Steve Thorne, energy expert and Director of SouthSouthNorth, casts a critical eye over conventional energy supply and suggests policy makers could learn a lesson from Thomas Edison in how to deliver low-carbon energy services

Energy systems are the largest contributors to anthropogenic greenhouse gas (GHG) emissions. To reduce the threat of human-induced climate change, energy systems need to change. This will require greater use of renewable energies to reduce GHG emissions, improvements in energy efficiency and a fundamental change in how the energy sector is governed. The governing institutions will need to introduce regulation to keep prices as low as possible, as well as considering energy from a service perspective. After all, it is the energy services, such as lighting and heating, that we require.

Looking back to the origins of electricity can help to illustrate how this energy future might look. In the early 1880s Thomas Edison sold light to factories. Rather than selling electricity he provided a lighting service; having patented incandescent lamps could have influenced this business model. He would have provided light as efficiently as possible within the constraints of what technologies he had access to and his choice of the inefficient direct, rather than alternating, current. Edison’s approach represents the germ of a solution for the transformation energy economies will have to undergo to achieve low-carbon development.

The energy economy is the largest commodity economy on earth. Think oil, coal, gas, nuclear, electricity and so on. Not only is it the largest such economy but it is one of the most profitable; the oil supply chain from production to petrol station pump has some large leaps in financial value and additional taxes along the way. Unlike Edison, who sold light, the main energy suppliers sell fuels or electricity, and they want to sell as much as they can. But energy itself is not what we want; we want the service that the energy provides, including light, heat, water pumping, food storage, media and mobility.

Selling fuels and carriers, rather than the immediate service or appliance, allows energy economies to remain largely hidden from direct public scrutiny. Only if the fuel or carrier is not available or of poor quality, do people usually take note. The hidden nature of the energy economy has resulted in the development of a culture that includes large, dirty, hidden and centralized facilities transforming energy from concentrated primary forms to useable forms, regulated by states. Oil, gas and coal are predominantly supplied by the private sector, while electricity usually lies in the hands of the public sector.

The technologies to produce, refine and generate these fuels and electricity, and take them to where they are needed, requires enormous investments of private and public finance. The scale of these investments has focused attention of policy makers on the supply side, commonly divided into fossil-fuels, nuclear power and renewables. This debate distracts from the real energy issue: how to achieve the desired energy services at the lowest cost to economies and, particularly, the poor.

This is not to say the supply side should not be the subject of policy; it should. And, like any other industry it should be regulated to increase positive spin-offs while reducing negative impacts. However, the scale of investments in the supply side has made energy policy makers focus on analyzing the energy resources they have and ascertaining how they can best force these down the tubes and wires. This mindset needs to be turned on its head, if energy-efficient systems are to be achieved.

Instead of asking the question, “what do we have?” policy makers need to ask, “what energy services do the public and economy require and how that can be provided as efficiently as possible?” If public policy makers were to look up-stream to supply options they would begin by questioning the quality and quantity of the energy service, then establish the best mix of fuels and appliances from an economic perspective to provide that service, and finally consider how the fuel could be transported to the place it is required as efficiently as possible, at the best scale of supply to fit the system requirement. Policy from the service perspective would build in the efficiencies of “useful-to-delivered”, “delivered-to-transported”, and “transported-to-primary” energy.

The current approach of supplier-controlled, demand-side management in the electricity sector has had some effect on improving system efficiencies and reducing peak system demand, but this is small compared to the possible efficiency savings. In part this is because supply-side policies are not sufficiently compelling to encourage better system efficiencies. Efficiency beyond the point of energy supply means losses of sales and reduced fiscal income for cities and nations, through taxes on electricity and fossil fuels. Even allowing utilities to recoup loss of sales is an insufficient incentive for them to really get serious about efficiency, apart from during periods of supply crisis when short life compact fluorescent lights (CFLs) are dished out to reduce peak demand. Let’s face it more and bigger kit means bigger utilities, greater leverage on governments, more GDP and opportunities for corruption hidden in big deals.

Rather than tinkering with incentives or disincentives on the edges of supply-side-dominated energy policy, a fundamental rethink is required. Edison got his lighting system approach spot on and at the relevant scale, in much the same way as my friend did when he designed the solar-, LPG- and biomass-powered lighting, heating and refrigeration systems for my home. Like Edison, my supplier ensured that the energy was provided as efficiently as possible because he was selling the services. Such energy service companies equate to the “soft energy pathways” proposed by energy theorist Amory Lovins.

It may take a while to fully come to fruition, but the big supply-oriented policy paradigm is starting to fray at the edges as the service approach to policy starts to take root. For example, prompted by the phasing out of nuclear power in light of Japan’s experience with Fukushima, Germany’s energy transformation Energiewende is starting to reduce the hegemony of the country’s big four utilities: RWE, E.ON, Vattenfall and EnBW. We see the Germans starting to use the internet as an analogy for their energy systems’ decentralization and “right-sizing”.[1]

Will the commercial energy sector adopt aggressive business-as-usual with reform on the margins, or can it be turned on its head and transformed to a least-cost, enabling service? We await to see if Edison’s bright idea will become a guiding light for the energy sector.

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[1] http://www.guardian.co.uk/environment/2012/may/30/germany-renewable-energy-revolution