Dr Adam Bumpus, Chief Executive Officer and Co-Founder of RedGrid

The Jolt to our Energy System

The COVID-19 pandemic has given a jolt to our current system and thinking on energy production and consumption. The pandemic has enabled people to see more clearly how fragile and out of date the centralised systems of the mid 20th Century are. They have noticed their dependency on these systems. At the same time, over the last three months, people have come to see more clearly the value of community. They are beginning to appreciate the value of having local resilience, reaching for the essential services that keep them alive and connected. Energy is one of those services, and the COVID-19 response gives us a pause to think about how energy, innovation, and economic productivity can be reimagined post-COVID-19.

Energy demand has dramatically decreased. Wholesale prices of energy have dropped by 50% in the last few months. Some would see this low wholesale fossil fuel price as an opportunity to keep fossil fuels alive, but it is exactly the opposite. Fossil fuels are on the way out. The economics clearly show that decentralised renewable energy provides cheaper opportunities for electricity supply than fossil fuels. As Ross Garnaut noted in his recent ‘RESET’ lecture series[1], the cost of the supply of renewable electricity is the greatest determinant of the reduction of the use of fossil fuels. COVID-19 has given us a window of opportunity to see a new system that promotes reduction in emissions, locally-focused productivity, and cities without pollution. But to sustain these benefits, we need to understand the elasticity of the ‘next normal’. Can we bring back the good parts of what we had before, while fostering the new ways we have learned through this pandemic?

Despite wholesale price drops, electricity bills for people are still rising due to extreme weather and the fragility of the centralised grid. Some estimates also show that home energy bills during the lockdown will be up by 30 per cent on pre-COVID-19 levels because of people working from home. Electricity ‘bill shock’ will come for most people in Winter 2020, and our initial research at RedGrid shows that people are concerned about the amount and cost of electricity they are using at the moment.

Whilst residential energy demand is currently at its peak, energy demand across the whole grid must and will increase as we move out into the post-COVID world. This is essential for economies to thrive, and for livelihoods and economic opportunities for people to be sustained. But our energy system doesn't have to remain as we had it before. The COVID-19 impact may be the single biggest impact on our energy system in 170 years. The last energy system overhaul on this scale was the beginning of the industrial revolution in the 1700s. In order to accommodate this inevitable growing demand while living within the bounds of sustainability, we must create and leverage new sustainable energy technologies, must optimise our energy demand in order to reduce wastage to a sustainable level, and improve productivity to encourage the use of new renewable sources.

Setting the ‘Next normal’ in community energy

There are two critical criteria that our future clean energy system must meet:

1. the full electrification of our economy through net-zero-emissions energy generation by 2030; and
2. the enabling of energy as a currency of economic productivity[2], driving toward the most effective, equitable and productive uses of energy at local scales.

We have the models to achieve net-zero emissions by 2030, and we are seeing this roll out in Melbourne already (for example, the Monash University Net Zero Emissions campus). But prototypes like this one need to be scaled up, making energy production, storage, and consumption a fundamental pillar of economic growth. COVID has shown clearly how we can think and act at a local level in response to global trajectories.

To build a more resilient system, both users of energy and grid management need to know where electricity consumption can be increased (in the case where there is excess renewable energy in the grid), and where it can be curtailed (when demand outstrips supply). A more nuanced understanding of these dynamics - from the devices in peoples homes and businesses, through to the DNA of the grid - will enable more productive use of energy in local areas, and in the grid as a whole.

To build this inclusive, fair energy system, we need trust in each other that we will build our economies sustainably. One way to build trust is through mutual credit systems that enable productive communities to grow. Energy as a mutual credit system could rejuvenate our cities. Mutual Credit is a system wherein creditors and debtors know each other and work with each other in a community-defined system of complementary currencies. This is essentially what is being built with clean energy programs right now, but the systems of exchange are not set up to reward those producing electricity and encourage equity. Instead, we have wholesale prices falling, and individual bills rising. We need to flip this model. And our communities and cities can be the drivers behind this flip.

Far from being hollowed-out because of COVID-19, our cities and towns will still be the hub of innovation and delivery for new economic systems. In fact, they offer the promise of becoming what RedGrid is calling ‘Productive Energy Precincts’: places that enable the seamless integration of energy production from local renewable energy sources, through to productive use of that energy in multi-use precincts. The value exchange between machines and people within these city precincts could realise the full potential of clean energy resources. These precincts could be based on equity, and on the notion that everybody has the right to access clean energy, at easily affordable prices, and to be included in what sustainable productivity really looks like.

One way to create these precincts, we believe, is through “automated reciprocal altruism”: a system in which machines generate and sustain the economic systems that reward energy generation, stewardship, sharing, and productivity in local business and ecosystems. This means that local businesses and individuals can take part in local energy production and the optimisation of the grid through interconnected mini grids, with little more hardware than the devices they already use. It’s about using renewable energy as an investment tool; digitally-backed energy security that enables people to prepay for energy at affordable prices, and reward mutual lending between actors in the system. It's about setting up the currencies that make sense in the context of why and how we use energy in our communities, and supporting this through the best technologies we have right now.

The next energy normal isn’t about Malthusian scarcity, nor social Darwinism that promotes the few over the many. Instead, the commons can be managed to the benefit of all based on fair markets, management, and decentralised accounting. Automated reciprocal altruism in our energy systems can start the virtuous circle of clean energy access for all, investment in new ways of using this energy, and enabling Australian cities to become the clean energy innovation powerhouses of the world.

This opinion paper is part of the City of the Future event 2, exploring focus area 2: Future Business.

Problem statement: How might we encourage new industries and businesses to emerge and thrive in the city?