Will Cheaper Oil Burst the EWPC Bubble?

I posted the following comment under the article Will Cheaper Oil Burst the Energy Tech Bubble?, by Mark Mills, Chairman & CTO, ICx Technologies.

The simplistic realities - demand that rises - the author suggests to be kept in mind by investors and policy makers give an insufficient view of the emerging world in the power sector. However complex, a systemic view is required.

The world is undergoing a transformation from an industrial society to something else. The author says is a digital economy; some say is a systemic society; still others envisioned a knowledge society. At any rate, a new society will emerge, which will lead to an End-State of the electricity industry for quite some time. My hypothesis is that electricity without price controls (EWPC) will be such stable state. See 12 Selected 2006 Posts on Electricity Without Price Controls.

The 1st principle – energy demand always rises – is unsustainable. There are always limits waiting, some of which lead to system collapse. Pollution and global warming are potential limits. It doesn’t matter whether oil is cheap or expensive.

The 2nd – it’s about the technology – which increases the above limits. But technology should have the right context – the whole organization. The architecture and the design of the market can also help the millennia-long search to find a stable power industry. The deregulation experiments in the USA led to an unstable power industry due to excessive power by vested interests to extend an old paradigm.

The 3rd principle could be rewritten as “Over time, bits trump iron.” For electrons to trump barrels the law of conservation of energy might be at stake. Generation and transmission capacity used for coordination of a synchronized system are iron that could be replaced by bits. Demand response is a technology that fits such a purpose. See “An Alternative Business Case for Demand Response” to see how supply side risk management (iron that wastes barrels while coordinating) can be partially replaced with demand side risk management (bits that come from electrons while customers respond).

The 4th principle – silicon… increases demand – requires the development of new technology that is not so energy intensive. A nanotechnology breakthrough might help. Technology should arrive that will turn the grid into a real network from customer to customer and the right organization will be needed.

The 5th principle – improving efficiency increase energy demand – should be use with caution. In the vertical integrated utility paradigm, metered demand of electricity would decrease by improving efficiency, producing a perverse incentive against it as utilities make money on sales. That’s why a new paradigm is needed.

The 6th principle – not all BTUs are created equal – is not about energy, but about supply security. It is under supply security that the 3rd principle operates. That is the key to market differentiation of electricity. Retail marketer’s job is to develop the resources of the demand side.

The 7th – in the end, it’s always about the Money – is placing capitalism at a crossroad, as Stuart L. Hart characterizes it. One way out is the development of the markets at the Bottom of the Pyramid. In that regard, Peter Senge said: “[T]he people of the world are in desperate need of new ideas if global industrial development is ever to result in something other than the rich getting richer and the poor getting poorer, with nature (and potentially all of us) suffering the collateral damage.”