Although today microgrids serve a tiny fraction of the market, that share will grow as costs fall. Utilities can benefit if they plan ahead.
Lighting Up the World
Why electricity is good—and more is better.
power, where agrarian communities are transformed into modern industrial societies. This evolution, driven by the accumulation of income and wealth, eliminates many contagious diseases, reduces child mortality, and lengthens life expectancy—a virtuous cycle has been demonstrated over and over again for well over a century in dozens of countries around the world. The emergence from poverty begins as countries develop transportation systems based upon petroleum and electricity networks typically based upon coal. These technologies are able to achieve massive economies of scale that provide large amounts of energy at low cost. Abundant and reliable supplies of energy spur technological change and productivity growth, thereby substantially improving the living standards of the people.
Arguments that the small market shares of renewable energy systems are the result of market distortions, such as the absence of pricing for environmental externalities, ignore the reality: the IEA’s latest 450 Scenario (2010), which optimistically assumes that “policy action is taken to limit the long-term concentration of greenhouse gases in the atmosphere to 450 parts per million of CO 2-equivalent,” projects fossil fuels and nuclear power will still generate 70 percent of U.S. electricity in 2030. 11 Wind and solar energy, for instance, are inconveniently intermittent and considerably more expensive, not yet capable of utilizing the economies of scale that conventional energy enjoys. To promote these uncompetitive technologies, governments use subsidies and production mandates like the so-called “renewable portfolio standard” (RPS). These policies not only swell government spending and bureaucracy but also impose hidden efficiency costs on the economy that silently erode our standard of living. This helps explain why two leading U.S. authorities on electricity, Jay Apt (Carnegie Mellon University) and Robert Michaels (California State University, Fullerton), have publicly opposed a possible federal RPS, known as a “renewable energy standard.” 12
Living Longer and Better
In 1936, the year of the Rural Electrification Act , an article in The New York Times stated, “Nothing in modern life so raises the standard of living of high- and low-income groups as the use of electricity.” 13
The rise in the standard of living in the United States over the past century has been the envy of the world. Society after society has tried to emulate the tremendous progress that we have made in health, education, productivity, environmental improvement, and science and technology. The foundation of this leap forward is the ever increasing access to reliable and affordable electricity. The rapid expansion of the U.S. population was closely paralleled with the generation of electricity that the average American could afford to buy (see Figure 1) .
Additionally, electrification has increased the average human life span. Brenner’s work in the International Journal of Epidemiology (2005) clearly demonstrates the link between affordable energy, economic growth, and declining mortality over the course of the 20th Century: “It is now among the firmest of epidemiological findings, across industrialized societies, that socioeconomic status is inversely related to health status.” 14 Greater access to electricity has meant more food, cleaner water, new medicines, safer work settings, and more control of the environment through heating and eventually