Economics of Clean Energy

Cost reductions for solar panels have been phenomenal over just the past half a decade. The world took quite some time to master the manufacturing and use of this technology; and slightly less time to roll it out and deploy all over the world. Subsidies are being withdrawn and feed-in tariffs have been falling for solar power as solar energy reaches cost levels close to grid parity. Now we move on to thinking about the cost of solar intermittency and mitigating the cost that it afflicts to the grid and users.

I don’t think the economics of solar energy will work without the initial subsidies or at least the progress will take longer. The coordination impact of government direction, incentive policies and commitment towards clean energy helped us draw intelligent, passionate people into the industry, and concentrate the efforts it take in order to get the economics through.

There are still many different areas of the reality where scale economics can operate and help new domains succeed. But the difficulty they have is to line up the stars for that. The principle for selecting those areas to push for lies outside economics – for example, climate change, a better environment for the next generation, or to just improve animal welfare.

Even as we understand the economics of things we ought to recognise a lot of resource allocation decisions can lie beyond the realm of economics because we don’t have perfect information and knowledge across time.

Human Nature

Economist gets a lot of envy from psychologist from being able to publish papers about mundane psychological topics. Like creating a mathematical model of the failure to delay gratification and accounting for the costs of that. Behavioural economics seem a bit more like trying to create mathematical descriptions for common sense.

Of course this is possible because economics have made assumptions about humans that were wholly our of touch with reality for models that worked. At least for many decades, they kind of worked without too much fuss.

But we’ve built worlds that we are not really psychologically evolved to deal with and as a result, the deviation from the assumptions of the rational man became more and more significant. For one, the complexity of the computations needed in the modern world to make the best decision have really made it harder to assume rationality. Making decision across 3 choices is different from making it across “n” choices.

There are dimensions of scarcity in the real world economics failed to capture: computation/calculation, environmental limits and parameters, human’s limits on our mental wellness. Let’s look at economics with more humanity, shall we?

Creating a future

In my day job as a consultant, we often are asked how the markets will move, whether governments are likely to regulate one thing or another, push for more renewables or not. We also do some long term forecasting of trends, and their impacts on the business operations of large companies. Truth is, we don’t know and we won’t. But we will use information and data available to make intelligent guesses in order to help clients make decision, and move forward.

So the point is really about the actions we take upon making the intelligent guesses and inferences about the world. And when met with resistance, or realising that there are errors, refining our approach and moving forward nevertheless.

“Prediction depends on events outside your control. Creation depends on events within your control.  Don’t guess about the future. Shape it.”

James Clear

I often remind my coaching clients about their agency in the future; and it must feature in the stories that we tell ourselves. Not so that we will be so caught up with an outcome we are gunning for, but so that we are conscious the choices we make are not only to be for our own individual lives, but for the world and culture we reside in.

Right to Repair

Centuries of cultivating the culture of consumerism and sale of mass manufactured products means the concept of individual property ownership has spread through the world. When something is bought or sold, it is seen as being with the new ‘owners’ and ‘ownership’ should come with an implicit bundle of rights including the ability to repair something should it come to its demise or just partial dysfunction. Yet companies, in a bid to continue selling their products as the penetration of their products reach saturation point in the market introduced the concept of planned obsolescence.

And of course, that’s wastage. Deliberate wastage for the sake of commercialism; though of course, shorter lifecycles of products may mean greater innovation. Because every innovation needs adoption to provide the resources for it to sustain. The momentum of the Right to Repair is thus going meet more resistance across time even as it is gaining more following.

The main reason for the current momentum is that consumers are no longer keeping up with the ability to keep upgrading. There are people left behind in the upgrading frenzy – limited by either digital/tech literacy or financial capacity to upgrade. But that may change when these bottlenecks are solved, either through getting back oomph in our economy or having more attractive and intuitive products easy for demographics who were previously excluded.

So enshrining the principle of the right to repair into the legal system and setting it as a context/backdrop for companies to compete and innovate is important. It is important for the environment, for the values around environmental stewardship and waste reduction. And above all, it helps to at least address the power imbalance between consumers and producers. At least for a while to come.

The Sine wave

I learnt that trigonometry wasn’t just about angles and they involved graphs whilst in High school (which is probably called Middle School in US and most other places). And that was when I came in touch with the sine wave.

It’s beautiful; lined up on the rightly scaled axis, it resembles a series of semi-circles alternating directions. It runs up a peak and then down the trough. In-between, the gradient is changing at a different rate continuously and forms inflexion points where the function strikes zero, which is when it changes concavity. Interestingly then, the gradient of the Sine function is given by the Cosine function.

There are cycles all around us; small ones and big ones. Cycles are representation of learning and unlearning, or learning and forgeting. They are also a stark reminder of the falseness of “This time it’s different”. Yet they also present opportunities. If you missed the peak or trough, get on the next one. Train yourself to watch the cycle and catch the indicators.

Thanks to cycles, we can bounce back, we can be sure anything and everything probably won’t last, but also that “only once” is probably not going to be true.

What are the mistakes saying?

Like it or not, mistakes are feedback. And they are feedback to you, and everyone else. The issue or point of content is what the feedback is about: you or your action? The circumstance or the people involved?

It just so happened that the manner by which human civilisations evolved and developed allowed us to gain more control and mastery over things in the world. And because of this agency, we tend to start attributing more things to humans, and to ourselves. We expect ourselves to be automatons, humans, perfect, rational and full of empathy all at the same time. That itself brings about a whole host of mental health issues but for today let’s just think about mistakes.

When we allow mistakes to tell us more about people, about us, than our actions, circumstances, we stop learning. We think we’re learning about people, and about ourselves when it is an opportunity to refine our approach towards things. We become emotional and allow our minds to go into drama mode and search for excuses rather than solutions.

So how do we want to get over that. First, be aware of what mistakes are saying to you. All mistakes, not just your own or that of others. Then consider directing your attention towards the circumstances and actions – looking at how they contribute to the mistakes. Consider the action to change in response to the situation. Start making a difference to your personal learning and how you influence the learning of those around you.

Selling Time

Professional services have somehow been left this weird legacy of putting a price on our time and then having to estimate the amount of time it takes for us to do something in order to price a task. There are, of course fast ways and slow ways of doing things and it seemed that you can trade off efficiency with being cheap – ie. you can end up pricing some work the same way either because you are efficient/smart but expensive, or that you’re inefficient but cheap.

This leaves us all relatively miserable because when we start out, we need to spend a lot of time working in order to survive and we might not be able to make the time investments to get better or more efficient when we are just barely making it to survive.

Then, when we do eventually get better, our rates might be high so we may not be able to do so many different interesting things because the customers will start to self-select. Of course, it’s good to continually work with good, demanding customers who push you reasonably to achieve more and better.

Is our time really all that cheap or quantifiable only by money though? We can all be sure it is worth much more than that. Maybe there’s a better way to do these things.

Where are you going to start?

Every business is trying to effect a change. It could be just switching products, changing behaviours, and if these all gathers sufficient momentum, it can lead to a change in culture.

Thought this way, the tasks is phenomenal even as it is exciting and interesting. How do you do such a big thing? Isn’t it intimidating to be challenging the status quo, to get people on another side of the proverbial fence? Where do you even start?

That’s the important question. Where do you start? You need to start and you need to try and pry. It is not the ideas themselves you cling on to; but the change you’re trying to effect. And that’s why technologies can be powerful and even effective but selling to customers is more about overcoming the fear of something new, of providing a journey of change.

Start with thinking about the journey that you or the people you’re targeting can make the change. Don’t start with the product or the technology. Tweak your offerings and services to edit the journey, not the other way around. And change, would be on its way.

Someone would have done it

I was brought up with a dose of “if that was such a great idea, someone would have done it…” and so we are taught to bury our heads, work hard along the paths well trodden.

The strange thing is that we think any deviations are supposed shortcuts. That people who might have gone down a less trodden path might have sacrificed something important – maybe their morals, or they have had to work harder, or they had to – God forbid – take risks.

Why can’t the someone be you? If it’s an idea dealing with an issue you care about, why don’t be the one doing it. And then pivot when challenges come, take the feedback you deserve and work on it. Until you get it to work. And it works because you did the work. Not because you left it to that someone else.