?? Dawn of the distributed age

Two weeks ago, the Economist wrote a special edition on the “dawn of the solar age” in which they argued solar will become the dominant source of power, changing the global energy landscape. They are not wrong (as all EV readers would have known for years), but it’s much more than that… it’s the dawn of distributed energy.

The future of energy isn’t just about technological advances. The decentralisation — driven by modularity and declining prices — is about reshaping economies, transforming geopolitics, and democratising access to electricity globally.

This is about a fundamental shift in the way we approach energy systems.

The implications are massive. Unless you’re reading this by candlelight, energy impacts every aspect of your life. And the changes coming down the pike are going to affect everything from your electricity bill to where the next economic boom happens.

In today’s edition we will help you understand why distributed energy isn’t just changing how we power our world—it's reshaping who holds economic power on a global scale.

Enjoy! Nathan Warren and Azeem Azhar

David vs Goliath: Changing markets

Bottom-up pressure is now driving change in energy markets. The rapid adoption of small-scale renewables is outpacing our creaky old regulatory frameworks, leading to some pretty weird situations — negative energy prices, for instance. Sometimes there’s so much renewable energy flooding the grid that prices go negative. It’s like your local grocery store paying you to take their overripe bananas off their shelves.

This chart shows how often we’ve seen negative prices in various European countries:

But here’s where it gets interesting: this is forcing regulators and utilities to adapt. Locational pricing, meaning that electricity prices vary based on where it’s produced and consumed, is gaining traction globally. It’s already been in the US for decades, and now other countries are catching on. It could save UK consumers ￡34 billion by 2040. That’s not chump change.

Locational pricing means energy prices better reflect the cost of generation. Price distortions melt away. The market is better able to do what markets do well.

In this case, we see:

1. Market signalling: High local prices will incentivise investment in local generation assets from small-scale PV to large wind farms. In addition, it can encourage more flexible demand from customers - to move consumption to times and places where prices are low.
2. Grid optimisation: Local pricing makes the existing grid more efficient, reducing congestion & flow of energy across the grid.
3. Direct cost reductions: Price signals that reflect local conditions can reduce curtailment of renewable resources. In aggregate will reduce balancing costs.

And we’re not just theorising here. When Texas implemented a similar system in 2010, they saw a 3.9% reduction in fossil fuel generation costs – and that was before renewables really took off. Imagine what it could do today.

Going further… This shift could reshape entire regional economies. Take North-Eastern England, for example. It’s blessed with abundant wind resources, but 25% of people there live below the poverty line. Ever since Thatcher shut down the coal mines, things have been pretty grim. But with all that wind and a locational pricing system, they could see an economic boom, enjoying cheaper energy than the rest of the country.

When neighbourhoods become powerhouses

Let’s talk about Virtual Power Plants (VPPs) — it’s a way of linking up all those solar panels and batteries in people’s homes to create a power plant that exists only in the cloud. The Rocky Mountain Institute thinks VPPs could reduce US peak demand by 60 GW by 2030. That’s enough to power 45 million homes, or roughly every home in California, Texas, and Florida combined.

In 2023, Sunrun and PG&E launched a VPP in California that could power over 20,000 homes. But here’s the kicker: VPPs are good for the grid AND for consumers’ wallets. In Australia, some VPPs are cutting the payback time on home batteries from 11 years to as little as 4.5 years. In Texas, a company called Base Power is taking this idea even further by installing oversized home batteries for only $3,000 and using the excess capacity to trade on wholesale markets (as discussed on the Volts podcast).

Beyond the traditional grid

In many parts of the world, especially in Africa, reliable power grids are still a distant dream. But communities are taking charge with mini-grids. These local power networks are gaining traction fast. They are already in widespread use: in 2023, 50% of new connections in Africa were delivered through off-grid systems.

While these systems are rapidly declining in price, their installation costs are still not cheap. That’s where innovative financing comes in, like the pay-as-you-go (PAYG) model, which makes electricity more accessible to those who couldn’t afford it before. ARC Power in Rwanda is one good example. They kicked off with a ￡900,000 loan and by March 2023 had connected over 10,000 people to power. Their approach? Letting customers buy electricity in small amounts using their mobile phones. It’s like topping up your phone credit, but for power.

Of course, micro-grids aren’t just for places without reliable grid access. InRange(which Azeem and several EV members invested in) does this for commercial buildings in industrial and retail parks, with a focus on powering data centres with renewable electricity. Such a model could be effective in the US as well.

The big picture

All these solutions we’ve been talking about - locational pricing, VPPs, and mini-grids - are ushering in a whole new era of decentralised energy.

Think about it this way: we’re moving from a world where a few big power plants supply everyone, to one where energy is produced and managed locally. One analogy to keep in mind is going from a few TV channels to YouTube. Suddenly, everyone’s a creator.

This shift is happening because of three main drivers:

1. Tech is getting better and cheaper, so more people can generate and store their own energy.
2. VPPs are connecting all these small energy producers into powerful networks.
3. Locational pricing is making it worth for people and businesses to produce and use energy efficiently at a local level.

These three factors are working in tandem. As technology improves and costs fall, more people are investing in personal energy systems. VPPs make these investments more valuable by allowing participants to sell excess energy or grid services. Locational pricing then provides the economic signals to optimise energy production and consumption.

The implications of this shift will be profound:

• A geographical redistribution of economic power: Regions with abundant renewable resources, such as windy coastlines or sunny deserts, could become new industrial hubs.
• Seasonal energy arbitrage: Businesses will adapt to seasonal energy patterns. Imagine OpenAI running its AI model training during peak solar months, or Tesla producing batteries when wind power is cheap.
• Evolution of energy markets: New financial instruments and trading strategies will emerge to balance supply and demand across time and place.
• Energy democratisation: Your grandma might become an energy trader, selling the excess power from her roof to your electric car.
• Increased grid resilience: A network of distributed energy sources is less vulnerable to large-scale outages, improving overall energy security.
• Accelerated technological innovation: New industries will emerge around the management and optimisation of distributed energy systems, driving advances in areas such as battery technology and smart grids.

The bottom line? Every industry needs to rethink its relationship with energy. This transition is redrawing the map of economic advantage. Those that adapt quickly will thrive in this new landscape, where energy is not just a utility, but a dynamic, decentralised ecosystem of opportunity.

The question is, are you ready to be more than just a consumer? The power, quite literally, is in your hands.