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Energy: You Don't Know What You've Got Till It's Gone

[caption id="attachment_155" align="alignright" width="282"] Cupertino Electric, Inc. (CEI) Solar PV project at San Bruno Park School District[/caption]

How we make and use energy hasn't changed in many thousands of years. Humans have become more sophisticated in what we use energy for, but converting fuel to heat to electricity or motive power, is really, really old stuff. As a matter of fact, we've become so good at it (and it's so inexpensive and available) that we don't give it much thought unless the energy stops flowing. When that happens we're like fish out of water.

Why is this? Why do we take for granted the very thing upon which our lives depend? And what is it about energy that allows us to so undervalue it?

The easy answer is that energy is too cheap and too plentiful. But while that is correct, the answer is too simple. I've found that trying to comprehend the nature of energy is a counter intuitive process filled with uncertainty.

Energy: The most undervalued commodity?

Energy fills most of the requirements of a classic commodity: it's widely available, there is little, if any, differentiation among suppliers, and it's cheap. Where the commodity fit breaks down is when we try to apply the laws of supply and demand. When supply is fixed or falls, the price of a commodity should rise to reflect scarcity. When this happens, consumers should limit or halt purchases, lowering the commodity's demand.

Well, energy is different. Very different. No matter the price fluctuations, within as-yet-unknown limits, demand remains constant or even increases. Demand is said to be inflexible, and this moves energy away from the commodity category. Energy, and electricity in particular, moves further away because: (a) it is only available from one supplier (a local utility), and (b) it can't be stored or stockpiled.

For these reasons, electricity is classified as a "super commodity." In fact, the phenomenon of electricity supply always needing to equal demand is worthy of separate discussion. Since I know you'll agree, I'll expand on this idea in a future post.

Implications

Electricity is so beneath our everyday consciousness that we do not value its presence in our lives. Energy is so readily available, and so cheap, that we are simply not motivated to shop around for another supplier as we would if the price of our favorite beverage had risen too high, or our TV needed repairs every week.

But take it away, and energy's perceived value increases sharply. Counter intuitively, we'll spend four or five times as much on goods and services to mitigate the consequences of energy's unavailability. For example, a typical Ni Cad battery provides energy at about $1,500 per kilowatt-hour versus the $0.20 per kilowatt-hour we typically pay. An Uninterrupted Power Supply (UPS) backup generator costs about three times more per kilowatt than a similarly-fueled power plant. We're willing to pay whatever it takes to ensure power is there when we want it. When we look at energy in this way, it becomes clear that we actually do "know what we've got" when it's gone.

Where then, do we find the better investment? Do we pay to make the grid more reliable, or do we buy more backup generators? Which is the better solution? I welcome your comments and invite you to join me in exploring this and other topics in future blog posts.

[box type="info" style="rounded"]A Tip from Steve: Who Knew? A government-funded advocacy group exists to represent the collective interests of ratepayers in California. For more information, visit turn.org. [/box]

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