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Bruce Huber in the Economist discussing Renewable Energy: A world turned upside down

Bruce Huber of Alexa Capital, which helps fund renewable-energy investments, says business consumers are probably going to be more influential in driving the adoption of these technologies than households, because they will more quickly see how they might cut their bills by using demand-response and storage. “For the last 100 years everyone has made money upstream. Now the added value is coming downstream,” he says.

Waiting for enlightenment

Mr Huber likens the upheaval facing utilities to that seen in the telecoms industry a generation ago, when a business model based on charging per second for long-distance calls was replaced by one involving the sale of services such as always-on broadband. This is bad news for the vertically integrated giants that grew up in the age of centralised generating by the gigawatt. Jens Weinmann, of ESMT Berlin, a business school, names dozens of tech-like firms that are “nibbling” away at bits of utilities’ traditional business models through innovations in grid optimisation and smart-home management systems. With a colleague, Christoph Burger, he has written of the “big beyond” in which domestic energy autonomy, the use of the blockchain in energy contracts, and crowdsourcing of PV installations and other technological disruptions doom the traditional utility. Already, big Silicon Valley firms such as Google and Amazon are attempting to digitalise domestic energy, too, with home-hubs and thermostats.

But how this nibbling leads to a system that all can rely on—and who pays for the parts of it that are public, rather than private, goods—remains obscure. The process will definitely be sensitive to politics, because, although voters give little thought to electricity markets when they are working, they can get angry when prices rise to cover new investment—and they scream blue murder when the lights go out. That suggests progress may be slow and fitful. And it is possible that it could stall, leaving climate risks largely unabated.

Getting renewables to today’s relatively modest level of penetration was hard and very expensive work. To get to systems where renewables supply 80% or more of customers’ electricity needs will bring challenges that may be far greater, even though renewables are becoming comparatively cheap. It is quite possible that, as Mr Schröder predicts, Mr and Mrs Schmidt in Wildpoldsried will lay waste the world’s conventional electricity utilities while sharing Riesling and gossip with the neighbours. But that does not mean that they will be able to provide a clean, green alternative for everyone.

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