by Roberto Verzola

To reduce climate change risk in the next ten years, we need more than one technology. We need technology approaches and business models that can make carbon-free or carbon-neutral renewable energy as accessible and abundant as information has become today.

This means we need to learn from the approaches and models of the IT industry and how it managed to reduce the cost of information processing several orders of magnitude lower, from millions of dollars for a huge mainframe to a few dollars for a tiny single-board computer today.

This feat brought information processing devices to unprecedented levels of affordability and plenty. As the cost of information itself approached zero, new business models emerged that charged either per-month or per-gigabyte, gave it away for free, or their various combinations.

With users also becoming potential suppliers of information or service, peer-to-peer became as important as client-server business models. Because of their low price and abundance, the IT industry’s microchips have become fundamental building blocks at the core of all modern devices, turning computers into deep game-changers—they changed the rules of the game not only within their industry but in every aspect of society too.

The IT industry attained this feat by downsizing from mainframes to microcomputers, shifting its focus from economies of scale in size to economies of scale in quantity. While building larger and more powerful computers attained the industry some economies of scale, these could not compare to the economies of scale attained by mass-producing millions of tiny computers year after year. This (and other approaches) enabled the industry to maintain virtuous cycles of continually decreasing prices and increasing production.

Lower prices typically discourage production: this is what conventional economic theory asserts. But lower prices also encourage demand. If greater demand enables producers to reach such economies of scale that their costs of production drop faster than the drop in prices, then they are encouraged to produce even more, leading to the virtuous cycles that we still see today in the information industries.

If renewables can parallel this process, then not only can the industry avert the looming disasters due to fossil-fuel burning, it may also bring about a new era of clean, cheap and abundant electricity which can become a long-term foundation for building modern sustainable societies.

The solar PV industry is also silicon-based, like the industries that produce the chips at the heart of every digital device. The photovoltaic cell has in fact shown the same virtuous cycle of decreasing prices and increasing production as the rest of the electronic chip industry. One might therefore think that they would have learned the lesson well.

Apparently not. The PV industry today is upsizing. The biggest solar panels are now 300 watts, from 100 watts several years ago. The PV industry seems focused on serving the growing market for solar farms, which started below one megawatt, but are in the hundred-megawatt range today.

The wind industry is afflicted with giantism, starting with kilowatt-sized turbines a few decades back, to 8-megawatt turbines today.

The hydro industry likewise continues to focus mainly on megadams and multi-megawatt facilities.

They all remain tied to the mainframe paradigm, trying to attain economies of scale in size. How far can upsizing go before reaching diminishing returns?
I suggest that the impact of renewables will be far greater if they go for economies of scale not in size but in quantity. If they manage to trigger virtuous cycles of decreasing prices and increasing production, microrenewables hold the potential of becoming another deep game-changer—like microcomputers—averting climate change risks and changing the rules beyond the energy game.

The article was an entry of the author at the 2017 Masdar Engage Blogging Contest.