Local or interconnected future for our energy supply?

I am writing from Padova, Italy where there were several events and conferences last week to mark the signing of the Memorandum of Understanding between the University of Padova and University of Sydney. At the end of the week, I participated at a round table that was a part of the Open Innovation Days in Padova. The title of the round table was: “Australia vs Italy – Renewable Energy: who’s gaining? Economics of Change”
Around the same time back in Australia, the enormous storm that hit South Australia (SA) and left the state in a blackout generated a stormy debate around the role of renewables in that state’s electricity generation portfolio. This followed a similarly heated public debate earlier this year, about which I wrote in a recent post.
Interestingly, one of the participants at the round table in Padova was making an argument that we will have to rely on localised energy production and use in the future, giving an example of households generating their own electricity. I noticed that a similar argument is sort of being made in the case of the SA blackout. The blackout was caused by switching off the interconnector from Victoria, and an argument has been made that if SA had a reliable source of base load in-state, there would have been no blackouts. By extension, the blame was again thrown on the renewables, as it is claimed that the ambitious renewable energy policy in SA has crowded-out fossil fuel based generators that could have provided the in-state base load.
So, these two arguments hitting me around the same time made me think again about a point that I was making in the recent post that greater interconnectedness is a way forward, which will help us resolve the problem of intermittency of renewables. Are we really looking at an interconnected energy future, or is the future much more localised, where each state, each municipality, building, or household generates its own energy and doesn’t depend much on what others do?
It didn’t take me too long to reassure myself that a localised energy future cannot be a viable way forward. The very human history is all about getting away from localisms, and about connecting with other people on ever-larger scales. There are fundamental reasons for this, which essentially lie in the heterogeneity among people, places and environments. That heterogeneity is the source of wealth on this planet!
We are witnessing the way the economy is currently developing, resulting into a much greater interconnectedness across many dimensions, and at a global scale. It is a world of a sharing economy. Energy cannot be an exception! I still believe that we should be looking at how to better connect, and not at how to attain energy self-sufficiency. Making sure that the electricity interconnectors among Australian states remain active irrespective of circumstances is a much better way forward than replacing the renewable energy capacity in SA with old-fashioned fossil fuel capacity!

Author: Tiho Ancev

Tiho Ancev is a Professor of Agricultural and Resource Economics in the School of Economics, University of Sydney. His main research areas are agricultural, environmental, natural resource and energy economics. Tiho’s main contributions have been in water economics and policy, economics of energy, economics of air pollution and climate change policies, and economics of precision agriculture and agricultural input use. He has published widely on these topics in top international peer reviewed journals. Tiho has led and contributed to national and international research projects in these research areas. He is currently the Managing Editor-in-Chief of the Australian Journal of Agricultural and Resource Economics.