There's little doubt that the centralization (the current approach) of alternative energy production is more efficient than decentralization. It enables location optimization (better wind/sunlight), less management/industrial overhead per kWh, etc. It also leverages the existing industry design. However, this efficiency gain comes at a potentially fatal cost (which implies that most of the money currently being invested in this area, is going to be wasted). Here's why:
- In order for alternative energy -- particularly solar PV -- to reach its potential, it must go through a rapid series of generational improvements in technology. Each generation will be much more economical than the preceding generation. Since, the volatility of energy prices has already dried up investments in new drilling in the oil sector: is little reason to doubt that it wouldn't be even worse in the alternative energy due to technological risk (as in, the tech used will go rapidly out of date in a handful of years). Given both sources of risk, corporate angst goes off of the scale.
- Centralized generation requires the construction of vast amount of electrical transmission infrastructure. The combination of NIMBY (not in my back yard) opposition and a legacy of negligible investments in new electrical transmission infrastructure over the last 30 years, implies that this unlikely.
- The costs of centralized production can only draw on government and corporate financing. Even if we see another financial bubble emerge (unlikely), it's uncertain whether there will be remotely enough financial capital necessary for anything more than a minimal transformation in mid to long term time horizons. The government is tapped and the financial system is on life support (it's rife with zombie banks).
In fact, this situation is very similar to something seen in the computing industry, and why a decentralized model emerged. In that previous situation, there were attempts to centralize all computing and provide terminals to end-users (France's Minitel and Oracle's Network Computers). There were also attempts to provide interactive multimedia through boxes that provided interactive TV (ala 1994). However, in all of these cases the rate of change, the amount of required investment, the speed of end-user innovation, etc. doomed these attempts to failure. The same is likely true for alternative energy. The best approach, and the only one likely to succeed, is the decentralized model. To goose it, a variant of the following should occur (with, or without, official sanction):
- Personal decision making. Capital, currently tied up in malfunctioning financial markets, must be unleashed at the individual level. The energy IRA/401K is a dominant approach since it combines long time horizons, a massive pool of capital, and the ability to turn existing costs into revenue. Further, since decision making is decentralized (rather than being routed through a predatory financial system), the allocation of this available capital will be much more efficient than centralized approaches (to new methods, tech, etc.).
- A network. Use of the existing transmission grid at the local level must allow free riders. In the very same way the early Internet rode on the back of the telephone system, decentralized alternative energy must be able to ride freely on the back of the existing local transmission grid (microgrids). The goal: "plug-n-play" utilization.
- A platform. Finally, a standardized modular approach to the elements necessary for alternative energy must be established. This would allow improved technologies, particularly new PV modules, to snap into existing installations. We should use the way standards developed and were codified on the Internet as a starting point for this effort.