Electricity and the Sharing Economy: A Thought Exercise

Ryan Pollin for Zondits, September 8, 2014

On Friday I took a ride home from a stranger in his car, Saturday morning I bought food on the street from someone I don’t know, and this winter I might vacation in the home of a family I’ve never met. It’s not crazy: it’s Uber, my farmer’s market, and Airbnb. It’s the sharing economy, and electricity could be next.

Distributed energy from rooftop solar, wind, and other sources is cropping up faster than utilities know how to manage it.  Spurred on by rebates coming in from all sides, distributed energy resources (DERs) are quickly becoming a grid reality, and utilities in many states are scrambling to maintain control of their once-cornered customers, suddenly liberated by clean-energy options. There are proposals of a so-called “solar tax” in Kansas, Arizona, and other states, in efforts to steady the unknowns that come with DER. Other jurisdictions in Hawaii and elsewhere have limited the introduction of DERs to the grid—renewable or not— for fear of losing the safety and reliability we have come to expect in our power grid.

Enter the sharing economy. By definition, this is when individuals can share common resources to meet each party’s needs, without the traditional infrastructure of the marketplace. The taxi livery industry, for example, is in the middle of battling back a notable market disruption as ride-providing services like Uber, Lyft, and others have made clever use of new technology to offer more effective transportation services at lower rates. No full-time drivers, no infrastructure, no traditional overhead. On a larger scale, the reemergence of the farmer’s market as a healthful and enjoyable food source has developed a stronghold in many communities across the country. Farmers grow and get paid, and consumers get the very freshest of foods. No 18-wheelers, no supermarket distribution centers or big-box stores, no traditional overhead. Airbnb works similarly, a private-to-private interaction for travel accommodation that completely sidesteps the hotel industry—to similarly striking results. All these instances of the sharing economy have common traits: they avoid traditional infrastructure, save on costs and make use of idle assets, and you can easily argue that they lead to more satisfying interactions between human beings.

Now after being well primed by these examples, let’s imagine the world where the DERs (the farmers) meet the energy users (the eaters) in a virtual marketplace. A transaction is made, energy flows, and both parties are satisfied. The big question is (and always has been) how to manage the challenges of maintaining the physical grid equipment. Who maintains and develops grid connectivity, monitors power quality, and balances peak load demands? There are big questions that need solving before any market disruption occurs here, but the pieces of the puzzle are all there. We have an inefficient and unprepared infrastructure managing a new technology that has the potential for underutilization. There are private parties with assets that can be put to more efficient use, and a host of buyers who would prefer more choices. Is it likely that we are seeing the last days of the conventional utility company? Probably not. But could it be that a parallel energy marketplace that uses the principles of the sharing economy might offer energy choices using private DERs? That one seems possible.