In a few short months we have had major blackouts in New York City, England, Italy, and Scandinavia, see Lynne Kiesling’s blog for a running analysis of energy and electricity events. In each case critics have charged that ill-conceived deregulations have led to underinvestments in power grids.
To what extent could we avoid these problems by decentralizing electricity supply altogether? Why not just pull off the grid and have your own generator? How practical will this be in the future? More than ten percent of the American power supply is already produced this way.
These are exactly the kind of engineering questions that I have little sense of. But I have just read the most detailed case for decentralization to date. The authors argue:
Dispersed [electricity] generation has long been economically viable, with technology making it even more so. Natural monopoly is a myth.
The authors also give numerous details about how current regulations hinder such a decentralized market solution.
One of the authors, Alvin Lowi, is an engineer with numerous patents to his name and forty years experience. The article is in a Cato book edited by Fred Foldvary and Daniel Klein, The Half-Life of Policy Rationales, or click here for the Amazon.com link. Here is the Cato press release about the book, which looks about how new technologies can make government interventions unnecessary. Again, I cannot evaluate the arguments, but this is definitely an advance in the debate.