Monday, October 02, 2006

Unintended consequences

Lately I've been thinking a lot about alternative and renewable energy. I think it's an inevitable growth area, the question is not "if" but "when." I assume that there is a finite amount of oil in the ground that is economically recoverable. Some people think that finite amount is 20 years, some think 70 years, some think 150 years. Frankly, I don't know - all I know is that some number of years exist and it will be gone (too expensive) for all practical everyday purposes, reserved for only those applications that can afford the high cost or that simply cannot run on anything else.

I'm not an alarmist in the sense that I don't think the sky is falling over this issue - I think that ingenuity and innovation will find alternative sources of energy and that the laws of economics will make sure that ultimately everything works out, maybe not at a price we like, but ultimately at a price we can live with. Of course, coupled with that statement I also think there is tremendous opportunity in this space and I personally find such opportunities quite intriguing. So do many other people, although I think a lot of them go after opportunities because they are, for example, an alternative to oil, rather than because they are economically competitive with oil today. While I think there has been some good technical thinking that arises from this, it's not a particularly smart approach to creating a sustainable business. (See my earlier post on the need to compete on the merits and the payback period I'm expecting on my own solar panels).

I think that the biggest opportunities in the near term will be around efficiency - getting the same benefit for less energy consumption, and alternative sources will slowly become more and more viable.

So why did I call this post "unintended consequences?" I realized today that there is almost certainly a catch-22 involved in any meaningful gains in efficiency or rise in alternative sources of energy. I confess that this is conjecture, that I can't prove it, but I think there's ample prior examples to suggest that I'm probably right. Anyhow, my hypothesis is that any significant reduction in the cost of energy (whether through efficiency gains, discovery of new oil, practical cold fusion, whatever) will actually lead to an increase in energy consumption, which will offset a significant portion of the savings.

Think that's a nutty proposition? Maybe it is, but consider two examples from other domains:
  • Traffic: When roads are widened from, say, 2 lanes to 4, initially the result is a relief of congestion. But what frequently happens is that now with a wide free-flowing road, housing and employment opportunities that were unattractive down the clogged 2-lane road suddenly becomes attractive down the wide-open 4-lane road. Development ensues, and rapidly the road is again at capacity. This isn't a bad thing or a good thing, it's nothing more than a reflection of people responding to the incentives that we provide. (Economic laws are pretty powerful things!)
  • Computer Processing Power and Bandwidth 10 years ago we had sufficient CPU power and bandwidth for what people were doing with their PCs, and we asked what we would do with more. OK, nobody seriously thought we wouldn't find uses for more CPU or bandwidth, but that's not the same as saying that people were demanding it. Nevertheless, more CPU and bandwidth came, and what happened? I think it's best summarized by The cost of CPU/Bandwidth fell, and people found new must-have uses for it, which would have been prohibitive at the cost of 1995 CPU/bandwidth, but which in 2006 are so cheap that people can use it for the most inane of endeavors. (OK, I enjoy much of what's on Youtube, but you catch my drift.)
Anyhow, I see no reason to think that Energy is fundamentally different. I have 5 PCs in the house, 2 of which are on pretty much all of the time, the other 3 are on only when in use. Somehow, today, even though I could afford the bill for the electricity they would consume, I can't in good conscience do so. But if someone came along and said the electricity would be half the price, not feed money to terrorists in the middle east, and generate no greenhouse emissions or other bad stuff, would I leave these machines on? You betcha. I'd break out my web server into multiple machines, I'd help out with parallel computation problems computing Pi to the 3 billionth decimal place, I'd loan CPU time to SETI, I'd do all sorts of stuff.

And that's nothing, because I think people who are more clever than I will come up with applications - not just in computers, but in other energy intensive endeavors - that will be obvious 10 years from now but which my small brain doesn't even comprehend right now. (Hey, how many of us understood the internet in 1990?)

So I think it's an interesting unintended consequence of "solving our energy problem" that we will almost certainly end up consuming more energy as a result. Is that a bad thing? Not at all. My instinct says that it has the distinct aroma of opportunity around it. I'm excited.

Now all we need to do is solve this cold fusion thing...

UPDATE: So I'm not insane here, nor am I original (nor am I surprised that I'm not original). Apparently there is a name for this unintended consequence of efficiency, and it's called Jevon's Paradox. The linked article actually goes into a bit of detail about the prerequisites for its existence as well.

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