Small Local Energy Installations are more effective, finds Columbia Business School

Is it better to build a large-scale central power plant or to install small-scale renewable energy technologies locally? New research suggests the latter.

Scientists at Columbia Business School in New York have found that many industry sectors are near to or have even reached a tipping point where efficiency of unit size is being replaced by efficiency of numbers. They say that rather than relying on custom-built, large-scale units of production, such as thermal power plants, industries can benefit from a shift to small, modular, mass-produced units that can be deployed in single or many locations, such as photovoltaic (PV) panels mounted on utility poles.

Different ideas

Conventional thinking is that capital cost per unit of capacity declines as unit size increases. Other efficiencies of unit size arise from manufacturers’ ability to spread the fixed cost components of production, as well as factors such as operator labour and design costs. But researchers found that this alternative, local, approach to infrastructure design offers new possibilities for reducing costs and improving service.

The study was undertaken by Garrett van Ryzin, professor of private enterprise at Columbia Business School, PhD candidate Caner Göçmen, and Eric Dahlgren and Klaus S Lackner of Columbia University’s school of engineering and applied science.

The authors identify several driving forces underlying this shift in thinking:

  • New computing, sensor and communication technologies make high degrees of automation possible at very low cost, largely eliminating labour savings from large units
  • Mass production of many small, standardised units can achieve capital cost savings comparable to or greater than those achievable through large unit scale
  • Small-unit scale technology provides significant flexibility, a benefit that has been largely ignored in the race toward ever increasing scale, and one which can significantly reduce both investment and operating costs.

Mirrored by computing

The authors draw parallels between the shift from large to small optimal unit scale and the revolution that began 30 years ago in supercomputers.

The traditional approach to producing higher capacity and greater speed in computing was to build increasingly powerful, specialised machines with ever increasing processing power. This came to a halt in the mid-1990s, when it became cheaper to use mass-produced processors and high-capacity memory from the personal computer industry.

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