistic about disentangling energy use from emmissions. I want to see the equation become become:
I don't get your objections. Cap&trade and carbon taxes are specifically about emissions, not about energy consumption. They seem to match exactly what your want.
I don't see any movements in the EU against energy usage per se; I see a movement against pollution, and against waste of energy (which is essentially a form of pollution).
I'm not sure I understand the OP exactly, but I think I feel similarly. The issue for me is that by improving efficiency without changing the long-term growth curve, you're only buying a few years of reprieve. The fear is that this reprieve that feels effective in the short term might actually be delaying development of a proper solution.
Consider an immediate 50% improvement in fuel efficiency, but with a 10% increase in usage per year. In less than a decade, you are back to where you started, but now the chances of another 50% improvement in efficiency are very low. Worse, the lower cost due to the efficiency improvement may have actually accelerated consumption.
The question is whether the "kick the can" approach will eventually leave you in a position where you can't recover, and whether your efforts would have been better spent on solving the underlying problem of system that depends on limitless growth and the externalization of environmental damage. Unfortunately, it's hard to come up with a "real" solution that doesn't involve massive cutbacks in consumption and/or hard caps on human population.
Ah, thanks, re-reading the previous post in light of yours makes sense (hence the "detour"). I guess I hadn't understood before because I don't see carbon taxes as fitting with that complaint against efficiency - people are free to become more efficient or to keep consuming as much energy, as long as its from non-emitting sources.
It's true that in some areas the EU does mandate efficiency, such as in ICE vehicles. But even there, it's not like they say "you must build N efficient diesel cars", what they're saying is "if you're going to sell diesel cars, they must be efficient".
In summary, I think the sale of efficient cars and such is still a market process. If the EU didn't mandate efficiency, all we would get is inefficient gas guzzlers, not EVs.
Worse, the lower cost due to the efficiency improvement may have actually accelerated consumption.
I don't think so, because the efficiency requirements are accompanied by higher taxes in fossil fuels. At least in my country, the amounts spent on gas monthly hasn't really been dropping, even as cars become more efficient.
At least in my country, the amounts spent on gas monthly hasn't really been dropping, even as cars become more efficient.
I'm not familiar with this area, but I think that in the US retail gasoline prices (that is, including all taxes) have been historically flat. This means that efficiency gains fairly directly to lower operating costs, and hence result in greater demand: "In constant dollar terms, the price of gasoline in 2015 was only seven cents higher than in 1929."
I don't think that fuel taxes have increased much on a constant-dollar per-gallon basis. Considering inflation, the federal rate has in fact dropped significantly: "Since 1993, the US federal gasoline tax has been 18.4¢/gal (4.86¢/L)."
I don't know how the state rates have changed (they are of the same magnitude as the federal rate, ranging from 20-40¢/gal) but my guess would be that they too are historically fairly constant per gallon over the recent decades of efficiency improvements, resulting in an inflation adjusted decrease in the proportion of tax being paid.
It's hard to for me to compare directly because the US standards are expressed as miles/gallon while the EU standards are g CO2/km, but I think the US has about the same standards as the EU, although historically trailing by 5 years or so: http://www.rff.org/files/document/file/RFF-PB-16-03.pdf
But answering the implied general question, yes, the US does have legally mandated efficiency standards for vehicles, and the total number of miles driven is about 3 times what it was in 1970: https://www.afdc.energy.gov/data/10315.
>But investor-owned utilities (IOUs), which administer electricity for well over half of Americans, face another imperative: to make money for investors. They can’t make money selling electricity; monopoly regulations forbid it. Instead, they make money by earning a rate of return on investments in electrical power plants and infrastructure.
Wouldn't the next logical course be for IOUs to convince legislators of outdated/inefficient infrastructure, thus paving the way for infrastructure plans that provide tax benefits as well as real dollars to replace existing infrastructure. This would let the IOUs 'skim off the top' to provide profits on this upheaval for investors?
Where municipalities are unconvinced that they need new infrastructure either through insufficient budget or other reasons, IOUs could convince regulators that stricter environmental limits are required, forcing municipalities to pay for the new infrastructure, usually by allowing utilities to pass that cost on to consumers by tacking on additional charges to subscribers bills.
Seems like a prime environment for this to happen -- if the proper cogs were greased in this direction.
Appetites are sated and efficiency isn't driving (or, rather, enabling) demand. Populations in highly developed nations, with the most supply, are stabilizing. Materials science, telecommunication, and software are replacing part of energy as a component of GDP. Though it is hard to get around the prediction that electrifying transportation will create significant additional electricity demand.
As someone who works for an investor-owned utility it is more than clear that IOUs are entering riskier markets such as solar, energy storage, EV charging stations, and wind. Utilities will either be pipes and wires companies or new-age energy solution providers to businesses and residents. Many already have the new sexy solutions making up 20%+ of their business, which just 5 years ago would of been unbelievable for the industry. This trend will continue and thus long-term winners (imo) will be the ones looking for new energy revenue models to make up the majority of their revenue. Vector (New Zealand) is a great example of this and they've done so in a short amount of time...
P.S. Utilities don't necessarily make more money by providing more electricity, they often ask customers to lower consumption so the utility assets don't blow up. Utilities try to sweat assets as long as possible and that cost deferral across multiple towns, states, etc adds up to millions or billions saved per year.
So when Rio Tinto Kennecott (copper mine near slc utah) had to suspend operations a few years back following a slide, the pollution reduction and the power consumption of the whole area was impacted (positively, in my mind).
TVA provides power to a huge number of industrial operations like kennecott and with a reduction of strip mining operations (We don't mine coal anything like we did even twenty years ago) and the increase in renewables, insulation and smarter construction, I don't see why the TVA considers it bonkers, and that was really the article editorializing. If anything, we (computer industry) should be building more data centers in TVA serviced areas.
Not speaking for google here, but if you search for "TVA and Google" there's some interesting links..
It always baffles me to see how the rest of the world seems oblivious to modern heat pumps. They come in a variety of medium (air-air, air-water, geothermal-water). Seeing how heating a house is the biggest energy expenditure it should be a no-brained to heat homes with heat pumps.
To give a concrete example, In Northern Sweden, above the Arctic line, a modern geothermal heat pump an warm a 200 m2 (~2000 sq feet) house for a year, including warm water, for 15000kWh. Using gas, the need would be 4x higher. Even if you use electricy made from coal, you’re still coming out ahead.
This is true in my experience, but the load is spread a lot by good infrastructure. I rarely charge at home, for example. And many people here with EVs have at least a small solar installation that offsets a lot.
"Instead, utilities find themselves constantly surprised, caught flat-footed again and again by a trend they desperately want to believe is temporary."
Electricity demand will go back up, especially as renewables drive the price down. In MA, when you own your own solar panels, running a space heater costs about as much as using a natural gas heater.
Furthermore, because renewable energy is primarily electric, I suspect that a lot of energy usage from fossil fuels will switch to grid electric.
So yeah, IMO, demand will come back. It's just that electricity will need to be extremely cheap, about 10-30% of current prices.
"...we want overall demand to decline. It saves money, reduces pollution, and avoids the need for expensive infrastructure. But the way we’ve set up utilities, they must fight that trend. Every time they are forced to invest in energy efficiency...demand for their product declines, and with it their justification to make new investments."
Isn't this true for any government activity? Government builds institutions around solving some problem. But since when does an institution want to sunset itself because the problem is solved.
Isn't flatting electricity demand and actually reversing it what we have all been pushing for? Utilities should have been preparing for this to happen eventually.
Of course local electricity usage is falling. We import more than ever. Electricity (and other forms of energy) are being consumed elsewhere and then shipped to us.
It will be interesting to watch this in light of the increase in electric transportation. If we were 100% electric, our energy grid in its current state would not be able to handle the load. If electric transportation sees exponential growth, I question whether current trends in renewable will be able to scale sufficiently to meet the demand, and suspect that an expansion of centralized production will be inevitable.
Nothing is ever going to jump from 1% to 100% in the scale we're talking about aside from being just talking points. What's likely going to happen is the production will change slowly to meet the demand. But it's not clear if other areas will use even less electricity than now. All you've pointed out is take the current situation and swap all gas card to electric. Of course things won't work that way.
No, that is not "all I've pointed out." I specifically addressed the change in production. My point is that I doubt renewable will scale sufficiently, and that tradition modes of production will likely see an expansion.
That there will be an expansion (renewable or otherwise) to meet the coming demand is beyond question. The current power excess is a temporary situation. The eventual (and IMO inevitable) conversion of petroleum-based transportation to electric will require more capacity than our grid can presently provide.
What will happen is that electricity prices will RISE, because these bloated utility companies need to maintain their revenues. This will hasten people to move to solar, etc, and then cause electricity usage to drop even further. It's a spiral downwards, and they don't have the means to disrupt themselves.
Funny when you hear this and then you hear all the complaints from people who think cryptocurrencies waste energy. It's almost as if there's always someone who will look at one half of the picture that is pessimistic for him.
Do you know how utilities can ride the wave of lower demand from homes and businesses due to more people installing their own solar roofs? They could try and get ahead of EV revolution and install and own EV chargers everywhere.
That is why it will be better to be a transmission line owner (or vertically integrated) instead of just a generation owner/operator, since everything will be going to an energy market anyway.
There isn't a"global" perspective on this, just a country-by-country perspective, because utilities are governed by national law. See Quitting Carbon for what a really aggressive attempt to transform Denmark's electric grid looks like: https://justingerdes.atavist.com/quitting-carbon?promo
This is how to achieve sustainability: increased productivity, decoupled from an increase in resource consumption. We need this for other resources as well (e.g. transportation).
Even better if the investors who own the utilities do this -- they'll be potentially profiting on cryptocurrency while profiting on the infrastructure improvements needed to power the cryptocurrency mining.
I expect the opposite. As everyone moves to efficient light bulbs for instance, the utilities still want to make X% profit on Y revenue for Z customers, roughly, and will adjust numbers upwards until they stay at least at the same place.
This is exactly what has happened in Ontario. But a lot of that has come from boneheaded contracts that the government signed, which guaranteed payment for capacity, not usage. So the more demand falls, the more we pay per kWh, because the hydro companies are getting paid whether they actually generate power or not. The excess power is then exported for much less than what they're charging residents for it.
I suspect you're right on the money here as we've seen this before, most notably with the dying cable TV model. Declining viewership, increasing viewer age (younger viewers are more highly valued by advertisers as a general rule) and the abundance of cord-cutting streaming options (ie Netflix, Amazon Prime, Hulu, HBO, etc) are all trending in the wrong direction (for cable companies and traditional broadcast outlets). The result? Rising prices to make up for the revenue shortfalls from selling less bundles.
With TV this will end badly unless something drastically changes because the rising prices will drive more and more people to cut-the-cord. I suspect as soon as you can get major sporting events in a convenient form outside of having a cable subscription it'll be game over.
Utilities have significant fixed costs. These are the capex costs of building plants and power infrastructure. These don't get any cheaper if consumers consume less power. The most likely response is simply to raise prices.
Solar in particular has been on a rapid decline in recent years. Utility price increases will only hasten adoption.
Here's another thing to consider: electricity tends to be more expensive during the day and cheaper at night. This is because industrial and commercial usage tends to be at peak during the day. Utilities typically need to maintain a base load on their infrastructure to cover peak usage so any usage at night is "free" for them essentially, hence the subsidized cost.
But consider this: in addition to residential usage of solar another response you'll see with increased utility prices is people installing batteries. This will not only store excess solar power but will allow customers to store power at night. Batteries too continue to get cheaper. I imagine that net this won't be good news for utilites either.
> With TV this will end badly unless something drastically changes because the rising prices will drive more and more people to cut-the-cord. I suspect as soon as you can get major sporting events in a convenient form outside of having a cable subscription it'll be game over.
In the US, SlingTV offers the ability to get local Fox (NFC) and local NBC (Sunday night games) in their "Blue" package for $25/mo. You can jump up to "Orange" and get ESPN (Monday-night games) for $35/mo (but this package only allows you to run one stream to one device at a time). You do have the option to get both packages for the obvious cost, but at that point, you are coming up on the price of standard cable. SlingTV does have NFL Network, but Amazon got the rights to stream Thursday night games last season. Local CBS is still missing from Sling, so too bad if your team is in the AFC I guess.
MLB (MLB.tv), NHL (NHL.tv), NBA (NBA TV) all have their "out of network" streaming services that can be purchased without a cable TV sub, but watching in-network games can typically be done with a $10/mo VPN service.
In-network games for NHL/NBA/MLB are really what is left for disruption for the "big 4" US sports. But with Comcast tied NBC Sports and all of the regional channels, I suspect they will be holding on to those rights with a death grip.
The death knell for the cable companies will be when something challenges their virtual monopoly in high speed Internet.
Considering that younger people tend to watch sports in a different manner than previous generations (more smartphone / social media oriented, according to this study -- https://www.mckinsey.com/industries/media-and-entertainment/...) I suspect that even sports is not going to be a saving grace for traditional cable.
With 5G coming up and the possible promise of WISPs, fiber, satellite, or other technologies people are exploring to bring fast broadband outside cable, that death knell might be sooner than later.
For power, utilities are heavily regulated by the state, which might mitigate some of this "death spiral" to some extent. But, yeah, they do have that same issue of cable companies of being heavily invested in a legacy hardware network.
That being said, one counter example that comes to mind is the old copper-wire analog phone systems. In the US, most of the old Ma Bell monopoly transitioned to a more mobile oriented business (Verizon or AT&T) over time. Landlines have been on the decline for the last couple decades, but my impression is that the telephone companies were able to adapt instead of getting caught out for the most part, or trying to play legislative-bully against mobile.
In contrast, the cable companies (my impression again) seem to be resisting technological trends and trying to use legislative strong-arming to sustain their business model, rather than reforming (their legal fights against muni broadband being a good example here). I do not see this as working long-term, at all.
Unfortunately my impression is that the power companies are more comfortable emulating the cable companies (fighting to make solar power less viable to consumers for instance) instead of transitioning business models gracefully...
This is a debate in the industry with wide-ranging implications. It basically boils down to will we have a wireless future as the primary means of Internet delivery or will we not?
And there's no clear answer. Sure 5G (even 4G) is fast but could it handle, say, all of Manhattan using it with no fixed line Internet? I have my doubts even with the 5G focus on concurrent connections. Or if it could it may just suck a lot of the time.
Wired (particularly fiber) has many distinct advantages:
1. The lifespan of the infrastructure is like 30-40+ years, possibly much longer;
2. Once you have the fiber in place it's pretty easy to change the lasers at either end and boost the speed, likely to 10Gbps+ if required;
3. Fiber unlike wireless doesn't suffer from interference and the amount of data you can get down a conduit with all the fiber strands you can fit is simply gigantic.
But of course wireless doesn't have the massive upfront capex cost that a fixed-line network does. As much as people (reasonably) deride the US cable industry, high speed Internet pretty much exists in the US because of riding the coattails of the infrastructure that was built in the latter part of the 20th century. Who knows where we'd be without it?
If you had to build that infrastructure from scratch today the cost would be astronomical. This isn't unique to cable or telecommunications either. It seems like in virtually every Western country the cost of infrastructure has ballooned to the point where many things that exist now would just be uneconomical to create now (eg rail and subways in major US cities) and that's going to be a huge problem going forward.
Of course this isn't a binary problem. The future may be a hybrid (eg wireless last-mile).
As for your point about cable companies fighting competition at the regulatory level, absolutely true. It's not a simple issue however. As much as cable companies are desperately fighting commoditization (they don't want to be the provider of dumb Internet pipes), an overbuild with a fixed-line network doesn't make much sense either economically.
It's why we only have one water network, one gas network and one electrical grid (per region; many in the US have this deluded view that regional monopolies are somehow "competition"). It's also why utilities are highly regulated as they are monopolies. It's also why ISPs need to be regulated as a monopoly. Internet is the so-called 4th utility.
But this regulation will prevent naked price gouging. It will however impact the cost per kWh and ultimately regulators will have to relent to let them raise prices to cover costs.
It's kind of a beautiful vicious cycle. As renewables and efficiency increase, power prices increase, which increases the incentives to switch to renewable sources and efficient consumption.
To reinforce this, I was reading an article (can't remember the source now, unfortunately) about Caesar's switching to solar power and having to pay the Nevada utility ~$90 million dollars to offset the "lost revenue" to the utility.
Caesar's wasn't obligated to pay, but they chose to to prevent the utility from passing that cost on to the residential customers.
Found some sources. Closer to $50 million than $90 million, and these imply that Caesar's didn't have as much of a choice in it as in the source I first read (but can't find).
In a way, this is all kind of a free market solution to energy over-use (I'm not saying this happens all the time), companies develop electronics to be more efficient so that customers will look at how much less they'll spend on electricity, so energy companies will (due to their monopolies in many parts of the world) raise prices to keep their revenues consistent, which means there's an incentive to make electronics even more efficient.
Residential efficiency isn't really driving the drop though. It's big users moving to on site solar and the like. Residential lighting (the residential component seeing the biggest improvements in efficiency) is about 3% or 4% of the market ( https://www.eia.gov/tools/faqs/faq.php?id=99&t=3 ), so even huge improvements aren't going to upend the market.
Trying to raise prices on commercial and industrial users just makes alternatives that much more attractive. There's a similar effect with residential hot water and space heating, both huge components of residential usage.
Generation and transmission, at least, are auctioned to the lowest bidder through RTOs. Collusion to inflate prices is prohibited. The RTOs are the industry self-regulating, but post-Enron the industry is under a lot of scrutiny and nobody wants the government to take over regulation. The resource (electricity) is completely fungible, so providers can only compete on price. So at least at the generation/transmission levels, I think competition might actually prevent what you're predicting.
It's worth noting that generation occurs in different groups based on how expensive it is to increase or lower output, which is necessary constantly because usage fluctuates cyclically:
1. Hydroelectric is cheapest to scale up and down, so there's incentive to inflate prices and wait for high-usage times, especially when water levels are low.
2. Fossil fuels are mid-price to scale up and down, so there's some incentives for inflating prices, but fuel prices are also a factor.
3. Nuclear is extremely expensive to scale up and down, so there's incentive to try to always be the lowest price. Turning off and on is sometimes more expensive than selling generation at a loss.
4. Wind/solar are cheap to scale up/down, but are weather/time dependent and therefore unpredictable and uncontrollable to an extent. You can scale down cheaply by dumping energy into the ground, but you may not be able to scale up at any cost.
It should be clear from this how important hydroelectric is to our power system's pricing. Nuclear/wind/solar often result in the most competitive generation costs, but if hydroelectric goes up in cost, nuclear would have to scale generation up and down more often at great cost. When wind/sun are good, there's competition for flexibility, but when they aren't, hydroelectric controls the price of adjusting generation. So I think that if companies adjust their numbers up to maintain profits, it will mostly be hydroelectric generation.
I don't understand the effects of wind/solar on the market as well, because they weren't as large a sector when I worked at an RTO. However, I am under the impression that efficient energy storage would have a large impact on allowing wind/solar to compete with hydroelectric on ability to scale up/down. And this is urgent, because the inflated cost of hydroelectric's scaling is capped at the cost of fossil-fuel scaling, which is only going up in price in the long run.
If electricity wasn't a monopoly, the answer would be an obvious yes: falling demand and falling costs both indicate falling prices.
But given that it is a monopoly that is supporting huge amounts of fixed costs (infrastructure and debt payments) there will be significant pressure to increase costs.
I predict that both will occur, increasing the already significant disparity between regional electricity prices.
This really depends on the model used for utilities. Here, for instance, transmission is a monopoly (held by the old state monopoly generator), but generation is not; generators and companies who sell electricity (who aren't necessarily the same) pay fees to the transmission monopoly, but they themselves aren't monopolies.
My local electric utility just got a rate hike approved by the state utilities commission and is already pushing for another. They're putting the costs of cleaning up the 2014 coal ash spill in the Dan River on customers, the bastards. As long as utilities are permitted to make mistakes and pass the costs of cleanup on to taxpayers or their customers, they will, and bills will rise.
A significant proportion of utilities are regulated by states' Public Utility Commission, and the utility bring rate cases to the PUCs every so often, which set theoretically regulated rates of return on equity (which therefore in turn drives prices).
So -- vastly oversimplifying -- unless the PUC targets a lower ROE, it's unlikely to see electricity prices fall.
While demand might be slowing, it's still very inelastic. We can improve efficiency, but we absolutely can't live without lots and lots of electricity.
The pricing structure that is currently baked into power bills assumes that the cost of generation is paramount, and that the cost of distribution is nothing.
As distributed generation increases, regulations will have to change to reflect the fact that the cost of the distribution does not go away. I wonder what the best pricing structure is for the future.
Yes, not sure what GP is meaning here. My bill is about 30% 'standing charge' which is a daily rate you pay regardless of energy consumption, which would be for distribution costs.
> The pricing structure that is currently baked into power bills assumes that the cost of generation is paramount, and that the cost of distribution is nothing.
This isn't true; not only is distribution included in pricing, but there are three major components in pricing (generation, transmission, distribution) and you've completely omitted one.
Engineering-wise, I think that makes sense (I'm not sure, I was never involved in the engineering side of things when I worked at an RTO, I was involved in the financials software). However, legally/economically there are big differences between distribution and transmission, and if we're talking about cost, it doesn't make any sense to bunch these into one as if they have the same cost structure. If anything, transmission and generation have more similarities in the way they're priced (at least as of a decade ago when I worked in that industry).
Generation is cheap.
It's the distribution where the overhead is.
Most of the electricity is lost in transmission.
We must get wireless transmission working.
> Most of the electricity is lost in transmission.
False.
"The U.S. Energy Information Administration (EIA) estimates that electricity transmission and distribution (T&D) losses average about 5% of the electricity that is transmitted and distributed annually in the United States.1"
We convert a lot of AC back to DC to use modern appliances: Computers, Phone Chargers and LED lighting. Although I am guessing down stepping DC voltage is also expensive to do efficiently.
Ha, there used to be buildings in NYC that had DC power until relatively recently. AC is easier to work with since you can step it up and down easily, but DC has lower transmission losses over long distances.
But you still have to store it in that case. Unless you're using non-renewables, but transporting them around seems less efficient than just centralizing the generation.
Why is this so crazy to imagine? There are so many drivers to increased energy efficiency. LED lightbulbs, LCD TVs instead of monitors, vastly improved efficiency standards/technologies for various appliances, fact you can do loads of stuff with a smartphone instead of watching a giant TV, etc etc, huge fall in heavy industry, small scale solar/wind generation actually appearing as a reduction in demand on the grid instead of 'increase of supply and corresponding increase in demand'.
I'd actually say it was more crazy if we expected it to continue increasing thinking about current trends, and I've heard this story of the utility death spiral for about 5 years so I don't think it is a sudden problem.